Area Development

Rise of Natural Disasters Affecting Commercial Real Estate Markets

With the rise in natural disasters over the past few years and as climate change continues to be a challenge, natural disaster resiliency is top of mind for commercial property executives.

Following the wildfires on the West Coast and 2017’s trio of harrowing hurricanes, concerns may be in order for the commercial real estate industry. Last year’s Altus Group Real Confidence Executive Survey results revealed 46 percent of property professionals view climate change as a larger economic concern than geopolitical conflicts and terrorism. At first glance this might be surprising, but if you think about other risks like terrorism or political fallout, natural disaster risk is slightly more controllable. You may not be able to control the natural disasters themselves, but they tend to be location-specific, which means risk mitigation can be factored in with insurance and underwriting.

Hurricanes have proven to be very costly to the real estate industry, particularly to coastline regions, but we have recently seen a shift to inland properties that has created greater cause for concern regarding those assets. With strong winds and heavy rainfall, hurricanes have proven to test the readiness of commercial properties. Damage totals can often be difficult to calculate, and costs to rebuild are not always an accurate reflection, as some assets are not rebuilt immediately or at all.

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