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Flood risk hurts property market

WEDNESDAY, NOV. 25, 2009

Green River Valley businesses, residents seek higher ground

KENT, Wash. – Group Health has stored its records in a leased building in Kent for 16 years. Next month it will move that operation up the hill to SeaTac.

One big reason: SeaTac is more likely to stay dry.

The Kent building “was right in the path of the potential flood” that has been the talk of the Green River Valley this fall, spokeswoman Katie McCarthy said.

So Group Health signed a lease in October for 26,000 square feet in the new ProLogis business park in SeaTac. “They were very insistent on getting out of the flood plain as soon as possible,” said ProLogis’ Alex Vulic.

The much-publicized flood risk in Kent and other valley cities is sending ripples through South King County real-estate markets, both commercial and residential.

Some valley businesses, like Group Health, are relocating to higher ground or contemplating it. Some businesses that were considering moving into that area from elsewhere are backing off.

“Before, rent and amenities were the issue” in lease negotiations, said Nick Fletcher, a sales associate with brokerage Colliers International who specializes in South King County office properties.

“Now it’s, ‘Is it or is it not in the flood zone?’ “

On the residential side, some agents who work in the valley say flood fears are driving sales and prices down. Marti Reeder, a John L. Scott agent in Kent, said she’s advising all prospective sellers with homes on the valley floor not to bother listing them until March.

Right now just looking at a puddle seems to spook most buyers, she said: “It’s at a virtual standstill.”

Beleaguered property owners and city officials hope an announcement by the Army Corps of Engineers earlier this month will provide some relief. The corps said temporary repairs at Howard Hanson Dam, upstream on the Green River, had reduced the risk of flooding in the valley this winter from 1 in 3 to 1 in 25.

It’s hard to quantify the impact of the flood risk on valley real estate. The threat didn’t become regular front-page news until September, too recently to show up in most market statistical reports.

The Green River Valley is the state’s premier warehouse and distribution center. It’s home to 1,000 businesses and more than 20,000 residents.

Most aren’t fleeing. Some just can’t.

For most manufacturers, the cost of moving their equipment is prohibitive. Many office and industrial tenants are locked into long-term leases; they can’t afford to relocate now and make two monthly payments.

Two-thirds of Kent residents who live in the potentially affected area are low-income, said Ben Wolters, Kent’s economic-development director: “They don’t have many options.”

Economic-development directors in cities above the valley, such as SeaTac and Federal Way, say they’re fielding more calls from valley businesses looking to move. Meanwhile, their counterparts in Kent and Renton say they’re working hard to persuade businesses to stay.

Commercial brokers say some business tenants who are staying also are lining up backup space elsewhere. Others are using the flood issue to push for lower rents.

Huge sandbags also line the levee above the river in The Lakes, a huge residential development in Kent. More sandbags and black plastic sheeting surround some condos and apartments.

“If buyers were cautious before, they certainly will be scared off by these measures,” Kathi Jones, a Lakes homeowner, member of the community’s board and John L. Scott real-estate agent said in an e-mail.

But valley city officials and property-owners suspect much buyer and tenant fear is based more on emotion than fact. And there are signs that the Corps of Engineers’ recent downgrade of this winter’s flood risk may be starting to stem the tide.

Ryan Hopkins confronted the flood question head-on with humor when he put a house he owns near downtown Kent up for sale last month. He offered to throw in two Jet Skis for buyers to use as “evacuation vehicles” in case the house became waterfront property.

The ploy didn’t work. A few weeks ago Hopkins said many prospective buyers were steering clear of the valley; he feared the house might not sell for months.

Then a buyer surfaced. Now Hopkins says the sale without the Jet Skis could close as soon as next week. “When they reduced the risk, that probably helped some,” he says.

Before the corps’ announcement, Teresa Hutchens received an application to rent a house she owns on Kent’s East Hill above the flood plain from a woman with a disabled son who lives in an apartment on the valley floor.

The woman sounded terrified, Hutchens said. Her application was approved.

She canceled the day after the corps downgraded the flood risk.


 
Tags: Flooding

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