Campbell Hanan and why resilience is high on the agenda
2 Dec 2014
Climate risk has become a key consideration for Investa following its involvement with the Australian Business Roundtable for Disaster Resilience and Safer Communities.
Chief executive of Investa Office Fund Campbell Hanan said there were also broader lessons for the sector to learn regarding where to develop, with greater stringency required from local consent authorities to avoid the “groundhog day” of rebuilding the same things again and again in high-risk areas.
Mr Hanan told The Fifth Estate the extreme weather events of the past five years were probably in a bizarre way an “ally” in bringing resilience to front of mind for the property sector and other industries.
“I think it is changing behaviour, and I think it has to,” he said.
Mr Hanan said disasters such as the floods and cyclones in North Queensland had demonstrated the “ultimate economic consequence of inappropriate housing in inappropriate areas”.
For example, in Queensland, prior to the 2010-11 floods, only 25 per cent of the state had up-to-date and relevant flood maps. After the Royal Commission into the floods, mapping was made a priority and now more than 90 per cent of the state is mapped for flood risk, and 27 per cent of land has been identified as vulnerable. Victoria on the other hand is still to engage in coordinated and state-wide flood mapping, with a tender for flood mapping of key catchments only opened this month.
“Really, for [the property sector] it simplifies the development process, also planning for councils, and it protects households from risk,” Mr Hanan said.
While some developers might not think about the consequences of building in high-risk areas where the eventual householders might not be able to obtain insurance, it was also hard for the developer to be discerning about sites if the data didn’t exist, he said.
“At the end of the day, reputational damage [due to poor site choice] is reputational damage, but the problem for most is [that] nothing in the way of data and mapping exists.”
One thing that had become clear, he said, was that the majority of towns and cities where the bulk of the population lived had areas at high risk from natural disasters – not only flooding, but also bushfire on the suburban perimeter, hail storms, flash-flooding from major rain events, king tides and storm surges, extreme winds and cyclones.
This made community consultation a critical element of mapping, as locals had observational information on impacts from severe weather and disaster events.
Another dataset required is climate change impacts mapping, which Mr Hanan said roundtable member Munich Re had been investing in.
“It is critical for them as they are reinsurers,” he said. “And they have made it clear they are happy to share their own information.”
A big issue is that the “political will” may be lacking, Mr Hanan said, and the government may see that generating information that assists people in making development decisions is simply “not our problem”.
“And local government says, ‘It’s not our responsibility,’” he said.
Mr Hannan said the recent roundtable discussions he attended with the head of the United Nations Office for Disaster Risk Reduction also reinforced the need for open access to disaster data to assist with improving mitigation efforts.
Building codes trying to catch up
The various building codes were also in catch-up mode for resilience and mitigation. Mr Hanan said the national construction code had only recently incorporated resilience.
At stake is the financial viability not only of households but also of businesses and whole communities, especially if insurance is hard to come by.
“If an individual business or town can’t get insurance, there will be a population decline, and the value of property investment goes down. Market forces will always dictate the outcome here,” Mr Hanan said.
Reducing risk is key, and the issues are interlinking – appropriate and informed planning and site selection for development; appropriate local infrastructure; and building codes that ensure the homes and other buildings in an area are designed and constructed for the applicable natural disaster risks.
The phenomenon of communities experiencing damage, and then rebuilding in the same place in the same way was described by Productivity Commission commissioner Karen Chester as like “Groundhog Day”.
Instead, the approach should be to look at reconstruction as an opportunity to engage in better planning and reduce the level of damage next time, whether it be a bridge, a road, an office block or a suburb, Mr Hannan said.
“It seems staggering to me that you can have a development application in an area that is likely to flood and the local government doesn’t say to the developer, ‘Put some levee banks in.’”
Councils might offer to co-fund such work, perhaps, through a rates increase for that property – or simply refuse to approve the DA.
“If you build a levee that costs $3 million [around a property development], it might increase the value of the property by more than that $3 million – you can never tell,” Mr Hanan said.
Ultimately, he said the property sector needed to be looking to mitigate reputational risk around developments in areas likely to be heavily – and predictably – impacted by natural disaster.
“In terms of restocking our land business, we think about disaster risk a huge amount now, and we are asking ourselves questions we didn’t four to five years ago,” Mr Hanan said.
The company’s’s experiences as a commercial property owner and previously as a home builder has generated some useful insights post-disaster, the bushfires of 2009 being a prime example.
“What we found is that from a resilience perspective [evacuated] people need to be able to charge mobile phones, so it would be good, for example, for the local council to have a generator with power points,” Mr Hanan said.
“We also saw how the local shopping centre becomes a community evacuation centre, so it would be wonderful if shopping centres could have charging points supplied by generator or solar for use in emergencies.”
The Brisbane floods also provided a useful lesson, with one of the office properties flooded throughout three basement levels. The substation and plant were at the bottom level, and Mr Hanan said the fact it can take months of repair, replacement and restoration works after this kind of event before tenants can return, has made Investa scrutinise potential office acquisitions more carefully in terms of flood damage risks.
“Now when we are thinking about buying assets, we ask ourselves, ‘What is the climate risk?’ We’re asking a lot of those questions about resilience and sustainability of developments,” he said.
One of the things he said took the wind out of the sails of long-term resilience planning at the public policy level was people’s tendency to optimism – the “lighting never strikes twice” mindset.
“But it only takes one catastrophic event where someone loses everything. And somehow we need to keep getting that across, that social cost.”
The economic cost is also one he said cannot be escaped.
“Whether you are a climate change sceptic or not, the facts are we are having more storm events and climate events, and that will inevitably lead to costs somewhere, sometimes. We saw that with the Queensland Flood Levy. At some point natural disasters will have an economic cost.”