Crisis Management

Building owners and managers have another reason to dust off their emergency preparedness plans — the growing threat of avian flu. A January 2006 Deloitte & Touche survey of more than 100 U.S. corporate executives found that roughly two-thirds of respondents had done little or nothing to prepare for a pandemic. It also found that most of the executives hadn't even appointed someone to spearhead a flu contingency plan.

Avian flu could cost the economy more than $675 billion, reports the U.S. Congressional Budget Office, with roughly 40% of all U.S. workers sidelined for weeks on end. The World Health Organization (WHO) warns that a virulent strain of the human-to-human H5N1 virus — bird flu — could develop in the coming months. WHO claims that the world is closer to a virulent flu outbreak than it's been since the late 1960s.

Risk managers are advising building owners and managers to closely review their business continuity plans now rather than after a crisis has taken hold. In March, the Toronto chapter of the Building Owners and Managers Association (BOMA) released guidelines for keeping office buildings open in the event of an outbreak.

It's no coincidence that Toronto-based BOMA Canada took the lead on this issue: In 2003, the severe acute respiratory syndrome (SARS) virus killed 38 people and spurred several building closures in the Toronto CBD. Those were the only SARS-related fatalities in North America.

“Our goal was just to get building owners and managers thinking about this threat,” says Deb Cross, executive vice president at BOMA Canada. “We've talked to all of the major real estate firms in Canada about how best to prepare for this.”

SARS taught Cross that communication is vital when a public health crisis emerges because misinformation can snowball and force people into isolation. A detailed communication plan makes that scenario less of an issue.

BOMA also recommends establishing sick tenant protocols such as monitoring for symptoms, setting up lobby hand-washing stations, and possibly quarantining entire floors. Owners and managers should also make plans for critical staff members to work offsite in the event an entire building is closed. The same measures apply if a property is deemed uninhabitable following a storm.

Building owners and managers aren't necessarily in the clear once a pandemic abates. Tenants may be unwilling to return to the property unless the building manager carries out a strict sanitization campaign. OSHA guidelines say that tenants are legally entitled to break their leases if a building is deemed hazardous.

Most office leases contain so-called “quiet enjoyment” clauses requiring landlords to ensure that the space isn't hazardous. These clauses can apply to any number of hazardous conditions that would impact an office tenant.

Industry experts say that business interruption insurance is unlikely to kick in to help a landlord whose jilted tenants refuse to return and pay their rent. Business interruption insurance typically covers events such as fires, earthquakes and storms rather than an incremental crisis like bird flu. That's why risk managers advise building owners and managers to closely examine their business continuity plans.

“We highly recommend that companies conduct probing self-examinations and begin preparing for a crisis,” says Michael Lee, senior vice president at real estate services firm Jones Lang LaSalle, which manages 927 million sq. ft. of property globally. “Early planning and contingency preparation are the most powerful weapons in any firm's defense.”

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