Industries across the world are in the midst of planning for climate change and reacting to its effects. It’s clear that climate change has implications that extend well beyond the average temperature of the earth. This introduces the question: how will climate change affect the world of real estate? In this blog post, we discuss the impact of climate change on real estate investment sentiment and decision-making.
Areas of Uncertainty
We do know the effects of long-term climate change, but it’s difficult to say with absolute certainty how these changes should shape our investing choices. After all, these are long-term risks that we don’t have an exact timeline on. Trying to factor in any discounts for long-term investments is tricky when we can’t measure future impacts of climate change with absolute precision.
What We Do Know
Since it is impossible to predict the specific effects of climate change, let’s focus on the facts we do know. For starters, there are many well-documented short-term risks associated with climate change. The frequency of extreme weather events like wildfires and hurricanes is likely to continue growing in the coming years as a direct result of climate change. Increased heavy rain and rising sea level are also documented risks. Each of these risks poses direct threats to real estate investment properties, which has led to an increased emphasis on ensuring climate risks for short-term protection. Many investors agree that limiting investments in certain areas based on climate risks should be a secondary priority next to properly insuring investments in any location. Even still, it’s hard to feel complete peace of mind when the situation with climate change is volatile, and most insurers do not factor future climate risks into their policies. As we move into the future, there are a few strategies investors are implementing in anticipation of continued climate change:
- Diversifying investment portfolio to mitigate risk
- Lobbying with city level policymakers for improved resilience strategies to mitigate investment risk
- Mapping high threat areas to identify vulnerable markets
Partner with Willowbrook Valuation & Advisory Services for Investment Assistance with Climate Change in Mind
At Willowbrook Valuation & Advisory Services, we are a leader in trusted insight, cutting-edge innovation, and customer service. We offer exceptional litigation support to assist clients with insurance valuation, arbitration and consulting, property tax services, and expert testimony. To learn more about our valuation, counseling, or litigation services, please contact us at (202) 919-3888.