August was a busy month for natural disasters. Hawaii experienced a series of wildfires in the early part of the month, with one blaze unleashing destruction on Maui and destroying the historic city of Lahaina. The death toll is 115, while hundreds remain unaccounted for; this wildfire is now considered to be the deadliest in America over more than a century. At the other end of America, Hurricane Idalia made landfall at Category 3 strength on August 30th and brought flooding and wind damage throughout Florida’s Big Bend region before moving through Georgia and into North Carolina & South Carolina.
Real estate investors need to start calculating potential costs associated with these kinds of disasters as part their due diligence activities according to Marcus & Millichap’s John Chang who recently released video “How Natural Disasters Impact CRE Investors” which tells story about Los Angeles real estate investor making seismic retrofits to his properties mitigate earthquake risk – an important realization that he could be knocked out business by just one natural disaster since all his real estate was located within same metro area prone earthquakes.
Many investors are facing similar risks as numbers show that natural disasters have increased over past two decades: during last three years US has experienced average 20 events costing more than $1 billion; during much 2010s there were 12-8 events per year compared 6-7 per year 2000s decade; furthermore 2022 saw US suffer around $175 billion worth damages mostly impacting real estate – certain areas country being particularly susceptible hurricanes floods fires etcetera .
Natural Disaster Impacts include lost revenue dealing repairs cleaning up costs (even though insurance may cover them) plus higher insurance rates (homeowners insurance having risen by 12% last year some markets seeing 40%-60% increases). Diversification can potentially help mitigate issue according Chang who suggests analyzing economic/business drivers when buying property but also considering risk cost associated with any potential natural disaster event too – investor not geographically diversified could see short term cash flow driven zero single event so it pays consider diversifying portfolio across multiple metros reduce overall exposure such kind losses .
