Seismic changes in commercial real estate transactions

By Narendra Srivatsa September 17, 2014

Narendra SrivatsaSo many things come together at Verisk. That thought occurred to me as I read Ralph Dorio’s blog post (Hard lessons from the Napa, California, earthquake) about the AIR Worldwide ALERT™ regarding the recent earthquake. The Alert prompted him to write about the ISO Community Hazard Mitigation Building Code Effectiveness Grading Schedule (BCEGS®) program, which evaluates building codes and code enforcement throughout the United States. The BCEGS grading system encourages communities to adopt better codes and code enforcement, which can help prevent damage due to earthquakes, wind, and other natural catastrophes.

I’d like to weigh in from a slightly different perspective. The blog focused on the differing levels of damage to structures built before codes addressed seismic concerns versus buildings built to newer codes designed with natural catastrophes in mind. The former types of buildings suffered damage, while the newer buildings withstood the earthquake. This data is of vital importance and widely recognized by insurers. And since it has similar interests, the commercial real estate industry should take notice.

So far, however, the commercial real estate industry has been slow to embrace the more detailed data and analytic products and services. That’s surprising, especially because lenders and buyers have an additional concern — a building’s reputation. It’s difficult to attract tenants to a building considered unreliable or vulnerable in a natural catastrophe. Maintenance costs are higher, too, which speaks to an owner’s ability to repay a loan.

I believe the time is right for the industry to adopt more insightful risk management tools in its transactions. Drawing on the knowledge, expertise, and data from various Verisk sources, such as BCEGS, Verisk Commercial Real Estate has developed products for lenders, investors, and commercial real estate attorneys unlike anything previously seen in the industry.

For example, our Enhanced Zoning Report goes beyond basic zoning information from other providers and has more granular detail and a wider range of information than a typical zoning report. We provide BCEGS data that includes our expert evaluation of the property’s building code grade and adoption. We offer details on state-mandated codes; code revisions, including changes to technical structural provisions; code adoption history; enforcement; and natural hazard vulnerabilities specific to the location. The report benchmarks the subject jurisdiction to state and national grades.

We’re confident that our additional insight will greatly help all parties in a commercial real estate transaction and establish a new standard for the industry. For more information on Verisk Commercial Real Estate, go to www.verisk.com/cre.


Narendra Srivatsa

Narendra Srivatsa is the assistant vice president of product development for Verisk Commercial Real Estate.