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Hurricane Ian Won't Stop Development In Climate-Vulnerable Areas, But The Strain Is Showing

Even before it made a second landfall in South Carolina, Hurricane Ian had already caused billions of dollars in damage to the Florida Gulf Coast, placing a heavy burden on real estate and its associated industries to recover.

The effects of climate change on the Earth’s atmosphere and a multidecade surge in population and development in western Florida compound each other, making each successive natural disaster to hit the region likely to cause more and more damage.

Yet there seems to be little impetus to slow or reverse the buildup of low-lying areas that have become especially popular among the affluent, who are either relocating south or buying second homes.

A Coast Guard MH-60 Jayhawk from Air Station Clearwater flies overhead while personnel teams scan for missing people in Fort Myers Beach Sept. 29.

“Do you wring your hands and say, ‘Oh, no,’ or do you get back to work?” said Randy Krise, owner of Fort Myers-based Krise Commercial Group, which develops, owns and offers brokerage services for multifamily, retail and industrial real estate in the area. “I’m going to get back to work. It’s still Florida, and people are still coming.”

Population growth and development on the Florida Gulf Coast were made possible by extensive dredging and filling of marshlands, which has taken away swampland that once helped buffer storms.

“If you have a storm moving over an area [that] is swampy and has a lot of moisture in the ground, or where the border between land and sea is blurry, then it won’t have as many detrimental effects as if it goes over solid or dry land,” National Hurricane Center acting Deputy Director Michael Brennan said.

In Lee County, home to Fort Myers and the especially hard-hit island communities of Sanibel and Cape Coral, developed land increased by 21% while marshland decreased by 11% between 1996 and 2016 — years after the risks of the first post-World War II wave of development in the area were known to the federal government, the Washington Post reports.

Florida is one of a handful of states that have moved to wrest control of wetlands and waterway protection laws away from the federal government in the past few years, taking over management of a key Clean Water Act program in the waning days of the Trump administration.

That has prompted legal action from environmentalist groups claiming Gov. Ron DeSantis' administration would be overly permissive of construction projects in marshes and wetlands. The Florida Department of Environmental Protection has been issuing construction permits while the court case is ongoing, the The Pew Charitable Trusts reports.

“It's been a complete s---show,” former DEP staffer and senior attorney for Earthjustice Bonnie Malloy told the Pew Trusts of the state's oversight. “The goal is, ‘How quickly can we say yes to developers?’”

The Sanibel Causeway bridge connecting Fort Myers to the island of Sanibel was destroyed by Hurricane Ian.

Developers are responding to population growth and surging demand that caused rents in Lee County to increase by 45% in a 12-month period ending in May, according to data from rental website Zumper. Around 10,000 housing units are under construction in Lee County, Krise told Bisnow.

Lead times had already been longer than historical averages for most parts of the construction industry, especially in Florida. And for the next couple of weeks at least, new construction will be put on hold by many construction companies while they redirect their efforts to urgent repairs, said Tammy Hall, marketing and services director for CFS Roofing, which has offices in Fort Myers and nearby Naples. 

“We have 200-plus employees and we’re literally overwhelmed,” Hall said. “We’re all hands on deck, 24/7.”

Since Ian moved on, it has yet to rain again in Southwest Florida, but the next precipitation will be another catastrophe for any building that sustained exterior damage as a result of the 150 mph winds and huge storm surges that came when Ian made landfall.

“We’ve pretty much gone off our normal jobs and shifted to repairs to get people safe,” Hall said. “Then in a couple weeks, we’ll go to [commercial buildings with] flat roofs and stage things where we can.”

Two of Krise’s shopping centers in Fort Myers sustained major roof damage, and while he works feverishly to line up an insurance claim and repair at one of them, the other may be too badly damaged to save, he said.

“It may have to get torn down,” Krise said. “I may just have to start over.”

An airman from the Florida National Guard's 202nd Red Horse Squadron surveys a debris-covered road in Fort Myers Beach after Hurricane Ian.

There may be dozens of commercial properties that will suffer a similar fate, especially those constructed before Hurricane Andrew in 1992 prompted the tightening up of Florida's building codes, Hall said. 

“There are some older buildings downtown that weren’t in good shape, and some developers may say they’d just as well bulldoze the building and either build new or sell the real estate,” she said.

Whether for repairs, replacement or previously planned new construction, out-of-market companies and workers are descending on Florida to take on extra work.

The materials supply chain will have a harder time ramping up to meet a spike in demand, Krise and Hall said.

“From the business side of it, we will be doing well, but there’s more to it than ‘We’re just going to be really busy,’” Hall said. “The lack of materials is going to hit hard for us and any construction company.”

As a result of the supply-demand imbalance, the cost of materials is likely to rise, but that increase could pale in comparison to what will happen to insurance premiums. Krise expects insurance costs to double at most, if not all, of his company’s affected properties.

Because of the flood of payouts that insurance companies will be forced to issue in the coming months, there is concern companies with smaller balance sheets and coverage areas could go out of business or require billions in government aid to avoid doing so.

Though residential property owners are likely to bear the brunt of insurance shortfalls, commercial landlords retain the ability to pass the cost of premiums on to their tenants with common area maintenance charges. Even that option could be pushed to its limits in the wake of Ian.

“You may drive your tenants out of business, and then you’re paying that portion as a landlord,” Krise said.

To the extent any of these cost increases or challenges could prompt developers and investors to move their target areas, subtle shifts within the Florida Gulf Coast are more likely than outright abandonment of the region.

Krise, for one, plans to focus more on North Fort Myers, which is on slightly higher ground than the beach and low-lying islands that sustained the most catastrophic damage.

“I believe it’s going to be a safe haven,” Krise said of North Fort Myers.