The impact of climate change on commercial real estate markets has long been underappreciated due to the pervasiveness and time distance of expected effects. However, this situation is beginning to shift due to the increasing occurrence of weather-related disasters that follow predictive models.
It is irresponsible to use single anecdotes as evidence either for or against climate trends that are measured in decades or centuries, but the long-range data seems quite clear that climate change will have long-term pervasive effects throughout the globe, with immense implications for commercial real estate. The most immediate and obvious effect will be greater disruption of coastal gateway markets, as well as other major metros in the Gulf of Mexico region, which is particularly exposed to coastal erosion. Even the relative beneficiaries of these shifts (inland growth markets) will likely see increasingly volatile and destructive weather patterns, and these will also have financial impacts.
The rising prevalence of value-destroying weather events—as well as the increasing role of ESG concerns within institutional investment circles—means climate issues will become a more central strategy concern that real estate managers must incorporate into their diligence. In this whitepaper, we examine the potential effects of climate change on future real estate investments.
