A satellite image shows TD Bank Ballpark inundated with floods, after Hurricane Ida swept through the town of Bridgewater in New Jersey, September 2, 2021.
Maxar Technology | Document broadcast via Reuters
The commercial real estate industry is facing an increasing threat from flooding, potentially leading to billions of dollars in increased costs, a new study says.
Approximately 730,000 retail, office, and multi-family properties are at risk of flood damage each year in the United States. According to the First Street Foundation, a nonprofit research and technology group and global commercial engineering firm Arup, structural damage from flooding is expected to cause $13.5 billion by 2022, to more than $16.9 billion by 2052.
The study incorporated sea level rise, but focused more on flash floods, also known as floods.
Matthew Eby, founder and organizer of First Street Organization.
“We have companies like Nuveen or Morningstar or these large institutional investors looking at our data to understand what is at risk today and during that ownership period.” Eby added. “How do you plan against these or make sure you’re buying into the right commercial real estate properties?”
First Street partnered with Arup to overcome a simple flood hazard, which they have already done with residential areas. By combining his flood modeling on commercial properties with Arup’s knowledge of structure and architecture, the two were able to understand the impact of flood risk on each. specific commercial buildings in the country. They can then determine the economic consequences of a flood based on the specific type of structure.
“As climate change continues to intensify, flood risk will pose an economic threat to commercial properties across the country,” said Ibbi Almufti, Arup’s risk and response team lead in San Francisco. “This new report will serve as a guidebook for understanding construction-specific risks and for taking actions to mitigate the impacts of climate change.”
They also take into account in their damage estimates downtime, such as how long a building will be inoperable after a flood event, based on the specific structure.
The researchers also provided an estimate of potential damage, which is factors that take a toll on local economies and productivity. According to the report, the cost of that impact is expected to increase to $63.1 billion in 2052 from $49.9 billion in 2022 as climate change-related flood risks worsen. than.
In total, local businesses in the US could lose the equivalent of 3.1 million operating days in the next year alone. By 2051, that number could rise to 4 million. That would increase the economic impact of lost productivity and output on all of these assets.
Last year, First Street partnered with Realtor.com to provide flood scores for every home in the US. That score could warn homeowners who may not have flood insurance that they should consider buying it. Federal flood maps are often outdated, and until recently failed to account for the effects of climate change.
The country is currently seeing much more rainfall, because as the atmosphere warms, it will hold more water. The remnants of Hurricane Ida caused unprecedented flooding in the Northeast, causing billions of dollars in damage and killing nearly 50 people.
Flood risk to commercial real estate affects not only property owners and building tenants, but also investors in those properties.
“The people who actually own these buildings are your average American in a 401k plan, or the commercial real estate investors who own these $100,200 million buildings,” he said. Eby said, who added that once they see that risk now and in the future, they can better understand how to reduce the risk and the potential costs involved.
