Shortly after Hurricane Harvey left Houston submerged in five feet of water, an article was published by the Washington Post analyzing the vulnerability associated with other low-lying East coast cities like New Orleans, Tampa, New York, and Miami. The piece is directly specific to flood risk, however, there is an important message that can be taken from it that applies to any city at risk of a natural disaster.

While Houston was being flooded, Mumbai in India was also victimized by a natural disaster. The all too recent Hurricane Irma also battered parts of mainland U.S and the Caribbean. Events like these amplify the vulnerabilities of our country, our world and our lives. However, there are lessons to be taken from them, such as how to build for future to make our cities increasingly resilient and essentially more competitive. These lessons can assist in transforming the reconstruction process from shifting a focus from not just building back assets but also on progressing forward.

 

An emerging fact from Harvey is that the U.S. places significant resources on food recovery, as opposed to flood avoidance. The bulk of FEMA provisions was utilized to assist those in need along with administering a national insurance scheme that places restrictions on what is built where. This scheme has been tied repeatedly to bailing out houses in high-risk flood areas that are frequently affected.

Houston has adopted a laissez-faire style of city planning. A lack of zoning allowed residential areas to spill out over a large land space, often in locations close to volatile floods. The city lacks sponge-like parklands and is predominately concrete which further diverts water into unplanned streetscape pools. Houston’s flat terrain and proximity to the Gulf of Mexico Hurricane hotspot represent additional vulnerabilities.   

Climate change may be the elephant in the room but there is no denying it is a key contributor to natural disasters. The seas are rising faster on the U.S. east coast than anywhere else in the world, amplifying the effects of storms and hurricanes. With studies demonstrating the likelihood of hurricanes gathering strength and frequency, growing coastal areas in particular are at significant risk.  

This challenge, plus the learnings from storms such as Katrina and Sandy that blasted New York and New Jersey in 2012, have forced city officials along with many real estate developers and investors to put more thought into defense strategies, not just relying on basic levees and pumps.

 

  • There are no  “one off” freak storms anymore

Hurricane Harvey launched unanticipated amounts of rainfall on Houston, an amount that would have overwhelmed any location, regardless of how well it was prepared. While chances of another storm on the extreme scale of Harvey are slim, crippling storms are not. The reality of climate change means that what used to be considered a once off freak storm of the century can now be expected to occur somewhere around the globe at least every couple of years.

 

  • Urban resilience planning makes good business sense

The act of urban planning, design, and development is crucial in understanding that a natural disaster will most likely occur again sooner rather than later. Resilience isn’t just relating to levels of preparation for major events, it is about understanding and drawing learnings from it. Resilient investments in infrastructure and approaches to land use can do a couple of things.

  1. They help cities protect its inhabitants more effectively
  2. They help foster business growth, long-term investment, and economic development opportunities. Overall, resilience or emergency planning makes the increased investments in people, assets and city amenities more secure and worthwhile.

 

  • More focus should be put on making less vulnerable locations more attractive for development and investment

An increasing number of cities are drawing their attention to directing investment and development at locations that are classified as less vulnerable. This is being achieved via concepts such as supportive zoning policies, financial incentives, strategic usage of city amenities. The purpose behind these actions is to create more resilient growth patterns. It is deployed by prompting a larger density of people, activities and businesses to areas that possess the infrastructure to thrive in changing conditions.

 

  • Input from the private sector is crucial in city resilience planning

In order to achieve long-term transformative results that add genuine value to an environment, there needs to be an element of involvement from the private sector in land use decision making to ensure local policies are effective and benefit the entire community.

The stark reality of climate change activities and its effects will sooner rather than later result in a standard practice of including emergency contingency plans as a 21st development measure.  This could be viewed as the one silver lining from storm Harvey as well as future crises. Enhancement in this urbanized world is inevitable but poor development is not – there are options to consider for assisting in further protection.  

Hurricane Sandy in 2012 alone caused $20 billion in insured damages and included cancellation of 20,000 flights along with the closing of the New York Stock Exchange NYSE for two days – something that hadn’t happened in more than a century.  Property developers and investors are now taking a closer look at resilience in light of these events.

 

Grosvenor – Resilient Cities Report

In 2014, international property group Grosvenor published the results of their three-year study on resilient cities.

The study focused on 50 of the world’s most important cities who represent the major focus of most global real estate investment and consume the majority of global resources. To measure overall resilience levels the study incorporated “adaptive capacity” with vulnerability. Results reported that Canadian cities are the world’s most resilient with inland Chicago and Pittsburgh coming next. In summary, the top ten most resilient cities are in North America and Northern Europe, while the ten least such as Mexico City are located in emerging markets.

The Grosvenor study was initially intended to assist the company’s internal real estate investment strategy, however, it was made public knowledge to assist in public planning, with many cities bumping up resilience planning on their list of priorities.

 

Portland, Oregon

Portland’s solutions include physical enhancements such as building codes and infrastructure and a focus on healthy and connected neighborhoods. A further example of physical resilience implemented is stormwater management rules for new developments. Single-family dwellings can also add a small “accessory dwelling unit” to further strengthen communities. If public transport was to be hindered, Portland’s army of popular food trucks would be dispatched to bring supplies to the city.

 

New York City

Naturally, being a coastal city New York is vulnerable to higher sea levels and storms. Additional challenges include the increase in inevitable natural disasters along with the growing gap in social inequality. An ambitious long-term plan was deployed with concepts varying from investment in green infrastructure to increasing economic opportunity. Based on the presence of strong governance, highly regarded educational institutions, adaptable financial tools and an investment in tracking systems, New York achieved a score of 100 in adaptive capacity and 80 in vulnerability – flying a score of 92 in overall resilience.

 

Vancouver

Vancouver ranked second following on from Toronto as the most resilient city of the 50 in the Grosvenor study. The city’s only major cause of vulnerability is its low lying coastal location. With a population of over 600,000, the city scores quite well in relation to governance, planning, and financing structures – resulting in a score of 98.

Despite the fact that many cities are busy working on plans and strategies to enhance their own resilience, several entrepreneurial real estate developers are taking matters into their own hands and are implementing measures that they think will work. One example was 1450 Brickell – a high rise commercial building located in downtown Miami between 2007 and 2010. After the devastation of Hurricane Wilma in 2005, Relia Group opted to use impact resistant blue glass on all levels of its new building – not just on lower floors as required by the code. This specific glass is designed to resist winds of up to 482 km per hour and costs twice as much as standard glass. 1450 Brickell is now fully leased in a submarket with high office vacancies, acting as a success story for resilient cities and buildings.

 

 

Bouncing back from disaster

How cities can avoid financial ruin following a natural disaster

Upon arrival of a natural disaster to a city, the government has to jump into action as lives need to be saved, infrastructure needs to be fixed and properties need to be rebuilt. This all requires financing and if the damage isn’t insured, the brunt of the fees will fall on the city.

More times than not, the damage is not properly insured. Only 1% of natural disaster losses in developing countries were insured between 1980 – 2004, while only 30% were in developed nations – based on findings from the World Bank. Naturally, these damages create significant drains on local budgets, which is usually coupled with a turndown in economic activity because of the actual disaster.

Question marks remain looming over coping mechanisms for these situations. Concepts like decarbonizing investments and the stimulation of the green bond market to fund environmentally beneficial infrastructure are topics of discussion. There is an additional tool that more and more governments are opting to assist with their post-disaster financial conundrums.  

Catastrophe bonds or “Cat bonds” as they are also known operate very like insurance, with a twist. The sponsor (it could be a city government, transit agency or insurance company) pinpoints what kind of disaster they want to protect against such as hurricane, storms, earthquakes etc. The second step involves choosing a specific, measurable trigger related to the event, for example, a Richter scale.

The bond is then sold to general institutional investors attached to large pools of money and modern modeling abilities. Should a natural disaster trigger the agreed conditions of the bond, the sponsor is rewarded with the money to utilize for response and recovery. If it is not triggered before the expiration of the bond, all investors get their money back.

Cat bonds are definitely a way to hedge against future disasters, and represent an obvious choice for cities that anticipate being hammered by the impacts of oncoming climate change. However, so far cat bonds tend to be gathered in developed countries versus developing countries. For example, a bunch of them exist for hurricanes in the Southeast of U.S, for windstorms in Western Europe and for earthquakes in Japan. There are limited cat bonds in the developing world, ironically where risks to climate effects are largest.

 

 

Using Reonomy to assist in identifying properties in high-risk locations

As the common theme emerges that a proactive approach is more important than a reactive approach relating to natural disasters, technological tools like Reonomy can be helpful for governments when making  natural disaster contingency plans. Reonomy contains 99% of all commercial properties across the United States with multiple sources of information about each, such as actual images of the property through a direct integration with google maps, property ownership information and parcel size. High-risk areas or locations that are anticipated to be hit could be mapped out quickly and easily on Reonomy through the radius search or custom draw feature. This would provide intelligence of all commercial properties in the area, helping estimate potential damage to areas and assist in rescue plans.

An example below is a roughly mapped out Miami, demonstrating a total of 311, 425 commercial properties. This could be anything from commercial office towers, apartment buildings, industrial warehouses, multi-family etc. Reonomy allows you to search and refine by asset type.

By zooming in and out on the map and customizing your search based on your requirements, you can see where certain buildings are clustered together, for example, indicating a financial district or industrial estate.

Sign up for a free trial here today.

 

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