We need to talk about flooding – but what does that mean?

Coming off the back of a winter which, for many of us, felt interminably rainy (and yet it wasn’t actually the wettest winter on record overall!), flooding is becoming a hot topic of conversation, both locally (if your local social media groups are anything like mine, you’ll have seen constant posts about “that road” being flooded again) and nationally. Winter precipitation, on average, is on the increase, and the effects are starting to be felt more widely. But is your property due diligence wide enough to pick up those effects?

Property searches generally indicate how likely flooding is to occur at the property itself, and in the immediate vicinity. But what about the roads and railways a little further away? What if your warehouse is located, unknowingly, on or near “that road”, and the route to the nearest motorway is likely to flood after a heavy downpour? If your office can’t be accessed by commuters because the trains or roads are disrupted again, your property might start facing functionality issues even when the building itself has remained above water.

New analysis carried out by the Financial Times indicates that many main roads and railways in England are becoming vulnerable to flooding disruption, suggesting that flooding events could disrupt almost a third of main roads into Greater London, 40% of those into Birmingham and more than half of those into Greater Manchester.

Those figures are likely to increase as rainfall becomes more frequent or more intense, and in today’s online-retail, just-in-time economy, an inaccessible motorway or bypass has the potential to cause significant challenges to businesses. Property owners, investors and tenants may need to deepen or change the focus of their due diligence accordingly.

So, what does that mean?

Investors will become attracted to areas where improvements to infrastructure resilience can be demonstrated. Due diligence might include a more in-depth review of surrounding infrastructure, and a deeper consideration of whether flood defences and other mitigation measures are being actively progressed. Perhaps the scope of valuation might change, incorporating the risk of flood-related disruption to access and infrastructure into the final figures. Local authorities might come under pressure to show long-term resilience planning in order to draw in investment, and regions which don’t tackle the topic will start losing out as investors look to cover their own ESG accountabilities in the boardroom.

Lenders too may look more closely at how they assess their own lending risks and offer reduced loan-to-value ratios for properties in areas more likely to exposed to infrastructure disruption. Banks already often insist on assets having full insurance cover for issues such as flooding and subsidence; in the future they may scrutinise other insurance such as business continuity cover. Is your property insured for disruption caused by the local motorway being out of action?

So yes, we do need to talk about flooding – but the focus might be a little wider than you expected…

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