CRE In Disbelief As Continued Power Outages 'Cripple' Houston Economy

A week after Beryl slammed into Houston, more than 200,000 CenterPoint Energy customers remain without power as of Monday afternoon. Some of those customers are entire office buildings. 

While numbers are down from a peak of 2.26 million outages, some customers have an estimated power restoration date of Friday, July 19 — 11 days since the Category 1 hurricane hit the city, where it was downgraded to a tropical storm. 

The sustained power interruption and significant damage have led commercial real estate players to criticize the city’s infrastructure, express frustration over lost productivity and question their insurance brokers on what is covered and how they should handle repairs.

Aspire Commercial Real Estate’s office in Westchase still does not have power, founder Brandon Avedikian said Monday morning. 

“I’m not a government power distribution expert,” Avedikian said. “I just cannot believe in the Energy Capital of the World, in the largest city in the state and fourth largest in the country, that a Category 1 storm can basically cripple us for a week and counting.” 

He added that he would like to see CenterPoint take accountability and for someone to provide details about how this could happen.  

Aspire CRE is a professional services firm that can work remotely, but Avedikian is thinking of all the restaurants, nail salons, dry cleaners and other retailers that operate on margins.

“They can’t afford to go a week without power,” he said. “They can’t lose all that revenue.”

A group of restaurants in the Houston-Galveston area filed a class action negligence lawsuit against CenterPoint Energy, the Buzbee Law Firm announced Monday. 

The prolonged power outage and extent of the damage were both unexpected, as this hurricane caught everyone by surprise, said Coy Davidson, senior vice president at Colliers. He posted on social media platform X Thursday about how difficult it was to do business in the week following Beryl. 

I called 5 Houston based clients today. I have heard back from one. This week is almost over with no productivity as a result of the Hurricane. A CAT 1 Hurricane should not shut down the city for a week. There are still a significant number of people without power. Our…

— The Tenant Advisor (@CoyDavidsonCRE) July 11, 2024

Some previous Category 1 hurricanes have felt like a few hours of thunderstorms, and this clearly wasn’t that, Davidson said in an interview with Bisnow.

“I do think our infrastructure needs to be addressed,” Davidson said. “That’s probably a prevailing sentiment among all Houstonians.” 

With the storm hitting at the tail end of a holiday weekend, productivity was basically wiped for two weeks, Avedikian said. While his team was functional by midweek, many clients had to prioritize their family’s safety amid a power outage and extreme heat over closing deals, he said.

Davidson isn’t concerned about hurricanes from a business perspective in the long term, considering there have only been four significant hurricanes to hit Houston in the past 40 years, he said. 

Mooring USA, a disaster restoration and commercial construction company, had calls ramp up two to three days after the storm as people got power back, Business Development Manager Jana Aviles said. 

The environmentalist Mooring uses to test for microbial growth was the only environmentalist with power in Houston last week, Aviles said.

“All of the people that are asking for mold and asbestos testing, they’re just overwhelmed with work,” she said.

The longer a building goes without power, the worse the microbial growth will be, which will keep tenants out longer, she said, adding that it is extremely important to mitigate that damage.

Commercial tenants have questions about who is responsible for filing an insurance claim for their damage, themselves or their landlord, Rafail Insurance Agency owner Mark Rafail said.

Typically, damage to the interior build-out is the tenant’s responsibility, while damage to the exterior is the landlord’s responsibility, he said. But it can vary on a case-by-case basis. 

Clients also have questions about whether their policies cover business interruption and lost revenue due to the power outage, which is possible but not common, he said.

Business interruption coverage is typically triggered by physical damage, Rafail said.

“There are a lot of cases where ‘Power is out for five days, and I have $50K in steaks and meats spoiled,’” he said. “That is covered by utilities business interruption, and you have to be in an industry where a carrier will offer it.”

The last significant hurricane to move through Houston — besides Hurricane Harvey in 2017, which was more of a rain event — was Hurricane Ike in 2008. Mooring is offering a lot of advice to younger property managers who may have been in grade school then, Aviles said. 

Some property managers are worried about how much the mitigation will cost, but it will only get more expensive the longer they wait, she said. The recent frequency of storms, with Beryl following the May derecho, has helped Aviles quickly learn and settle into the position she started in March.

While back-to-back hurricanes aren't common in Houston, Avedikian said there is no way CenterPoint can fix its infrastructure issues before the end of this hurricane season, which is expected to see storm activity well above average.

“There’s no quick fix to the inability to transmit electricity after some wind blows through,” he said.