Op-Ed: The Economic Benefits of Earthquake-Resistant Buildings

In 1971, the Anheuser-Busch brewery in Van Nuys, California, suffered extensive damage in the 6.5-magnitude Sylmar earthquake. Forced to cease operations in order to rebuild the facility, the self-proclaimed “King of Beers” took another hard financial hit as competitors made inroads into the Anheuser-Busch market during this time. Faced with the serious consequences of being unprepared for a natural disaster, the brewery upgraded its 95-acre facility, built in 1954, with earthquake retrofits and new construction designed to the latest seismic standards.

Last summer, California received the double blow of two major earthquakes in the Ridgecrest area, a 6.4 quake followed by a 7.1 temblor that was a wake-up call to thousands of California businesses large and small still deciding whether retrofitting is a wise business investment or whether it’s better to gamble that buildings, capital and assets, and employees will survive a major earthquake.

Yet business and property owners willing to believe they can put-off or skip retrofitting should be aware that seismic experts forecast economic devastation for the region when a major earthquake hits. In fact, the Geological Survey determines California has more than a 99 percent chance of experiencing a magnitude 6.7 or larger earthquake within the next 30 years.

A University of Southern California study reports that the eight-county region of Southern California could suffer property damage of $113 billion in a major earthquake, with additional business-related impacts of $68 billion or more.

And the U.S. Resiliency Council, a nonprofit organization with the mission to educate, advocate and promote resilience-based design that considers the impacts of natural disasters as an essential component of long-term sustainability, estimates that up to 90 percent of buildings in Los Angeles were not built to modern building codes.

When a building collapses, an owner or lessee is left with no operating business, huge business interruption costs, no cash flow, payments on an existing mortgage, the need to pay for or build a new facility, employees out of work, and investors questioning why executives had no emergency plan. The Federal Emergency Management Agency (FEMA) projects that 40 percent of businesses that are forced to close their doors as a result of disaster never reopen.

The economic hardship can be worsened by legal actions; building owners can be held legally responsible for property losses, injuries and deaths, as well as millions of dollars in damages for negligence for not making seismic retrofit upgrades.  A precedent setting case following the 2003 earthquake in Paso Robles found a building owner negligent for not making his building safer and awarded survivors $1 million for each person killed in the building’s collapse.

The white paper “Economic Benefits of Earthquake-Resistant Buildings,” released in October by Optimum Seismic, Inc. and the U.S. Resiliency Council, is conclusive that earthquake resistant buildings are a sound economic investment for business and government entities, particularly those that serve or employ large numbers of people. By evaluating the latest seismic research and case studies, the paper asserts that California’s businesses need to retrofit and undertake other risk management activities to ensure the economic health of their enterprise and the ability of the entire community to withstand a major earthquake. These steps include identifying a business’s vulnerabilities; encouraging neighboring businesses to fortify their businesses; creating an earthquake resiliency plan; and evaluating the cost benefits when developing a plan.

Anheuser-Busch spent $1.2 million in seismic retrofits and other upgrades — an expense that ultimately saved the business more than $1.1 billion in combined property and business loss when the 1994 Northridge quake hit, state and federal officials reported. Even though the brewery is located just a few miles from the epicenter of that devastating 6.7-magnitude temblor, none of the retrofitted structures in the compound was damaged. The brewery was quickly returned to nearly full operations following minor cleanup and repairs.

The National Institute of Building Sciences further backs that retrofits make good business sense. Its seminal report, “Mitigation Saves”, estimates that for every dollar spent on mitigation, society sees a resilience benefit of four dollars or more.

And researchers at the California Institute of Technology found that for every dollar spent retrofitting soft-story structures, property owners could expect to save up to seven dollars. The cost of retrofitting a 10-unit apartment building valued at $250,000 per unit can be just $75,000, which is three percent of the value of a building.

Business and property owners who choose not to retrofit their buildings, or think they can put it off for years, make themselves vulnerable to loss of property and destruction of their businesses as well as liability for the deaths and injuries.

California’s economy will take an even more severe blow if small businesses cannot reestablish themselves and larger companies relocate to other states. If a building cannot withstand a major seismic event, despite the best use of recycled materials or energy efficient systems, it’s truly not sustainable because sustainability and resilience must go hand in hand.

Article By Ali Sahabi and Evan Reis, who co-authored the “Economic Benefits of Earthquake-Resistant Buildings” white paper, released by Optimum Seismic, Inc. and U.S. Resiliency Council.

Evan Reis is a Registered Structural Engineer in California, Hawaii and Texas. He co-founded the US Resiliency Council (www.usrc.org) in 2011 as a way to educate building stakeholders and the public about the gap between the growing sustainability movement and true resilient design. 

Ali Sahabi is a General Engineering Contractor, developer and business executive. He is president of the Optimum Group of companies in the Greater Los Angeles.  An award-winning real estate development firm, Optimum Group LLC has extensive expertise in land use planning, development, reclamation and renewable energy projects.