The countries that make up the United Kingdom are frequently described according to their differences, but something they share is the vital role that rivers and coastlines have played in the development of their towns and cities. Historically important centres of population, commerce and industry have grown up along waterways and coastlines over centuries. Today’s investors in the UK property market cannot afford to ignore the risk of flooding that this gives rise to.

In the last decade, hardly a year has gone by without notable flooding affecting parts of the UK. Last winter, flooding hit the headlines again, with large parts of the country affected by serious flooding from the sea, rivers and groundwater over a four month period. The media focussed on the plight of families forced from their homes, but along with the 7,700 homes flooded, the Environment Agency estimates that 3,200 commercial properties were also affected by flooding from December 2013 to March 2014.

Flooding is one of the critical environmental risks facing commercial property in the UK. The direct damage to buildings caused by flooding can be bad enough, but these are compounded by trading or rent losses while lengthy repairs are undertaken and the potential negative publicity associated with flooding. Furthermore, impacts on supply chains or transport and logistics networks can mean that even companies not flooded themselves can suffer financially.

Following a number of high profile flood events in recent years, these factors are starting to have a material impact on the long-term value of commercial property and investors are becoming savvier when it comes to investing in riverside and coastal locations. This was more than evident on a recent sale of an asset only minimally impacted by the floods of last year, which, during the due diligence stage, lost all interest from institutional investors and sold, with a 10% reduction in value, to local property developers.

uk-flood1While politicians struggle to agree on a cause and response, scientific conscensus points towards climate change resulting in increasing frequency of storms in the UK in future, against a backdrop of rising sea levels. Experts predict that this will mean an increase in the frequency of flood events. The Committee on Climate Change estimates that the number of people working in commercial properties at high risk of river or sea flooding may double by the 2050s (at present,an estimated 28,500 commercial properties are at high risk, with greater than a 1 in 30 chance of flooding in any year).

Recent government announcements on the next six years of investment in flood defences will be welcomed by many of those recently flooded. There remain questions, however, about the government’s focus on ‘big ticket’ capital projects, with many asking whether maintenance of existing assets is being sacrificed in the drive for capital spend.

Others would prefer the term ‘flood defences’ to be phased out altogether, with natural flood management and sustainable drainage offering more effective, but perhaps less spectacular, methods of maximising the benefit of taxpayers’ money.

In reality, there will never be enough money to address all flood risk to a satisfactory level and government will rightly prioritise limited funds on protecting homes over businesses. The onus remains with property owners to understand their risk and take action to minimise the impact. The headaches facing the government in allocating this funding emphasise the level of risk we face in the UK, as an island nation with a vast coastline and our notoriously changeable weather. With climate change expected to increase risks in the future, flood defence funding will continue to attract high media and political interest, and for every town perceived as gaining from government spend, there will be others feeling they are losing out.

Whilst the government and insurance industry have agreed the terms of the ‘Flood Re’ scheme that will ensure that all residential properties at high risk of flooding can obtain flood insurance, no such scheme would be appropriate for the diverse range of insurance products applicable to commercial property.

uk-floodA range of techniques exist to protect against flooding, from raised walls and banks designed to keep entire sites dry, to building modifications such as flood doors, raised entrance thresholds and waterproof airbricks. Costs can vary considerably, and it is imperative that an accurate and up-to-date assessment of the likelihood and consequence of flooding is obtained to inform the selection and design of any mitigation measures. The type of flooding, its precise mechanism and its duration all require consideration, as does the potential impact of any proposed measures on the normal day-to-day running of the businesses occupying a site.

The UK is rich in data and knowledge about the risks of flooding. Flood maps are available online, which everyone considering investing in UK property should be encouraged to investigate. It is important to note, however, that these maps are based on a range of underlying data that are subject to a number of assumptions. Furthermore, they consider only the likelihood of flooding, not the consequences at a specific location. Areas flooded a couple of inches are shown in the same blue shading as those flooded to head height. Specialist flood risk expertise is often needed to interpret key messages from these resources effectively, and to quickly identify whether flooding is of sufficient risk to halt an otherwise attractive investment transaction.

For the overwhelming majority, waterside sites remain deeply attractive places to live, work and play, but investors in these locations need to be able to take an informed view about the risks to their investment that a ‘once in a generation’ flood event may pose at some point down the line.   An informed review of the risk of flooding affecting an asset, now and throughout the lifetime of an investment, is absolutely vital for any property investor undertaking due diligence.


Ian Joyner is an Associate Director (Flood Risk) in CBRE’s Building Consultancy team


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