Virus won't revive suburbia: Californian developer

Los Angeles

US city dwellers are not about to flee to bucolic suburbs because of the novel coronavirus, as some brokers predicted, said Emile Haddad, founder of California's largest masterplanned community developer.

His Five Point Holdings would stand to benefit if such a trend did come to pass. It is building suburban projects around Los Angeles, Orange County and San Francisco with 40,000 residences and 23 million square feet of commercial space.

But, Mr Haddad, said cities will continue to thrive as centres of innovation and economic growth, and people will return to the bars, restaurants and other amenities that make urban living attractive.

"I am absolutely convinced that this is not the rebirth of suburbia," the chief executive officer of Five Point said in an interview. "I really don't think you're going to see a major change in anything in the character of the city."

Real estate stocks have been pummelled amid fears that the virus will gut retail, office and multifamily property values as more people shop and work from home, creating demand for more spacious dwellings.

The pandemic is likely to have a short-term effect on behaviour similar to the shock of the Sept 11 terrorist attacks rather than the long-term recovery following the financial crisis of 2008 to 2009, according to Mr Haddad.

He founded Five Point in 2009 as a spin-off from homebuilder Lennar Corp, devoting most of the last decade to getting plans and permits approved for his sprawling projects.

The most likely change in public and private spaces will be an increase in temperature-measuring sensors and other technology to track the health of people, he said.

Home prices in his communities will not decrease much, he added, because there is a long-term inventory shortage, but interest rates are likely to fall further, which will make housing more affordable.

Despite the halt in construction during the outbreak, builders have continued to close deals on lots in his Southern California communities, the Great Park in Orange County and Valencia north of Los Angeles.

Home sales are likely to quickly resume soon after people emerge from confinement.

"Our buyers are not the buyers that are losing their jobs," he said. "Our average price of a home is over US$1 million, so obviously those are not people who are working in restaurants or hotels." BLOOMBERG