Hurricane Ike Leaves Uncertainty in its Wake
- Sep 15, 2008
Ripples in the commercial real estate world will be felt for a long time after Hurricane Ike struck the Texas gulf coast and then worked its way north and east wreaking havoc in its path from Little Rock to Chicago. From ripping off sections of the retractable roof from the $352 million Reliant Park in Houston to shattering windows in downtown high-rises and sending papers and furniture into the streets there, Ike’s effects may be felt for years to come, experts indicated. Companies like Dallas-based Silverleaf Resorts Inc. evacuated resort guests and personnel from Silverleaf’s Seaside Resort in Galveston and are among those that don’t know the extent of damage sustained yet because they haven’t been allowed to return to the property. Local authorities in the affected areas have not yet projected when full access to the island will be granted to residents and business owners. “It’s too early to tell what the final impact will be,” Terry Clower, associate director for the Center for Economic Development and Research at the University of North Texas, told CPN. “We don’t really know how long it may take to get operational before any of the damage can be assessed.” Boston-based catastrophe risk modeling firm AIR Worldwide Corp. estimates that insured losses to onshore U.S. properties from Hurricane Ike are between $8 billion and $12 billion, with an expected loss of $10 billion. Ike made landfall at Galveston early Saturday morning as a strong Category 2 hurricane. Early damage reports included the destruction of several buildings lining the seawall. Several house fires in Galveston burned unchecked as firefighters were prevented from reaching them because of flooded streets and homes across the island are reported to have been damaged by Ike’s winds, according to AIR information. As indicated, AIR expects significant damage to glazing in Houston’s high-rise commercial buildings. However, because such buildings are well-engineered and built to stringent code, AIR does not expect significant structural damage. “In terms of the hurricane from this weekend, the adjusters and engineers are not able to get into all the areas to assess the damage on the large structures,” Clower said. “There are lots of windows lost in downtown buildings, but that is one element that is not structural in nature. There are thousands of commercial buildings that will have to go through engineering testing to determine if they’re safe and there was nothing to erode structural issues. Those same engineers have to evaluate roadways before traffic can even get into those areas.” Clower said multi-tenant property may take three or four months to repair, but the bigger question is whether or not tenants will be able to continue operations for that time in a temporary location or sustain the loss of income in that time. “What becomes critical from the facility manager standpoint centers around what is the business resilience of your tenants. Will being out of their offices cause the businesses to go down? Do they have the financial wherewithal to sustain no revenues during that time,” Clower said. Looking at the pattern from other disasters, Clower said, there are many businesses that manage to reopen but turn around and fail within a year because they just wiped out their resources while not operating or operating in a temporary location. “You can sometimes see a lag effect in vacancies–not just immediately, but in a year from now,” Clower added. Silverleaf Resorts, Inc. currently owns and operates timeshare resorts with a wide array of country club-like amenities. Based upon the preliminary reports of damage in the Galveston area, the timing of the reopening of the Seaside Resort is uncertain, company officials said. AIR Worldwide provides risk modeling software and consulting services. AIR founded the catastrophe modeling industry in 1987 and today models the risk from natural catastrophes and terrorism in more than 50 countries.