After 2017's destructive hurricane season, the industry is becoming aware of the need for a standard damage assessment model, similar to ones already in place for other natural disasters.
A devastating hurricane season in 2005 saw Katrina deal a massive blow of $125 billion in estimated damage. Last year, Harvey, Maria and Irma had a combined economic impact of more than $200 billion. In the wake of such devastation, the industry observed a need for establishing standards for storm surge and wind damage assessment. Probable Maximum Loss (PML) guidelines already exist when it comes to other natural catastrophes such as earthquakes or fires, but not for hurricanes.
Commercial Property Executive reached out to Bob Geiger, national client manager & principal at Partner Engineering & Science Inc., to discuss the lack of such standards and the process of establishing industry-wide wind PML guidelines.
Partner Engineering & Science provides a variety of consulting and design services to businesses around the country and internationally. Is there a noticeable change in clients’ interest in storm/hurricane resilience?
Geiger: There was not much general interest until Hurricane Katrina, which resulted in a huge uptick among Gulf clients, but then died down due to a 10-year gap in severe hurricanes. With Harvey, Maria and Irma bringing a triple threat, some of the requests have ticked up. The idea of hurricanes as a potential deterrent or consideration factor for investment and ownership is too new—resiliency due diligence is something that lenders are going to require to see an increase in demand. Right now, the value of coastal development far outweighs the risks of occasional hurricane damage for property owners.
Can property owners reliably retrofit a building to have a higher resilience to wind/hurricane damage?
Geiger: While there are no guarantees for foolproof structural retrofits, property owners can greatly increase storm resilience through meticulous property condition assessments and implementation of building reinforcements. Particularly for businesses and investment properties, assessments should address big-ticket items such as the roof, HVAC and MEP systems and external walls. For example, if the roof has a large surface area, seams and panels can be reinforced to minimize tearing due to wind damage. Likewise, tilt-up properties or unrefined masonry found in many multifamily properties can be anchored to prevent total structural collapse.
Typically, a standard principal certified authority does not involve uncovering or delving into structures to look at their condition. Therefore, resiliency retrofitting must include considering deterioration of finishes, cracks or any vectors for water intrusion that hint at structural vulnerability beneath the surface. Ultimately, effective building resiliency depends on the engineer’s retrofit design experience, combined with meticulous, strategic building assessments.
Partner Engineering & Science was recently tapped by ASTM International to chair a committee which will establish wind PML guidelines. How does such a standard get set in place and what challenges are most difficult to overcome in this process?
Geiger: A commercial real estate standard evaluation is initiated when the conglomerate of financers, insurance companies and private owners decide they want to understand the risks to their property based on tropical systems and winds associated with them in a similar method to seismic evaluations. This includes wind-blown debris and storm surge, and the wind from the tropical hurricane itself—tornadoes are not included in this standard. The committee includes representatives from all different fields coming together to discuss their needs which are then merged and agreed upon as a unified standard. Financial stakeholders, architects, engineers, software designers for data assessment, owners and lenders, all participate.
One of the biggest challenges is that these stakeholders have different angles to approaching investments and ownership, and risk tolerances thereof. That’s why one of the goals of the wind PML standard is to establish different risk assessment levels for the client. The second challenge is that there are many more levels of property assessment and potential damage estimation in the wind PML than seismic because there are many more levels to a hurricane and tertiary effects. Therefore, it’s harder to predict what kind of damage this may incur.
To come up with a final number and offer remediation action items, it’s important to understand the risk landscape for different client types. Finally, there’s the challenge of conflict between software developers and engineers or architects because developers have proprietary information that they don’t want to reveal. Namely, how they set up their design and evaluation program. But the engineers and architects want to make sure that the equations are correct and the underlying analysis is appropriate so that the client gets the most reliable evaluation possible.
After these challenges are navigated and a unified standard is agreed upon, ASTM then approves that standard which becomes an industry-leading guideline.
In the absence of such a standard, how are buildings currently assessed in terms of potential hurricane damage?
Geiger: Several due diligence assessments can be performed to give owners or investors insight into potential hurricane damage risk, starting with a comprehensive property condition assessment. Wind loss estimates can take into account loss from both winds and wind-blown debris from nearby structures. Many states that are vulnerable to hurricane damage have updated their Uniform Building Code to include specific wind codes.
Far more damaging than wind and debris is loss from flooding and water damage. FEMA flood zone maps are a good rough start for evaluating flood risk. However, a more reliable and accurate assessment would be a land survey by a professional civil engineer. This provides three-dimensional topography that shows elevation and secondary issues that could impact the property after flooding—landslides, subsidence and soil erosion.
Investment in smart buildings and smart cities is growing. How can these systems be protected from cyberattacks in case of hurricane damage?
Geiger: With smart buildings and smart cities ever-reliant on automated operations systems, preprogramming properties to automatically or even manually adjust to an emergency operation mode is excellent resiliency protocol. Proactively maintaining emergency generator systems—many of which can operate on solar energy—and upgrading them to handle sustained periods of operation following a natural disaster is one of the most important considerations, especially for industrial and retail businesses, as well as residential buildings.
Prolonged utility loss disrupts everything from cellular service to basic services. Don’t forget safety concerns such as carbon monoxide exposure related to prolonged emergency or portable generator operations. Finally and most importantly, for smart building components, consider a contingency plan for maintaining accessibility and operation of brick-and-mortar systems infrastructure. Address IT security and cyber vulnerability, which peaks after disaster events, with a cybersecurity disaster plan and training.
Geiger: The biggest challenge for remediation plans is on one hand, the sheer unpredictability of storm strength and the degree and type of damage that may occur. Secondly, the variety of ways that a property might be affected by a natural disaster. There are many aspects to consider and, as such, resiliency preparation must be holistic and comprehensive. This includes evaluating engineering, mechanical and electrical systems, and possibly moving them above ground in case of flooding or storm surge.
For properties with hazardous materials, spill prevention plans should be in place, as well as assessing the safest storage conditions possible. In case of any kind of damage involving water, owners should prepare asbestos or lead paint operations maintenance plans. Lastly, insurance paperwork should be stored with a formal contingency plan that includes drinking water risks, safety precautions for machinery, life preserving safety kits and cash.
How much do forecasts influence market decisions?
Geiger: Commercial real estate stakeholders plan their developments and investments years, sometimes decades, down the line. Therefore, year-to-year forecasts do not sway market decisions one way or the other. Moreover, coastal development remains robust and some of the most desirable commercial real estate investment. Although resiliency considerations and natural disaster forecasts have not yet significantly influenced market decisions, some investors have begun using resiliency metrics in addition to yields and interest rates for long-term asset planning in their portfolios.
Photo courtesy of Partner Engineering & Science