Despite roads reopening last week, the damage hurricane Harvey has created for commercial and residential real estate could make it the costliest natural disaster in American history. Harvey generated more than 50 inches of rain over some parts of Texas, breaking records for the U.S. mainland. Texas Governor Greg Abbott estimates the damages to accumulate to a total loss of between $150 and $180 billion, and the Federal Reserve stated that the natural disaster has “created broad disruptions to economic activity along the Gulf Coast in the Dallas and Atlanta Districts.”
The focus of attention was Harvey’s effect on petroleum production capacity and rising oil prices in the US. Meanwhile roughly 27 percent, about 12,000 properties, of Houston’s commercial real estate was affected by the flooding. Those 12,000 affected properties are made up of 167,281 apartments, 73 million square feet of retail space, 60 million square feet of office space, and 11 hospitals, totaling 433 million square feet at an estimated value of $55 billion.
Keith Knutsson of Integrale Advisors commented, “the damage Harvey has done is beyond any comprehension; pictures don’t do it justice. Flooding can create a lot of invisible damage that is often dismissed until years later.”
In the short-term the housing market will appear to tighten with demand dropping relatively little compared to the drastically lower supply. Yet investors looking forward must consider the possibility of factors such as readjusted risk premiums, conjunctions of banks foreclosing on destroyed homes and a lower long-term demand in the Houston market.
With more storms brewing in the Atlantic, it is possible that incoming hurricane Irma’s damage will permanently shift interstate investments near the Gulf of Mexico downward as a result of a quick succession – a factor many investors will keep their eye on.