Hurricane Risk and Commercial Properties
Florida is known for beautiful weather, but there is a huge concern: hurricanes. Hurricanes are major weather events that damage properties. They affect communities and economies in various ways.
For those interested in purchasing commercial properties, hurricane risk is a critical factor due to the state’s geographic location and vulnerability to severe storms. Hurricane risk can lead to financial implications. Understanding the risk of a commercial property being affected by a hurricane or other serious weather event can be complex. However, there are tools that can help lenders, investors, and developers anticipate hurricane damage when a storm approaches.
A recent report by Moody’s outlines how lenders can anticipate hurricane risks and measure damage. The techniques cover four complementary approaches:
- Real-time event analytics show which properties are likely to be damaged by wind, storm surge, and precipitation.
- Post-event modeling, which can estimate potential property-level damage
- Insurance industry loss estimates communicate, which can determine how an individual hurricane compares to others in terms of impacts on the insurance industry.
- Assessing properties’ potential exposure to damage from extreme weather events over the life of the loan
Hurricane Risk Factors
Here are some key considerations:
- Geographic location. Coastal properties face the highest risk due to storm surges and wind damage. Inland areas are less prone to storm surges but still face risks from strong winds and flooding.
- Building age and construction standards. Properties built before updated building codes may be less resilient to hurricanes. Wind-resistant designs, impact-resistant windows, and fortified roofs significantly reduce risk.
- Flood zone designation. Properties in FEMA-designated flood zones are at greater risk of flooding and may require flood insurance. Coastal High Hazard Areas (Zone V) are especially vulnerable.
- Storm surge and wind damage. Storm surges can cause catastrophic flooding, particularly in low-lying areas. Hurricane-force winds can damage roofs, signage, and external structures.
Here are some tips for those who already own commercial properties:
- Conduct a risk assessment to identify vulnerabilities.
- Create a disaster preparedness plan for staff and operations.
- Ensure compliance with local building codes and consider exceeding them where possible.
- Stay informed about storms through real-time tracking and forecasts.
Consider these types of insurances to protect your property:
- Windstorm insurance: This covers damage caused by hurricane winds and is often required for properties in high-risk zones.
- Flood insurance: Separate from standard property insurance, this insurance is mandatory for properties in flood zones with federally backed loans.
- Business interruption insurance: This insurance covers income loss during and after a hurricane.
Learn More About Commercial Real Estate
There are a lot of risks that come with buying commercial real estate. Weather conditions can be a huge deal, especially in Florida.
Orlando commercial real estate lawyer B.F. Godfrey from Godfrey Legal can assist you with purchasing property. While commercial real estate investments can be highly profitable ventures, these investments come with legal concerns that need to be addressed at all stages. To schedule a consultation, fill out the online form or call (407) 890-0023.
Source:
urbanland.uli.org/capital-markets-and-finance/hurricane-miltons-impact-on-commercial-real-estate-navigating-financial-risk
