Last week, reports emerged about the formation of a tropical storm off the coast of Baja.
Over the following days, the storm gained strength and reached Category 4 status, just below the most severe Category 5 storms. There were concerns of catastrophic flooding, high winds, and record-breaking rainfall as this storm made its way towards Southern California, marking the first landfall of its kind in 84 years.
As I write this, Hurricane Hilary is currently passing through Northern California, Oregon, and Idaho, fortunately causing minimal damage. While there has been some flooding in the Inland mountains and valleys, Orange County has experienced little rain or wind. In fact, I’ve witnessed heavier downpours during El Niño storms.
You might be wondering what a hurricane has to do with commercial real estate. Allow me to make a few connections.
Resilience and preparedness
Just like communities and individuals prepare for natural disasters, businesses must have contingency plans and strategies in place to overcome unexpected challenges. Can your manufacturing business handle a power outage? Do you have an alternative shipping provider if UPS or FedEx go on strike?
Location matters
The path taken by a hurricane determines its impact, and similarly, the location of a commercial property greatly influences its success. Proximity to employees, suppliers, and customers is crucial. Businesses must carefully select real estate locations to ensure accessibility, visibility, and the ability to withstand economic hardships.
Risk assessment and mitigation
Just as the risks of a hurricane, like flooding and wind damage, need to be analyzed, businesses must assess the risks associated with their real estate. Are you protected in the event of a cyber attack? With many carriers leaving California, have you discussed your coverage with your insurance provider?
Adaptation and recovery
After a hurricane, communities and businesses must adapt to new conditions and focus on recovery. Similarly, commercial real estate ventures may need to adapt to changing market dynamics, technological advancements, or shifts in tenant requirements.
Infrastructure and facilities management
Hurricanes can cause infrastructure damage, prompting businesses to invest in repairs and maintenance to keep their operations running smoothly. Last month, I received a call from a client looking for a roofing referral. He didn’t anticipate rain in August but realized the importance of preventative maintenance.
Community impact
Hurricanes affect not only individual properties but also the wider community. Similarly, the state of commercial real estate in a region can impact the local economy, and vice versa. When a regional mall or a large retailer closes down, it forces tenants to seek alternative locations.
Economic resurgence
After a hurricane, communities often collaborate to rebuild and revitalize. This mirrors the collective efforts that can occur following economic downturns or changes in the commercial real estate market. In 2010, an investor correctly predicted that we were entering the best buying cycle of a lifetime.
Allen C. Buchanan, SIOR, is a principal with Lee & Associates Commercial Real Estate Services in Orange. You can reach him at [email protected] or 714.564.7104.
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