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Although New Orleans has received the lion’s share of news coverage in the aftermath of Hurricane Katrina, other areas of the Gulf Coast were hit just as hard. After the hurricane, the governor of Mississippi described Biloxi as an American version of the atomic bombing of Hiroshima. Casino barges were literally lifted out of the water, and the Biloxi-Ocean Springs Bridge was almost entirely destroyed. However, the city is staging a dramatic, well-planned comeback… and because it is starting from an almost blank slate – 90% of oceanfront buildings were destroyed - there is plenty of opportunity.
Biloxi is being rebuilt from the ground up, basically creating an entirely new waterfront city. An estimated 55,000 new homes will need to be built in the next few years, and less than 10,000 (less than 18%) of these homes have already been built. The creation of an almost entirely new oceanfront city is unprecedented in modern American history, as most oceanfront real estate was developed years ago. This is a rare chance to create a brand new community, with none of the problems and disadvantages of real estate that was developed during and for the 19th and 20th centuries, instead of the 21st.
It’s not much of a secret that more and more people will be visiting Biloxi in the near future. The Biloxi-Ocean Springs Bridge is being rebuilt now, and will once again provide easy highway access to Biloxi when it re-opens this winter. Gulfport-Biloxi International Airport is already seeing 20% more passengers than it saw two years ago. The airport is also undergoing a major, $51 million expansion – to be finished this year - which will increase terminal square footage by 80%, as well as allow access to two more airlines. These are proven catalysts for economic growth and real estate appreciation. Why are so many people coming to Biloxi, though?
Biloxi is well-known for its numerous casinos, many of which were temporarily shut down following Katrina. Seven of the nine casinos have already re-opened, and there are plans to add ten more in the near future. A change in Mississippi state law allowing the formerly barge-restricted casinos to build on land has resulted in an influx of billions of dollars from the casino industry. Just one example of the new casino resorts is the Harrah’s Entertainment-Jimmy Buffett joint project, Margaritaville – an oceanfront casino resort whose first phase is budgeted at $700 million, and may eventually cost $1.3 billion. In fact, casino companies have purchased 175 acres of real estate for expansion purposes since Katrina, and experts are predicting that the number of casino workers will double to 30,000 within the next few years. Even with the wide-ranging construction (and re-construction), casinos have had record revenues in nine of the last eleven months.
Unfortunately, even with the broad economic success of the casinos, many casino workers are still living in FEMA-provided trailers and other substandard housing. There is simply not enough housing to provide space to all of the workers. The combination of more and more casino workers and more and more tourists visiting Biloxi results in one thing: an increase in demand for housing, and the supply of housing is not growing nearly as quickly as the demand. Economics 101 tells us that when demand increases faster than supply, prices go up… and that is exactly what is happening to rental prices today. Approximately 60% of casino workers rent, and rental properties are now being leased for 10 to 20% over market value only a few days after they are put on the market.
This appears to be a “perfect storm” of favorable factors for Biloxi – casino-fueled economic growth, low supply coupled with high demand for housing, transportation system upgrades, and the “smart money” purchasing real estate and developing more casinos. It could also be the perfect investment.
