A lot of things have changed in the past year, but one thing has stayed constant: Americans love a good vacation at the beach. Although travel was certainly more limited in 2020 than ever before in recent history, 72 percent of Americans said in May 2020 that they would go to the beach if they could drive to get there (and afford the cost of the vacation). This summer, Trivago predicts an onslaught of summertime beach vacations, many booked last-minute (either day-of or day-before). But for many individuals who may not have necessarily been financially hurt by the pandemic, the beach (or proximity to it) is starting to look more like a potential “home base” and less like an escape for a week or two each year. Those people could be your future buyers for homes within a four-hour drive of the right location.
Of course, not every beach offers the same benefits. There are additional considerations, both COVID-related and otherwise. For example, not every beach is located in a temperate climate that permits outdoor recreation the majority of the year. Not every beach is in a state that prioritizes individual freedoms, including the freedom to be outside and to patronize restaurants and other establishments without a “passport” indicating you are abiding by all public-health recommendations as they emerge and then change. Without naming names, you can probably see how some beach destinations are already less attractive when evaluated along those parameters.
Whether you have long invested in beachfront properties and those in close proximity to the sand and salt or you are beginning to think you need to add this element to your real estate portfolio in 2021, there are a few things you should be prepared for that might surprise you. PIP Group is constantly monitoring emerging trends in beach and beach-vicinal properties (defined as within a four-hour drive of an optimal beach location) that you need to know before leveraging capital toward investments in this asset class.
Cachet Could Substitute for a Pleasant Year-Round Climate
When you think of year-round beach living, you probably do not first think of the Jersey Shore or the Hamptons. After all, those locations tend to shut down when the states in which they are located receive a couple feet of snow and temperatures head sub-zero for the winter. However, the cachet of living year-round in the Hamptons has already brought in renters willing to pay the same price of a median-priced home in other markets for the privilege of renting properties just for the weekend until “the season” begins, and home values have skyrocketed by nearly 20 percent. A New York real estate developer is hoping to raise more than $100 million to develop the area and bring in more year-round activities, like a cultural center and theatrical complex, and, hopefully, shore up the area’s struggling wi-fi.
The Jersey Shore, which is not necessarily known for “cachet” but is known for being a great beach vacation location, is also finding itself to be a newly desirable location for year-round living and, even more, for short-term rentals. Not only is the Summer 2021 rental season essentially booked solid (it has been since January of this year), but property management companies and real estate brokerages say they have people looking to rent and buy as far out as Summer 2022. Local agents say landlords and sellers can “name their price” at the moment, which, of course, makes investing in this type of location an interesting proposition.
Just remember that there are plenty of beaches out there located in year-round temperate climates that also boast double-digit appreciation and offer far more affordable options for buyers and renters – not to mention slightly easier access to the market on the investor and buyer side. If you are new to this space, consider partnering with a more experienced investment firm that can help you evaluate properties and gain access to leads on deals.
The Southeast Still Rules the Roost for Vacation Destinations
There’s something to be said for the glitz and glamour of a northeastern beach, but there is far, far more to be said (and far, far more people saying it) about the attractive qualities of beaches in the southeast. According to that same Trivago report, top destinations for Americans as of March 2021 were nearly all in Florida, South Carolina, and Georgia. In Georgia, one beach in particular stands out: Savannah. Savannah is just about 3.5 hours away from the state capital by car, making most of Georgia a viable option for beach-vicinal investors. Savannah itself is currently projected to gain about 12,000 new residents by 2030, a number likely to rise in response to a faster-than-average COVID recovery in the Savannah economy.
As of October 2020, the Bureau of Labor Statistics (BLS) reported unemployment was already down to 4.8 percent, while employment growth was nearly 4 percent. A variety of universities, tech companies, and port-associated businesses create a thriving, diverse economy in the area. The Port of Savannah, one of the top four container ports in the United States, brings in essential jobs across multiple industries as well as three distinct freight service providers and an international airport. With Americans prepared to spend as much as $1.7 trillion in “revenge spending” in areas of the country where pandemic restrictions have eased, even Savannah’s tourism industry could soon bounce back.
Shannon Seery, a Wells Fargo economist, explained it this way to Bloomberg: “A lot of the snapback in spending will come from those more leisure…discretionary expenditures.” Economists agree that individuals with plenty of savings were likely to spend their entire stimulus check and, in some cases, far more. For example, take the couple in their 20s in Michigan who are “committed to taking a dream vacation” and have been saving for the past year. A number of them may find their new location so attractive they have to stay.
Americans are Changing Their Minds About Their Assets
The important thing for every investor to remember is that many of the longstanding concepts that have held true about real estate are changing, and many assets that seemed like long shots are now, in some markets, rising dramatically in value. Condos, for example, are once again a hot commodity – as long as they have outdoor living options and enough access to outdoor recreation. In many southeastern towns, buyers are signing contracts on condo units that only exist as digital layouts at present.