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Hurricane Harvey Impacts Commercial Construction

Hurricane Harvey continues to do its damage, not only from the wind or rain, but from the flooding. The area received 50 plus inches of rain in a three-day period while Harvey rolled in and decided to stay for a few days. I was going to write about another subject, but keep getting pulled back to Harvey. So, I have decided to do a post on the damage that Harvey is doing to the commercial buildings, including office buildings, industrial buildings, multifamily, retail, institutional and hospitality facilities. There are developing estimates of the damage to commercial buildings under construction as well as occupied buildings.

The damage ranges from minor roof and window leaks to total wipeout. There are a number of buildings that might be dry, but the access roads and parking areas are still flooded. They will continue to be flooded for several weeks while the second flood, the releases from two 70-year-old upstream reservoirs, continues to drain. There are other buildings that are flooded and in a mandatory evacuation zone until the flood gates are open. Many of them have flooded basements and might have had as much as 10 feet of water rushing through first floor lobbies.

Downtown, the arts district theaters flooded. Their basements that housed costumes, props, offices and storage for numerous musical instruments are being pumped out, but there is a coat of slime that covers everything below the waterline. Likely, as we have seen before, a total loss for those items. The Alley Theatre, which had recently completed a $25 million renovation, also flooded. A number of other buildings in the CBD (Central Business District), including the criminal courts building, sustained damage.

The initial numbers are a little bit overwhelming.

According to report titled Houston Flooding and the Potential Impact on Commercial Real Estate from real estate research company CoStar:

About 27% of Houston’s GLA (Gross Leasable Area) may be under water today, representing an estimated $55 billion in property value. There are more than 12,000 properties containing 433 million SF located in the floodplain. This includes 167,281 apartment units, 60 million SF of office, and 73 million SF of retail space. In addition, 11 hospital buildings, including a 1.1 million SF building at the Texas Medical Center fall within the 100-year floodplain.

Those numbers will be verified and adjusted as more accurate information is gathered. The major real estate firms are collecting data, evaluating client’s buildings and assessing their tenant’s status for their analysis of the costs. A number of the buildings referred to in the CoStar analysis are still in the flood area, and the remediation and restoration has yet to begin.

A number of companies are in the process of finding interim space. Many companies have been forced out of the buildings and are making plans for their employees to work from home for the next two to six months while their buildings are drained, the wet drywall and insulation ripped out, buildings dried out, and sprayed with anti-microbial and anti-mold solutions before being restored and re-occupied.

Construction workers from all over Texas, neighboring states and both other coasts have shown up and are beginning that long process of recovery.

Houstonians are resilient. We have recovered from past hurricanes and floods. We know that we will continue to be the 4th largest City in the country. We know that the challenges that Harvey threw at us will be met and overcome.

Meanwhile, Irma, a Category 5 hurricane from Africa is headed for Florida. The “first responders” who helped us here on the Gulf Coast are already marshalling to go to Florida should they suffer the devastation of a Cat 5 hurricane.