Post-earthquake decisions on whether to repair or to demolish and rebuild a damaged commercial building can be influenced by factors other than repair cost. These factors include the property’s ability to generate income and the conditions of the real estate market – factors not currently considered in seismic performance estimation models. This paper introduces a framework that unifies performance-based earthquake engineering and real estate investment analysis to model cases where repair of damaged buildings is feasible but redevelopment or leaving the building unrepaired and vacant might offer greater economic value. A three-stage approach for quantifying the likelihood of repair, redevelopment, or leaving the property vacant is proposed. First, building seismic performance analysis is conducted using FEMA P-58 and REDi methodologies; then, given repair and redevelopment costs and times, the net present value decision rule is used to evaluate alternative outcomes; and finally, the results from the two stages are integrated to quantify the probability of different decisions. An illustrative case study of four reinforced concrete buildings highlights the insights provided by the proposed framework.
Markhvida, M., and Baker, J. W. (2018). “Unification of seismic performance estimation and real estate investment analysis to model post-earthquake building repair decisions.” Earthquake Spectra, 34(4), 1787–1808. (Recipient of the 2018 Earthquake Spectra Graduate Student Paper Award.)