How to Protect Your Investments from Natural Disasters

When it comes to natural disasters, the unexpected is becoming more common. Wildfires, tornadoes, floods, and hurricanes have battered properties from coast to coast—with no signs of slowing down.

According to the National Oceanic and Atmospheric Administration (NOAA), there have been six U.S. weather and climate-related disaster events in 2019, each with losses exceeding $1 billion.

The good news is that a growing number of builders and developers are designing projects using materials that can withstand the elements, making them smart, long-term investments. For existing properties, there are steps you can take to help reduce the risks and damages from natural disasters.

Flooding is the most common source of damage from natural disasters. Even properties away from coastlines are at risk. Hurricane storm surges, extreme rainfall, and rising waterways can spill over, causing significant damage.

CoreLogic's 2018 Natural Hazard Report highlights one recent example. When Hurricane Florence hit the Carolinas in 2018, approximately 700,000 residential and commercial properties experienced catastrophic flooding and wind damage. Estimated flood damage caused between $19 and $28.5 billion in losses, and upwards of 85% of residential flood damage was uninsured.

Those are staggering numbers. At the same time, flooding is something for which you can prepare ahead of time.

The Federal Emergency Management Association (FEMA) monitors and lists geographic areas that are in floodplains and Special Flood Hazard Areas. These areas are at increased risk for flooding, so weighing these precautions matters. Consider moving expensive and essential equipment, such as generators, out of basements or areas likely to see an impact from floods.

Many property owners are also creating emergency plans to share with tenants. It all starts with knowing your local risks. Dealing with flooding from a hurricane is very different than hunkering down during a tornado. In an earthquake-prone region, for example, a lease may mandate that loose furniture such as bookshelves must be secured to walls.

For commercial properties, assess potential hazards both in and around the building. Ensure rooftop antennas stay secure (or are removable, if needed) and cut tree branches that could fall and cause damage. Also determine if including lease provisions requiring tenants practice emergency disaster preparation, create clear evacuation plans, or purchase additional insurance are necessary.

Explore flood insurance packages to help recoup the costs of damage should a worst-case scenario come to pass, and recommend it to your tenants. Check FEMA's Flood Map for particular dangers or hazards related to flooding in areas you're considering for investment.

Some property owners and investors are building with natural disasters in mind. Accordingly, builders across the country are looking to move beyond traditional structures—especially in disaster-prone areas.

These decisions are often driven by safety. Tony Aina, a green building guru at Chaney Enterprises, a ready-mix and related construction supplies provider, explains: "More of the conversation surrounding what materials to use for construction is thinking about the resilience to natural disasters, specifically fires."

Insulated Concrete Forms (ICFs) provide one solution that has been attracting property owners. These insulated foam blocks are manufactured with built-in rebar that lock together when concrete gets poured into them. It makes ICF more wind-, water-, and pressure-resistant than traditional wooden structures.

For many developers, these materials are smart investments, says Aina. "Investors are realizing the money savings goes right back into their pocket. They're also starting to understand the energy cost savings and that the ICF material is more affordable over time."

David Azar, owner of Eastern Bay Management Corporation, recently completed construction on the mixed-use Chesapeake Village Center in Eastern Maryland. He wanted to use building materials that provided more protection than that of traditional wooden framing.

"Safety is the most important thing to consider when building a multi-tenant structure that is shared by businesses and other residential tenants," Azar explains. He also highlights the shared costs, often in the form of insurance premiums from damage-prone buildings as reasoning too. "We all pay the price with our insurance premiums for structures that are simply not resilient."

Azar was happy he had used ICF for the Chesapeake Village Center. In 2017, a tornado touched down just a half-mile away, mid-build. The property saw no damage.

Beyond ICF, concrete is another popular material because it is fire-, wind-, and hurricane-resistant. In California, builders are using flexible foundations, shock absorbers, and even innovative materials such as polymers in construction to help defend against earthquakes.

Exploring alternative materials in the planning stage can help uncover how to build properties that are both safer and potentially provide savings over the long run.

Natural disasters aren't slowing down anytime soon. Many property owners and investors are being proactive in seeking ways to build that can withstand the new normal. Fortunately, there are innovative options for building materials, as well as proactive steps to reduce risks and damage while still keeping an investment smart. For Azar, building a property that would stand the test of time was an important consideration.

"The durability of this building provides security with current occupants, as well as future generations, who call it home."