- Some 16 separate weather disasters in 2017 caused more than $300 billion in economic losses, including damage to both commercial and residential real estate.
- In the past decade, nearly $8 billion worth of residential and commercial real estate has been built or approved for construction in the Boston Seaport District, its inventory of properties doubling, according to CBRE.
- This the first part in a series of pieces looking at the effects of increasingly severe weather and rising water on domestic real estate.
If last year was any guide, storms are getting increasingly intense, dangerous and destructive.
Some 16 separate weather disasters in 2017 caused more than $300 billion in economic losses, including damage to both commercial and residential real estate, according to the National Oceanic and Atmospheric Administration, or NOAA. That is a new annual record.
This year started with a bang as well. Back-to-back nor’easters slammed into the New England coast. The powerful storms sent water flooding in to Boston’s historic Seaport District. It was what city planners had predicted, just not yet.
“In Boston, we’ve spent a lot of time thinking that these impacts are 20, 30 years down the road,” said Deanna Moran, director of environmental planning at Boston’s Conservation Law Foundation. “The last couple of nor’easters that we’ve had have made it very clear that these storms are here now. They’re happening more frequently. They’re more severe.”
Moran studies the impact of climate change on Boston real estate, especially all the new development going on at the water’s edge. The water near Boston is warming more quickly than in any part of the U.S., save Alaska, due to Boston’s proximity to the Gulf of Maine, which is the fastest warming body of water on earth, according to NOAA.
“Boston is ahead of the curve in that we’ve been planning for these impacts, pre-disaster, but I wouldn’t say that we’re ahead of the curve in terms of actually doing things on the ground,” Moran added.
Planning started at the top, in the mayor’s office and with the city’s “Climate Ready Boston Initiative.” It released a comprehensive report in 2016, looking at risk, climate projections, and resilience initiatives. The initiative is headed by Austin Blackmon, chief of environment, energy and open space for the City of Boston, who points to recommendations the city has made to developers.
“Through the city’s zoning code, we were able to say, if you want to build a large building in the City of Boston, not only do you have to take into account what the climate projections are and the floodplains are right now, but you have to look at what those projections are in the future,” Blackmon said. “You have to let us know how you plan to protect your building all the way through its useful life, in addition to making it energy efficient and other goals that we have from a sustainability standpoint.”
But so far there are only conversations and recommendations, not rules and regulations.
“It’s something that we always continue to have those conversations with the developers,” Blackmon said.
Rising waters, rising demand
Meanwhile, data show the water is rising and the storms are intensifying, just as development is booming in the city’s most vulnerable district, according to experts, Boston’s Seaport.
In the past decade, nearly $8 billion worth of residential and commercial real estate has been built or approved for construction in the Seaport, its inventory of properties doubling, according to CBRE.
In fact, just the Seaport alone has seen three times the amount of new buildings going up thank in all the rest of Boston’s much larger downtown and financial district. This as city researchers already predicts much of the area will be under water on a regular basis anywhere from ten to thirty years from now.
“The past couple of storms have validated a lot of the city’s data on flooding,” Moran said. “They were able to go out and say, yup, this is exactly what we thought was going to happen and that’s just going to be happening more and more frequently as we see sea levels rise.”
And yet, according to Moran, there is a disconnect. Developers are relying on the historical past when they build buildings for the future. The process for changing the building code is at the state level, not the city level.
“The process for changing the code is long and tedious,” she added.
Changing the code could also drive away the precious influx of big business to Boston. Names like Amazon and GE, investing millions in Boston real estate development and attracting thousands of new workers, especially to the Seaport.
Skanska is one of the largest Seaport developers, recently selling two of its new buildings for record prices. It’s latest is an elliptical office tower, a centerpiece of Seaport Square.
“And that shape alone is very sustainable in that the wind on this building is far less than it would have been had it been a square or rectangle,” said Charles Leatherbee, executive vice president of Skanska Commercial Development. “This building is very well prepared to withstand any major storm event.”
The building’s electrical infrastructure is located 40 feet above the 100-year floodplain, there is a 40,000 gallon water reclamation tank, and the ground floor is elevated. All of this at increased cost.
“I think developers have to be prepared – for climate resiliency. Skanska takes that very seriously. It’s the right thing to do,” Leatherbee said.
It is also just smart business for developers assessing the future value of their buildings.
“I think all investors, whether it’s a pure sale or just a recapitalization, are very concerned about climate resiliency, which they should be. I think they will look to a Skanska building and realize that that building is well prepared for the future,” Leatherbee added.
While some developers are proactive, others are less so, because they know the end game is to sell the building. Increasingly, however, developers are not qualifying for financing because of potential risks.
“The insurance companies are saying, ‘Hey, we’re not going to ensure this unless you take into account some of those climate challenges,'” said Blackmon.
Ironically, cities need the valuable waterfront development, and the tax revenue it provides, to pay for planning and redevelopment of existing real estate.
“Right now, we’ve already got a significant number of buildings and assets that are already in harm’s way. But as we continue to grow the city, as we look at continuing to develop it, there’s actually an opportunity for those developments to be part of those protection processes,” Blackmon said.
The biggest frustration, according to city planners, is not having control over the building code, which is governed at the state level.
“There are guidelines and there are checklists. But everything is ultimately voluntary,” said Moran.
And changing the code?
“The process for changing the code is long and tedious,” she said.
Courtesy of cnbc.com and credit to Diana
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