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Superstorm Sandy highlights Manhattan's risk management deficiencies

Many Manhattan property owners vulnerable to catastrophes

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Superstorm Sandy highlights Manhattan's risk management deficiencies

One of the most glaring vulnerabilities revealed among commercial property owners in lower Manhattan after Superstorm Sandy was the widespread lack of comprehensive disaster response and business continuity planning, risk management experts say.

Nearly 35% of the commercial office space below Chambers Street was temporarily incapacitated by flooding and power outages, and as much as 20% remained offline at the end of November, according to a report by Chicago-based real estate brokerage Jones Lang LaSalle Inc.

In many cases, experts say, commercial property owners' efforts to reopen their buildings were substantially undermined by their own failure to develop and maintain business continuity contingencies. That failure was especially prevalent among midsize property owners, risk management experts say.

“A very high percentage of the owners in lower Manhattan were not properly prepared for handling the aftermath of this storm,” said Gina Higgins, senior managing director of commercial insurance for New York-based Crystal & Co. “Everything from elevators, phone lines, mold remediation — they were faced with everything that could possibly become a roadblock against reopening their buildings to tenants.”

By and large, business continuity planning in lower Manhattan fell short in three critical areas: alternate communications and information technology systems; tenant and employee relocation; and remediation planning.

The most critical element often missing from owners' continuity and disaster-response planning was an alternative means of communicating with tenants and employees in the event that servers and phone lines were unavailable, as was the case in many buildings after Sandy, experts say.

“A lot of people we spoke with after the storm had not planned for what would happen if their systems were down for two to three days, let alone weeks,” Ms. Higgins said. “People really were left in the dark, literally and figuratively, because owners weren't able to communicate with employees, tenants or third parties regarding what the next steps of the recovery would be.

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“Without that IT and communications piece of the continuity plan to link people together, all of the other pieces of the plan fell by the wayside,” she said.

Many property owners in lower Manhattan also failed to provide temporary workspace for the tenant companies displaced from their buildings and their own employees, as part of their disaster response and recovery plan, experts say.

Property owners also failed to plan for many of the logistical challenges tenants and employees would encounter as a result of the storm, particularly the extremely challenging commute in and out of Manhattan.

“That was a major issue for a lot of companies in lower Manhattan,” said David Finnis, executive vice president and national property practice leader for New York-based Willis North America Inc. “You can have a great disaster recovery plan or business continuity plan, but I don't think the transportation part was contemplated by a lot of property owners or their tenants. It was a very different set of circumstances here, which we hadn't really seen before with prior storms.”

Finally, most property owners had not established contractual or informal relationships with hazardous materials removal firms, mold and water damage abatement firms and other remediation specialists prior to Sandy's landfall.

Because those types of specialists are in short supply after a storm of Sandy's scope and destruction, many property owners were forced to wait several days and weeks for the next availability, experts say.

“Even if you only own one location or two in a coastal area, it's still a good idea to have a retainer contract of some kind with a remediation company,” said Al Tobin, the New York-based managing principal of Aon Risk Solutions' property practice.

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