Terrorism & CRE: Business Continuity Planning

Terrorism poses a significant threat to commercial real estate (CRE) properties and business operations. The September 11 attacks in 2001 tragically demonstrated the vulnerability of commercial buildings to such attacks and the devastating impact they can have on businesses and the economy. This report examines the impact of terrorism on CRE and explores business continuity planning, security measures, insurance options, and government assistance programs available to CRE property owners in the event of a terrorist attack.

Impact of Terrorism on CRE

Terrorist attacks can cause significant physical damage to CRE properties, resulting in property damage, business interruption, and even the complete destruction of buildings. The economic impact of these attacks can be substantial, leading to job losses, decreased property values, and disruptions to local economies ¹. The September 11 attacks, for example, resulted in the loss of slightly over 30 million square feet of office space in Downtown Manhattan, including 13,420,000 square feet of space completely destroyed and another 16,586,000 square feet severely damaged. Nearly one-third of the total Class A office real estate in the Downtown Manhattan submarket was lost ². These attacks also displaced 100,000 jobs and caused billions of dollars in economic damage ³. Research on the impact of terrorism on the real estate market is conducted by organizations such as the Terrorism Research Center in Fulbright College ⁵.

Beyond the immediate physical and economic consequences, terrorism can also have a long-term impact on the CRE market. Increased security measures and insurance premiums can make it more expensive to own and operate CRE properties ¹. The fear of future attacks can also deter investment in CRE, particularly in high-risk areas ⁶. However, CRE properties have the potential to generate steady income for their owners, even considering the risk of terrorism ⁷.

Furthermore, the evolving nature of terrorism presents new challenges for the CRE sector. While international terrorist groups remain a concern, there has been an increase in domestic terrorism in countries around the world, including the United States ¹. This trend highlights the need for CRE stakeholders to adapt their security and preparedness measures to address a broader range of potential threats.

Sector-Specific Challenges

Different CRE sectors face unique challenges in the context of terrorism:

• Office Buildings: Office buildings, particularly high-rises and those located in major cities, are often seen as symbolic targets. The September 11 attacks demonstrated the devastating impact that terrorism can have on this sector.
• Retail Properties: Retail properties, especially those with large public spaces like shopping malls, are vulnerable to attacks aimed at causing mass casualties. Security measures in these spaces must balance public access with safety considerations.
• Hospitality: Hotels and other hospitality properties can be significantly impacted by terrorism due to reduced tourism and travel in the aftermath of attacks. The economic impact on this sector can be long-lasting.

Business Continuity Planning for CRE

Business continuity planning is essential for CRE property owners to mitigate the impact of a terrorist attack. A comprehensive plan should include:

• Risk Assessment: Identify potential threats and vulnerabilities specific to the property and its location.
• Emergency Response Plan: Develop procedures for evacuating the building, communicating with tenants and employees, and coordinating with emergency responders.
• Recovery Plan: Outline steps to restore business operations, including securing alternative office space, recovering data, and communicating with stakeholders.
• Communication Plan: Establish clear communication channels with tenants, employees, and other stakeholders to provide updates and instructions during and after an attack.
• Training and Exercises: Conduct regular training and exercises to ensure that all stakeholders are familiar with the plan and can respond effectively in an emergency⁸.

Collaboration with local law enforcement and emergency response agencies is crucial for effective business continuity planning. Sharing information about potential threats, coordinating security efforts, and participating in joint exercises can enhance preparedness and response capabilities.

Security Measures for CRE

Implementing security measures is crucial to protect CRE properties from terrorist attacks. A comprehensive security strategy should integrate various measures:

Physical Security

• Enhance physical security measures such as access control systems, perimeter security, and surveillance cameras⁹.
• Employ physical deterrents such as bollards, barriers, and security personnel to discourage hostile activity¹⁰.

Cybersecurity

• Protect building technology systems from cyberattacks that could disrupt operations or compromise security¹¹.

Personnel Security

• Conduct background checks on employees and tenants to mitigate the risk of insider threats¹².
• Establish a threat assessment team to evaluate ongoing personnel risks and create policies for recognizing and dealing with personnel in distress¹².

Threat Assessment and Adaptation

• Regularly assess potential threats and vulnerabilities to adapt security measures accordingly¹².
• Stay informed about the evolving tactics and targets of terrorist organizations, including the use of propaganda and online platforms¹⁰.
• Consider utilizing Terrorism Risk Evaluation Services to assess and mitigate potential risks¹⁰.

Holistic Security

A holistic security approach considers the wider surroundings of a building and potential risks in those areas. For example, being situated near a notable monument or building may increase the risk of a hostile attack. Similarly, if a site has publicly accessible space abutting it, it is worth taking steps to understand the risks of those spaces and perhaps implement security measures¹⁰.

Long-Term Security Planning

Security planning should be an ongoing process, not a one-time event. Regularly review and update security measures to adapt to evolving threats and vulnerabilities¹⁰.

Online Deterrents

CRE companies can use online messaging to deter potential attackers. Sharing information about the site's safety, security, and proactive customer services can be both comforting to a normal site user and disrupting to a hostile agent¹⁰.

"Antecedent Offenses"

Understanding the concept of "antecedent offenses" is crucial for CRE security. These are non-terrorist crimes committed by a terrorist group in preparation for a terrorist incident. These can include creating false identities, thefts to procure funding, and thefts of weapons or explosive materials ⁵. Recognizing these activities can help prevent terrorist attacks.

Complex Coordinated Terrorist Attacks (CCTAs)

CCTAs involve synchronized and independent teams at multiple locations, often employing various weapons and tactics. These attacks pose a significant challenge for CRE security due to their complexity and potential for mass casualties¹³.

Insurance Options for CRE

Insurance is essential to mitigate the financial impact of a terrorist attack on CRE properties. The Terrorism Risk Insurance Act (TRIA), enacted by Congress in November 2002, ensures that adequate resources are available for businesses to recover and rebuild if they are the victims of a terrorist attack ¹⁴. TRIA creates a temporary federal program that provides a transparent system of shared public and private compensation for insured losses resulting from acts of terrorism ¹⁵. Under TRIA, all property/casualty insurers in the U.S. are required to make terrorism coverage available to commercial property owners, including office buildings, malls, factories, and apartment buildings ¹⁶. This has been particularly important for the CRE industry, as terrorism insurance is often a requirement for securing financing ¹⁷.

Terrorism insurance can cover various types of losses:

It's important to note that terrorism insurance policies may have exclusions. For example, policies may exclude coverage for acts of war, nuclear attacks, or certain types of biological or chemical attacks ¹⁴.

The Financial Action Task Force (FATF)

The Financial Action Task Force (FATF) is an international organization that sets standards and promotes effective implementation of legal, regulatory, and operational measures for combating money laundering, terrorist financing, and other related threats to the integrity of the international financial system. The FATF has identified the real estate sector as vulnerable to misuse for money laundering and terrorist financing ¹⁹.

Government Assistance Programs

Government assistance programs are available to CRE property owners in the event of a terrorist attack. These programs provide various types of support:

Financial Assistance

• Antiterrorism and Emergency Assistance Program (AEAP): Provides grants to support victims and jurisdictions that have experienced incidents of terrorism or mass violence. The program is designed to supplement existing resources and ensure that sufficient support is available to victims²⁰.
• Antiterrorism Emergency Reserve: OVC can access up to $50 million annually from this reserve to provide support through the AEAP²⁰.
• Homeowner Assistance Fund (HAF): While not directly applicable to CRE properties, this fund provides assistance to homeowners affected by disasters, which can indirectly benefit the CRE market by stabilizing communities²¹.
• Hazard Mitigation Grant Program (HMGP): Assists states and local communities in implementing long-term hazard mitigation measures following a major disaster declaration. To be eligible, communities must have an approved hazard mitigation plan. HMGP grants can fund projects that protect both public and private properties²².
• Community Facilities Program Disaster Grants: Provides grants to repair essential community facilities damaged by disasters. Eligible facilities include healthcare facilities, public facilities, community support services, public safety services, educational services, utility services, and local food systems. These grants can fund up to 75 percent of the total project cost²³.

Technical Assistance

• Helping Victims of Mass Violence and Terrorism Toolkit: Provides resources and guidance to communities on planning, response, recovery, and resources for victims of mass violence and terrorism²⁰.

Emergency Response

• Homeland Security Grant Program (HSGP): A suite of risk-based grants to assist state, local, tribal, and territorial efforts in preventing, protecting against, mitigating, responding to, and recovering from acts of terrorism and other threats. This program includes the State Homeland Security Program (SHSP), Urban Area Security Initiative (UASI), and Operation Stonegarden (OPSG)²⁴.
• Federal Emergency Management Agency (FEMA): Provides support in responding to and recovering from terrorist attacks and other disasters²⁴.

Resources and Further Information

The Financial Crimes Enforcement Network (FinCEN) publishes various resources related to terrorism and illicit finance, including:

Legal and Regulatory Framework

Several laws and regulations address terrorism and its impact on various sectors, including CRE:

• Executive Order 13224: Blocks property and prohibits transactions with persons who commit, threaten to commit, or support terrorism. This order has implications for CRE transactions and security measures²⁶.

Government Initiatives

The U.S. Department of the Treasury plays a crucial role in combating terrorism and illicit finance. The Office of Terrorism and Financial Intelligence (TFI) leads these efforts by enhancing national security through economic sanctions against foreign threats, targeting financial support networks of national security threats, and improving the safeguards of financial systems ²⁷.

Key programs and initiatives under TFI include:

• Terrorist Finance Tracking Program: Identifies, tracks, and pursues terrorists and their networks.
• Office of Foreign Assets Control (OFAC): Administers and enforces economic and trade sanctions based on U.S. foreign policy and national security goals.

Methodology

This report is based on a comprehensive review of research papers, case studies, government reports, and industry publications related to terrorism and its impact on the CRE sector. The research process involved:

1. Identifying relevant research papers and articles on the impact of terrorism on CRE.
2. Analyzing case studies of terrorist attacks that have impacted CRE properties, including the September 11 attacks.
3. Reviewing information on business continuity planning for CRE properties in the event of a terrorist attack.
4. Gathering information on security measures that can be implemented to protect CRE properties from terrorist attacks.
5. Exploring insurance options for CRE properties to mitigate the financial impact of a terrorist attack.
6. Identifying government assistance programs available to CRE property owners in the event of a terrorist attack.

Conclusion

Terrorism presents a significant risk to CRE properties and business operations. The evolving nature of terrorism, with the rise of domestic threats and complex coordinated attacks, requires CRE stakeholders to adopt a proactive and adaptable approach to security and preparedness.

Key takeaways from this research include:

• The Importance of a Holistic Approach to Security: Integrating physical security measures, cybersecurity, personnel security, and threat assessment is crucial for effectively mitigating terrorism risks.
• The Need for Comprehensive Business Continuity Planning: Developing and regularly exercising business continuity plans can help CRE businesses recover from attacks and minimize disruptions.
• The Role of Insurance in Financial Mitigation: Terrorism insurance provides a critical safety net for CRE property owners, covering property damage, business interruption, and liability claims.
• The Value of Public-Private Partnerships: Collaboration between the CRE industry, government agencies, and law enforcement is essential for preparedness, response, and recovery efforts.

By implementing these strategies and staying informed about the evolving threat landscape, the CRE industry can create a more resilient and secure environment for businesses and communities.

Works cited

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