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Climate change could affect real estate values

| Apr 24, 2019 | Real Estate Law |

The commercial real estate market in Philadelphia can be affected by a range of external and social factors. Experts note that climate change could be among these factors. Therefore, investors should consider preparing for changes in order to preserve profitability in the sector. Larger real estate companies are calculating climate risk measurements and how they may affect the long-term property values of different types of property. Of course, climate change is not just linked to global warming; it could have an array of impacts, including increased likelihood of extreme weather like hurricanes or rising sea levels that could make waterfront property more dangerous.

While experts warn that changes could be damaging to commercial real estate property values, they also say that investors who paid attention to the issue could outperform the market as a whole. Of course, weighing risk and opportunity is part of calculating any real estate investment. Climate change is simply introducing another issue on the risk side of the balance sheet for any real estate project.

Storm damage may indicate some effects of climate change that are already happening. In 2017, damage caused by extreme storms hit a record high. Over $300 billion in property damage was caused by wildfires, mudslides and floods. In 2018, rainfall was three times the normal amount through the summer months. In response, experts advise mapping the physical risk when considering potential property acquisitions and including climate factors into due diligence calculations. They also advise planning for the mitigation of these issues.

The commercial real estate market holds the seeds of significant profitability for many investors. An individual who is considering expanding involvement in the sector can consult with a real estate attorney about due diligence, contract formation and other guidance in developing their holdings.