Harvey: A devastating storm - by Jonathan Avery

The arrival of hurricane Harvey in the Houston area this past week has resulted in a huge personal impact on families, neighborhoods and those at the lower end of the economic scale. The dislocations, loss of irreplaceable documents/photos of family histories and wiping out of hard-earned equity in homes has only partially come to light. Many resources both in the Houston area and nationally will have to come together to assist those in need. A tremendous initial response will need to be sustained to overcome this devastation. 

Beyond these personal tragedies, this historic storm, which some are calling the “1000-year storm” has resulted in enormous damage to real estate in the area. Initial analysis suggests that well over 100,000 homes were flooded. Many damaged beyond repair. CoStar’s first look suggests as much as 27% (12,000 properties) in the commercial sector may have flooded. 

CoStar estimates that this translates to nearly 170,000 apartment units, 60 million s/f of office space, and 73 million s/f of retail space. In addition, 11 hospital buildings with an estimated area of 1.1 million s/f are located within the flood hazard areas. 

Comparison with hurricane Katrina is already being made. This storm devastated many areas of south Louisiana and New Orleans in particular. One thing that became clear in the aftermath of Katrina was the enormous damage to infrastructure. Roads were washed out, storm drains had to be replaced since they were clogged with debris, and attempts to cleanout were futile. Restoration of water, sewer, electricity and gas to impacted areas was an expensive and long term project. Much of this lies ahead for the Houston area. 

One thing is clear the construction industry in the Houston area is in for a period of intense activity. After cleanup, both new construction and renovations will be required to recover and return residents to their homes and businesses to their locations. 

This level of natural disaster often brings out the best in people and we have seen much of that in the aftermath of Harvey. This type of recovery effort will likely be repeated – and become all too familiar, as we hear of the cyclical increase in the recurrence of hurricanes. Combined with rising sea levels this will only become more frequent and those in coastal areas should understand and prepare in the future. 

This experience together with other recent hurricane land falls should clearly start the discussion as to how and if development and rebuilding should occur in flood prone areas. In New England, we have already seen substantial increases in the premiums for flood insurance. These increased premiums have not solved the current problems in other areas of the country. The cost of these recoveries may be more than we can afford. An easy solution is not at hand.

Jonathan Avery, MAI, CRE, is president of Avery Associates, Acton, Mass.