How Rising Sea Levels are Impacting Miami’s Commercial Real Estate Market
The inconvenient truths of climate change are no longer a minor inconvenience for south Floridians. Sea levels have risen an average of one inch per year in the Miami area– causing a dramatic shift in the local political and real estate climates. Estimates vary greatly on how much sea levels in southeast Florida will rise in the upcoming years. Conservative predictions project as little as two feet, with more comprehensive models projecting as much as six feet by 2060. The Florida Keys, for example, sit just six inches above sea level in some areas, while most of Miami’s prime South Beach real estate sits just four feet above the sea.
Comprehensive models, which were explored in a 2015 study by Princeton and Potsdam University professors, take into consideration established relationships between greenhouse gas emissions and previously unexplored connections between sea warming and sea level increases. The study 2015 effectively illustrates the compounding effect of rising sea levels, a notion prevalent in the science community.
Previously, rising sea levels were explained as a simple mass problem: millions of tons of melting ice sheets raise the water level like ice cubes in a glass of whiskey. However, global warming also has a volumetric component: as seawater warms it expands, not only causing more ice to melt faster, but making coastal areas more susceptible to regular changes in the lunar cycle, planetary alignments, and tides. Natural occurrences, like a new moon, can lead to the streets of South Beach being besieged by salt water for days.
Southern Florida’s susceptibility to rising sea levels is due to the porous limestone that allows seawater to reach several miles in land, flooding roads, homes, and businesses with potentially damaging salt water. However, Miami Beach’s Mayor Philip Levine is leading the charge of Southern Florida politicians determined to beat back the waters, staying that “[he’s] the Mayor of Miami and not Venice or Amsterdam.”
However, despite the stark future projected by the science community for southern Florida, many are optimistic. Rhonda Haag, Monroe County’s Chief of Sustainability says “All is not lost. We’re good for the next 15 years but we’re doing as much as we can to prepare in advance.”
Miami leads the charge of American cities fighting flood mitigation
Preparing for the future is a top priority for Mayor Levine- engineering solutions can help boost city’s reputation as more than just a party hub, but also an an innovation hub, while keeping real estate prices on their current trajectory. The later is crucial since real estate taxes account for the majority of Miami-Dade county’s $7.1 billion annual budget (2016).
In 2015 the City of Miami Beach created a plan to allocate $500 million to be spent raising roads, installing seawalls, and creating a network of 80 water pumps. Two years into the six year long project over $100 million is slated to be spent in 2017 with many of Miami Beach’s roads already under construction. The push is a concerted effort made by Levine, and the mayors of Broward, Monroe, Miami-Dade and Palm Beach counties through the Southeast Florida Climate Compact which works to mitigate the effects of rising sea levels, and keep property values in southern Florida from imploding.
The regional alliance, originally formed in 2009, has worked tirelessly to reverse misinformation campaigns (climate science deniers), and inaction on the part of state and federal policy makers. Their hard work garnered the attention of the EPA’s former Deputy Administrator stating that South Florida’s efforts should be a model for the nation’s coastal cities.
A rising tide lifts all commercial real estate prices
The hard work seems to be paying off- three of the region’s largest commercial real estate developments are in downtown Miami and Miami Beach. While developers are aware of the frequent flooding and rising sea levels their appetite hasn’t been abated. Lack of financing is what is slowing down the market, not a reduced appetite for risk.
Great real estate deals in Downtown Miami’s Brickell neighborhood, usually priced around $32 million, are becoming rarer. One reason is that traditional bank financing is pulling out of the region as it becomes more difficult to accurately forecast foreign investment demand in light of the rising sea levels.
Despite the well publicized floodings, Miami real estate is still a great buy to foreign investors, albeit to a lesser degree as the dollar remains strong against foreign currencies. As a result, many developers still see Miami as prime for investment especially for smaller, boutique deals.
Simply put, they aren’t making anymore land in Miami, and formerly not so hot areas (at marginally higher elevation relative to Miami Beach) have remained hotbeds of investment for years following the recession. It doesn’t hurt that the real work carried out by the Southeast Florida Climate Compact has helped curb the issue, aided no doubt by a fair amount of public and community relations by the Miami Beach Mayor’s office.
However, the efforts are to be taken with a grain of salt according to Robert Meyer, Co-Director of University of Pennsylvania’s Wharton Risk Center. “Under higher sea levels, the Biscayne aquifer—where southeast Florida draws its drinking water—will increasingly suffer from salt-water intrusion, a problem for which there is no foreseen solution other than the investment of billions of dollars in water-treatment facilities.” Meyer continues, that the persistence of investors is a collective effort to keep the market afloat long enough so that local governments can buy their way out of the looming crisis. “Rather than sounding alarms and cutting back on development, there is an implicit sense that the best approach may be, ironically, to do the opposite.”
Only time will tell which version of the future will prevail.