A new study by the engineering firm Arup and the non-profit First Street Foundation contains important predictions about flooding that are of particular importance to real estate development in Southeastern Louisiana.

The study predicts that flooding due to climate change will increase dramatically over the next 30 years, and it puts some startling dollar amounts on the impact of this increase. Damage to businesses, stores and apartments are expected to increase 25% over the next 30 years, reaching nearly $17 billion per year by 2052. Perhaps more significantly, the study predicts that stores will close, offices will furlough workers, and families will be forced to relocate. The financial impacts of these changes are estimated to reach $63 billion by 2052, and the number of lost business days is expected to rise from 3,100,000 days per year in 2022 to 4,000,000 days per year in 2052.

About 8% of existing commercial buildings that are currently not at risk will be considered “dangerous investments” by 2052, according to the report. Closer to home, the report predicts that the New Orleans area faces 3 to 9 times the economic damages from flood-closed commercial real estate in 2052 as the national average.

Unfortunately, according to the study, Louisiana is projected to have the heaviest adverse impacts of the increasing flood risk in all of the continental United States, with economic damages increasing 190% over the next 30 years.

The increasing flood risk in Southeastern Louisiana is not surprising news to property owners and developers in this area. However, the dollar figures attached to these risks, and the increasing severity of the risks, warrants serious attention, in such diverse areas as:

  • Elevation heights of new developments;
  • Construction techniques to attempt to prevent or mitigate damage from flooding;
  • Possible purchase of the maximum amount of flood insurance, when available;
  • Economic strain on the National Flood Insurance program, and possible private insurance options that might become available in the commercial marketplace; and
  • More direct attention paid to flooding consequences in lease documents between landlords and tenants.

In addition, as smaller property owners, or those with less appetite for risk, exit the market because of more frequent flooding events, there may also be significant opportunity for purchasers to acquire properties at depressed prices.

Filed under: Commercial Real Estate, Development, Zoning and Land Use, Industry News, Leases, Purchase and Sale, Residential Real Estate
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