Will memories of Hurricane Harvey scare business away from Houston?

DALLAS – In recent years, Houston's economy has weathered oil busts and flooding, buoyed in large part by the increasing diversity of its employers.

But now, the nation's fourth-largest city has been confronted with a challenge that could overpower its economic prowess — a perception that it's prone to catastrophic flooding that regularly grinds business to a halt.

Economic development experts are worried the devastation wrought by Hurricane Harvey could be a tipping point for businesses, whose leaders increasingly weigh factors far beyond available office space and cheap land when they decide where to bring jobs.

And that prized economic diversity? It could become a double-edged sword as the region not only rebuilds but tries to recruit employers.

"In the eyes of our clients … it's easily a three- to five-year mental block they'll have on locating in that region," said King White, CEO of Dallas-based corporate relocation consulting firm Site Selection Group. "Companies are going to think real smartly about where they can reinvest if they can pick up and move."

While efforts to rebuild the Texas Gulf Coast will provide a short-term economic boost, lingering concerns could be a major drag on the region's long-term growth prospects.

"The [Tax Day] flood in 2016 raised eyebrows," said Suzanne Mulvee, director of research for commercial real estate information firm CoStar. The April flood dumped more than 17 inches of rain on Houston, killed at least six people and flooded hundreds of homes.

For years, Houston has been among the country's most populous cities, and its ­suburbs have topped lists of the fastest-growing.

When Hurricane Ike hobbled Houston in 2008, the metro area had a million fewer residents. Last year, Harris County, the home of Houston, added the second-most residents of any in the U.S. after leading eight years in a row.

Certainly, energy continues to be a major driver for Houston, with the likes of Exxon Mobil Corp. employing thousands. All of the major energy and chemical companies have extensive operations in the city and attract a host of companies that serve those industries.

But according to the Texas Workforce Commission, which tracks employment across the state, just 3 percent of the metro area's jobs were in natural resources and mining as of July.

But demand has continued to push builders to keep building in areas that could flood. According to CoStar, 5 million square feet of commercial real estate is under construction in Houston's flood plain.

As of last week, a Greater Houston Partnership survey found that 90 percent of the organization's board members' offices were back up and running. About half of those had been back in business within a week.

While CoStar reported that more than a quarter of Houston's commercial real estate was at risk of flooding — encompassing more than $55 billion in property value — Mulvee, the firm's director of research, said high-end luxury apartments tend to be outside the flood plain.

And growth in that category is what's driving development in Houston's denser core.

That's bad news for lower-income residents living in the bulk of the apartments that flooded. But Mulvee said it's useful in gauging whether developers will be scared away from the market entirely.

More than baseline recovery, though, Mulvee and other economists are predicting a short-term economic "pop," as she described it.

Amy Liu, director of the Brookings Institution's Metropolitan Policy Program, closely tracked Hurricane Katrina's economic effects after it hit the Louisiana coast in 2005.

She said construction and hospitality workers who moved into New Orleans to do their jobs after Katrina found a shrunken housing supply. As a result, home prices rose.

But looking ahead, Liu said, there are limits to comparisons between two of the costliest disasters in U.S. history.

For one thing, she said, Houston as a city has more wealth, "and that is a major predictor for rebuilding and resilience."

On the other hand, because much of Houston's population moved to the city — as opposed to the large portion of New Orleans residents pre-Katrina who were born there — they may be less inclined to return.