Hurricanes are unavoidable in South Florida, but you can take some steps to protect yourself and your properties if a big storm hits.
In 2017, Hurricane Irma plowed through South Florida, knocking out electricity to over 75% of customers in the area. Many buildings didn’t have their power restored for about a week, while it took even longer in other parts of the region.
The flooding was widespread, as Miami-Dade County had blocks with six feet of water in the streets while Broward and Palm Beach Counties had areas with three-foot inundations. Locals also dealt with extreme winds, although the strongest gusts were on the west coast in Collier County, outside major metropolitan areas.
The storm did an estimated $50 billion worth of damage in Florida, making it one of the most expensive natural disasters in the state’s history.
It’s no surprise that dealing with hurricanes is simply part of doing business in South Florida. And while severe storm hits aren’t as frequent as they might seem from media coverage, there’s always some risk between late May and November, and CRE investors should be aware of potential issues.
Here’s a look at some ways you can protect yourself and your investment properties in the South Florida CRE market.
Proper insurance
Before anything else, you’ll want to ensure any commercial properties have hurricane and flood insurance. Hurricane insurance is generally available as an add-on to an existing CRE property policy or as a standalone hurricane policy. The premium you’ll pay is based on the building’s location and construction type.
Keep in mind that commercial policies in some coastal areas might exclude or limit windstorm coverage. You could also end up paying a high deductible if you end up finding a policy that meets your needs.
However, even if you don’t find a policy covering physical damage to the commercial building, other assistance could be available. For example, some policies cover expenses like debris removal, additional operating losses, business interruption, loss from government directives, utility interruptions, spoilage, and indemnity periods, to name a few items.
Shop around and get quotes from multiple agencies to ensure you get appropriate coverage before the next hurricane season arrives.
Preventative measures
There are some steps you can take to limit the damage a hurricane potentially does to your building, but you’ll have to plan in advance to have these measures in place.
For starters, laying plywood over windows and glass doors to protect them from flying debris is a good step when a big storm is projected to hit the area. While this is time-consuming and not practical for larger commercial properties, it can do some good if you invest in smaller units.
Installing fabric panels over doors and windows can have a similar effect, and you can pre-mount them to make the job easier when a storm is bearing down. Once again, though, these panels are only practical on smaller buildings. So if you’re in a high-risk area, own a larger building, or want better protection for any structure, consider retrofitting with shutters and hurricane-impact windows.
Larger commercial properties often have tools and devices mounted on their roofs, and anchoring them with hurricane straps makes it less likely they’ll blow away during a severe storm. This method is standard practice in many parts of the state because of the damage it prevents, and owners should also clear any space around the property of debris.
Flood barriers are a good idea, given the damage standing water can do to a property and the clean-up expenses involved in remediating it. While these barriers won’t help if there’s a 15-foot storm surge coming your way, they can block the two to three feet of water that sometimes arrives after a hurricane.
There’s a good chance many commercial properties you invest in already have some preventative measures in place, but looking into additional strategies is always advisable—and it may save on insurance rates.
Protective language in the lease
Including some protective language in a lease with tenants could safeguard against potential litigation. The gist is that every lease in Florida should specify which party is responsible for securing and maintaining property or casualty insurance and covering any exceptional circumstances that may be encountered.
The lease should thoroughly explain what happens if there’s damage from a hurricane or tropical storm, too, such as whether the tenant can terminate the lease if the property is unusable for a significant period and the availability of rent abatement during restoration.
You might also include clauses that cover mandatory evacuations and situations where the tenant returns to the property before it’s fully functional. You could find yourself liable in these situations if the lease doesn’t specifically address them, so stay aware of these potential pitfalls.
Protecting your properties from hurricane damages is extremely important in South Florida because big storms sometimes strike our area with varying effects. While there’s no guarantee a severe weather event will directly threaten your investments, minimizing the risk is a necessary step.
Morris Southeast Group helps investors manage and expand their CRE portfolios in South Florida. We also offer property management services to ensure your leasing and maintenance administration is compliant with local regulations and recommendations.
Contact Morris Southeast Group at 954.474.1776 to learn more. Ken Morris is also available directly at 954.240.4400 or kenmorris@morrissegroup.com.
