The Effect of Natural Disasters on Commercial Real Estate Professionals

By Guy Gray | CRE Professionals

May 23
The Effect of Natural Disasters on Commercial Real Estate Professionals

In August of 2017, a category 4 hurricane made landfall in Texas, where it would leave behind a devastating amount of destruction. Hurricane Harvey greatly impacted many Texas cities, including Houston, where certain areas of the city received more than 50 inches of rain. Major streets that were filled with bustling traffic just days earlier became crowded with boats filled with residents seeking help, or locating those that needed help. Countless Houstonians were stranded in their homes as the water took over. Entire sections of the city were cut off as the flood created temporary barriers. The Buffalo Bayou filled with water and city officials were faced with a major decision that had a grim outcome no matter the choice – release water from the dams and flood countless houses and businesses or leave the rising water to potentially overflow past the emergency spillways, which could cause an even bigger disaster. When it was all said and done, Harvey changed Houston forever, and the city is still working towards recovery to this day.

The Quarem office is located in the heart of downtown Houston. We all feel extremely blessed to say that our homes and business weren’t impacted by the flood, but we witnessed first-hand the aftermath and the damage that Harvey left behind. When faced with the question of how natural disasters impact commercial real estate and the professionals within the industry, we see beyond the loss of a property or building. Housed behind the walls of any commercial property, be it an office building, retail space, or warehouse, are thousands of important assets that are used daily to support the operation of a business.

Consider where you spend most of your time each week. You are probably at work, at your desk, in the conference room, in the warehouse, the office kitchen, etc.. It could be a multitude of different types of space, but the point is that you spend a great deal of your time at work. You make your space your own, whether it be through your company’s branding or a few pictures framed at your desk. What if a natural disaster of any sort swept through tomorrow? Do you have the details of your commercial space organized? Do you have a list of every single physical asset catalogued for insurance purposes? In the wake of destruction, what are you responsible for in terms of your lease, whether you are a landlord or a tenant? What are your obligations moving forward?

This article isn’t intended to scareyou or convince you to run to the closest grocery store and buy the entire supply of water and canned goods. It’s intended to make you think about the importance of your space and each item in it. It’s not fun to think about the impending doom of a potential natural disaster, but it’s a necessity to prepare when you own or lease space that is vital to your organization’s operations.

Preparation Tips

Make a detailed list of the physical assets within your space

The goal of this exercise is to have an updated list of all of your assets for insurance purposes. The added bonus of the list is that you will know exactly what you have to replace if anything is lost or damaged. In the meantime, this exercise is a smart way to track the lifecycle of your assets. This way, you will always have an idea of where it’s located, who uses it, the maintenance history, and the critical dates related to it.

Not sure where to start? Pick some of the assets listed below and start building your list!

  • Computers
  • Phones
  • Servers
  • Servers
  • Furniture
  • TVs
  • Cars/Vans/Trucks
  • Machinery
  • Kitchen Appliances
  • Light Fixtures
  • Marketing/Event Materials
  • Artwork

Create digital copies of your important documents

It’s safe to say that these days the majority of the important documents that we work with on a daily basis are already in digital form. It’s possible, however, that you have hard copies of documents, perhaps created before technology took over, that would be greatly missed if lost during a natural disaster. Consider this list as you brainstorm:

• Leases
• Space plans
• Insurance policies
• Meeting notes • Receipts
• Photos
• Legal forms
• Proposals

Back up your technology

Say your computer gets whisked away in a tornado and taken to the Land of Oz tomorrow, what happens to all of your important data? Luckily, it seems like it’s easier than ever to store your data in the cloud or on a server so take advantage and make sure that your data is covered in case of loss.

Determine what happens after the disaster

Force majeur, meaning “superior force,” is a lease provision that determines what happens with your commercial space after an event occurs that is out of your control. A “superior force” could be a natural occurrence like a fire, hurricane or tornado, or it could be an event like a riot or terrorist attack. Essentially, the provision is added to a lease in order to clearly define the obligations and responsibilities of both the landlord and tenant in case a superior force comes knocking.

Tenants – take a look at your leases and see what they say about force majeur.

Landlords/Property Owners – Do you have a force majeur in your leases?

Additionally, it’s important to consider what happens internally when disaster strikes.

Tenants:

  • Say your space floods, where does your operation relocate to while you are determining a solution?
  • What does the recovery process look like?
  • Do you have a safety plan in case disaster occurs during your operating hours?
  • Are you aware of your building’s safety procedures?

Landlords/Property Managers:

  • Is there a plan for your recovery process?
  • Is your safety plan up to date and well known by your tenants and staff?
  • Do you have an emergency communication system in place? How often do you test it?

The Quarem Vantage FF&E Management feature was built with events like natural disasters in mind. We wanted to give our clients a tool that would help them with their daily operations, but also give them peace of mind. The feature allows users to create a profile of each of their physical assets, where they can take notes on maintenance and usage updates, create automated reminders for any critical dates related to the asset, store important documents like receipts or insurance policies, and report on their entire catalogue of assets. Additionally, Quarem’s Lease Administration Software helps users store and track all of their critical lease data. Users can quickly access details like insurance policies or lease options with the click of a button. Click here to learn more about our FF&E Management and Lease Administration features. Additionally, you can schedule a live demo with a member of our team to see Quarem Vantage in action.

About the Author

Guy Gray serves as Chief Operating Officer overseeing our technology and client services teams. He is responsible for guiding Quarem application development, networking and security, as well as new client implementations.

>