Flooded commercial buildings

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Study: Commercial Real Estate Faces Rising Flood Threats

December 14, 2021

Flood risks are increasingly posing a risk to commercial real estate, and a new report cautions the sector to be prepared.

About 730,000 retail, office, and multiunit residential properties face potential risk annually of flood damage, according to a new report from the First Street Foundation, a nonprofit research group. Damage from flooding could cause $13.5 billion in damages in 2022 and increase to $16.9 billion by 2052, according to the report, which focused on sea-level rises and flash flooding events. First Street partnered with Arup to evaluate flood risks on commercial properties in the U.S.

“It absolutely will have an impact on the value of these structures because you’re increasing the risk and the known risks to these buildings, which then has a negative impact on the value of them today,” Matthew Eby, founder and executive director of First Street Foundation, told CNBC. “We have companies like Nuveen or Morningstar or these large institutional investors that are looking at our data to understand what’s at risk today and over that period of ownership. How do you plan against these things or ensure that you’re buying into the right commercial real estate assets?”

Eby says that once businesses understand the risks they can take steps to try to mitigate those risks to their properties and potential costs involved.

Last year, realtor.com® added a flood score for residential houses in the U.S. to both for-sale and off-market properties listed at its site. The flood risk data is from both Federal Emergency Management Agency flood zone maps and Flood Factor. The score can be used to help homeowners determine what properties may need flood insurance, even if their lender doesn’t require it. Read more: Realtor.com® Adds New Flood Risk Tool to Listings.