Is Floodplain Land Worth Anything?

Does land located within the floodplain (FEMA Zone AE) provide value? When speaking to brokers throughout Dallas-Fort Worth regarding land located partially in the floodplain, they will often say sale prices are based on usable area and no value is given to the area within the floodplain.

Before we dig much deeper, I am required to state that the following information cannot be used in any capacity without prior written consent from the author.

Floodplain land area is typically limited to development of horizontal improvements only (sidewalks, landscaping, etc), unless the site is built up and brought out of the floodplain. Note that this can vary market to market as I have seen buildings built within the floodplain (Zone AE). Those properties typically require flood insurance. Since horizontal improvements like parking areas, parks, and green spaces can be built within floodplain areas, in most cases it does provide at least some value.

Let’s discuss use for a minute. There are parking lots in central business districts that provide significant value due to the lack of available parking typically in a highly dense area. There are parking areas within industrial parks or along highways specifically for 53’ trucks. Dog parks, walking/biking trails, or green space for an adjacent apartment property would provide usability and value as well.

Below are a few multiple paired sales analyses of industrial land encumbered by floodplain that transacted compared to sales of similar industrial land that were not significantly encumbered by floodplain.

This first analysis indicates that the floodplain land is only valued at 17% of the typical market value. The average sale price of industrial land in this area is $4.24 per square foot. The land 100% encumbered by floodplain transacted for $0.73 per square foot. This is 17.29% of the unencumbered land. However, let’s take a look at floodplain land that was developed after it was purchased. We can compare it to similar land in its area. See below.

In the above analysis, we have found infill industrial land sales that were 100% encumbered in the floodplain, and one within the floodway (but it has a levee to protect it). We compare these transactions to similar industrial land sales in the same time frame and similar in size. As you can see, these buyers didn’t reduce the sale price. The buyer of one of the above properties reported spending $1.50 per square foot building up the site. This additional expense is not included in the price listed above.

For my visual readers, see aerial below.

Overall, a seller could expect (and I’m sure many sellers have received) $0 for land in the floodplain based on what brokers tell us. However, when looking at paired data, there are certainly circumstances that could enable floodplain land to be worth just as much as land outside the floodplain. As you can see from the analysis above, it really depends on many factors to determine just how valuable the land encumbered by the floodplain is worth.