September 2017

NATURAL DISASTERS: What does the new 2018 Commercial Real Estate Budget look like? 10 things I’m thinking about…

By Dave Petersen
CEO, NAI Hiffman

Wildfires, hurricanes, more hurricanes. Our entire company of real estate experts are together asking ourselves what does our revised 2018 property operating budget need to look like? Does it need to change?

We are full of questions that need to be answered with and for our valued clients and our vendor teams, all while leveraging our combined years of experience in our company and industry.

Questions include:

  • Will building material demand in the south and southeast create shortages for us in the Midwest and other unaffected hurricane markets?
  • We know materials like drywall, studs, flooring, roofing materials, plywood and likely gas and oil resources will be under great pressure to deliver in the south. So what are our options? What is considered over-reaction? How shall we monitor increases and where do we push back?
  • Will bulk buying drywall, studs, masonry product, etc. be required to meet occupancy deadlines here?
  • Will new labor options of relocation for steady work in the affected areas which will likely pay premium and overtime rates cause our construction trades talent pool to have a gap in keeping skilled labor here? Will our costs increase in order to meet local demand?
  • What about the new insurance terms (that we will discover in the fine print) and how will they impact us cost-wise?
  • Could it be that what we will learn needs to be in the bold print of our policies that pertain to business disruption as one example?
  • We have continuously made sure our building insurance certificates are current. A crisis is not the time to realize it was not in place correctly. Who is on it?
  • Will our client’s multi-city portfolio performance be impacted by the disaster cities, which then cause them to rethink expenditures and services locally to create maximum returns?
  • We are reminded and watchful that hurricanes are not our only disaster stories in commercial real estate. Fire, flood, tornados, micro-bursts and the mistakes made by a tenant within our portfolio are always ours to consider. What do we need to relook at in our markets in preparation?
  • Where are we most exposed operationally, and when will we feel the impact from a timing standpoint on supply and costs? Are these predictions we need to make or at least anticipate?

It’s been 35 years for me in the real estate business and I am surrounded by the best talent in the industry, which places me ahead on the knowledge curve. I don’t have all the answers but history and experience teaches us that it always gets easier to execute a plan when you ask lots of questions prior to executing it. What are your questions?

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