'We're in For a Rough Ride': How Russia's Invasion of Ukraine Is Affecting South Florida Real Estate

Russia’s invasion of Ukraine is generating uncertainty throughout South Florida’s real estate sectors, as well as for its Russian residents.

In the hospitality and alcohol industry, for instance, businesses are taking a hit as they remove Russian products like vodka from their shelves, according to Marbet Lewis, an attorney with Spiritus Law in Coral Gables. 

“It stirs things up a lot in an industry that’s already struggling, to look for stability. We’ve seen the hospitality industry bounce back in an incredible way,” said Lewis. “What people don’t realize is we don’t allow consignment sales of alcohol, meaning all of that product that’s being removed from the shelves has already been paid for.”

Thousands of people are believed to have been killed and more than a million displaced since the invasion began on Feb. 24, according to Reuters. And President Biden recently added sanctions against Russia’s central bank, prohibiting people in America from conducting business with the bank, as well as freezing its assets.

And Lewis’s clients have gone beyond making a statement in solidarity with Ukraine, in her opinion.

“They’re really putting their money where their mouth is. Taking it off the shelves, substituting ingredients on their menus is really an effort that’s impacting them first,” said Lewis. “The financial hit is to their business because now they have a product they’re not going to be selling.”

Lewis said her clients are only removing products after carefully researching which brands have fought Russian oppression on their own. 

A large population of people from Russia live and work in South Florida, and the war in Ukraine is making it hard to keep them in hospitality jobs.

“There’s a lot of workers that who may be having to go back home or having to move, or aren’t able to join the workforce or exit the workforce now. We know that that’s already a big problem the hospitality industry was having to begin with,” said Lewis. “This type of aggression at this particular time is just pushing the entire hospitality sector back a couple of steps.”

Rush to Liquidate High-End Properties

Transactions involving some of the most expensive properties in Miami and Manhattan are becoming more of a challenge to maintain for Russian and Ukrainian buyers as well, according to Erin Sykes, chief economist for Nest Seekers International.

“I have been showing in Sunny Isles A LOT this week. It is 60% Russian there and we have seen a significant number of ultra-high-end properties hit the market in an attempt to liquidate before accounts get shut down. Central Park South in NYC is experiencing the same thing,” wrote Erin Sykes in a press release. 

Lewis said clients who own restaurants, hotels, supermarkets and gas stations are hoping to stabilize some of the uncertainty that employees, especially in Sunny Isles, might be facing.

“Our clients right now are trying to embrace their teams and give comfort and security to their teams, and embrace the local Russian community, which is very large here in South Florida,” said Lewis. “We do have a strong Russian population here, especially in our hospitality industry.”

Lewis said she’s interested to see if Florida will take action and ban certain products entirely, which could affect the real estate industry or Russians who live in the area.

“Florida is in a unique situation, as opposed to other states that may be taking a public stance on this,” he said. “I think South Florida is in a unique predicament.”

‘How Much Higher?’

Rising gas prices caused by the conflict will make it more challenging for builders in the coming months, according to Lisa Colon, a construction attorney at Saul Ewing Arnstein & Lehr.

“My clients are expressing angst with the current pricing, with projects that they priced last year that are moving through the permitting process right now. How much higher are prices going to go? We’re already in an inflationary economy,” said Colon. 

The rise in costs won’t affect ongoing projects much, but there are worries over whether subcontractors will be able to hold prices on projects that were bought out in the last three months. Colon said she believes that the biggest projects in South Florida will be at the most risk of having long delays. 

“Quite frankly, I think we’re in for a rough ride just generally,” said Colon. 

Colon said it’s crucial to communicate with subcontractors to try to lock down materials now, as it’s already an ongoing issue due to a strained supply chain. According to Colon, Russia is a major producer of nickel and has 10% of copper reserves.

Although copper is extensively used in electronics manufacturing and construction of homes, Colon said builders are constantly looking at other options and materials to cut down costs and manufacturing wait times. Though the U.S. doesn’t do a lot of trading with Ukraine or Russia of materials that will severely affect construction, Colon said it’s still a concern. 

“Everyone is talking about having clauses in your contract that deal with material escalation and how those risks are going to be born,” said Colon. “Whether the owner is going to bear some of the risks, can the contractor bear some of the risk and what percentages and so forth. That’s kind of where we are right now.” 

Right now, Colon said the entire construction industry wants to know if the high prices are going to stick around for a while: “We’re all holding our breath.”