Isaac departs Miami, but storms remain on the minds of commercial market pros
Residential properties may get much of the attention during hurricane season — Tropical Storm Isaac is the latest storm threatening the Gulf Coast — but South Florida’s office buildings bring their own set of concerns for developers, brokers, tenants and those shopping for space.
It’s been seven years since the last major hurricane, Wilma, struck South Florida, but the office market has stepped up its armor, with features such as newly installed hurricane-resistant windows. Those windows have become a must for office properties to stay competitive with would-be tenants.
“There are so many Class A buildings right now that have the impact windows, which really wasn’t so much the case three or four years ago,” said Louise Bendix, a commercial broker at ComReal Miami. “I think that if you get Class A properties that don’t have the impact windows [they] are kind of A-minus — any property that has the windows has an edge in the marketplace.”
Hurricanes are often major concerns for out-of-market tenants looking for space, Bendix said. “When people come to Miami [looking for space], it’s like when you go to California and the first thing you worry about is an earthquake,” she told The Real Deal. “So for people moving into Miami it’s about ‘how can we protect ourselves from that.'”
For developers and owners, insurance is perhaps the biggest issue. Many insurance policies have coinsurance provisions, or insurance policies with clauses that require the insured to share part of the loss, according to attorney Philippe Lieberman of Kluger Kaplan in Miami. For a million-dollar property, for example, a coinsurance provision might require the property to carry insurance on 80 to 90 percent of the property’s value.
But given recent fluctuations over the past few years in commercial property values and appraisals, the 80 percent threshold may not always be cleared. Lieberman said that’s something that all commercial property owners should examine. “You have to make sure that you carry sufficient insurance coverage — if you don’t, the company will not reinsure you for the full extent of the loss,” he said.
For Miami’s current tenants — and property managers — there are other issues.
Miami’s office buildings regularly have to perform drills and reviews to make sure they’re ready for storms. And when the storms do come, they get more serious, said Christian Driussi, vice president at Miami’s Brickell Bay Office Tower. “If there is a real hurricane, a couple of people stay and sleep in the core of the building so we can address any damages right away,” Driussi said.
There’s also the problem of dealing with tenants during a storm, particularly those who may not wish to evacuate.
“Certainly, tenants want to stay [in the buildings] as long as they can, particularly if you’ve got, for example, a law firm and they’re in the middle of an important case,” said Stephen Froot, senior vice president at Jones Lang LaSalle’s property management division. “If they’ve got 25 files they’re in the process of moving out, we’re not going to lock them out of the building. We’ll work with them – and they respect the responsibility we have as property managers to protect life and limb, as well as the assets owned by our client.”