Climate Change Poses a Big Risk for Real Estate Investments

We’ve been warned about climate change and environmental damage for years now by environmentalists, but only recently has the government truly started to listen. They’ve introduced bans on singly-use plastic, encouraged recycling by erecting special recycling centres and restricted CO2 emissions in the city centre. However, no matter what measures are put in place now, climate change has already started to take its toll. Many industries are being affected, but perhaps none moreso than real estate.

Who Will be Affected Most?

In 2018, a report found that 35% of REIT properties have geographic exposure to climate hazards, including flooding, typhoons or hurricanes, coastal flooding and rising sea levels. The research revealed that some 73,5000 properties are directly at risk.

Coastal towns are among the most immediate at risk, which is why investment has significantly dropped in the past decade. Residential conveyancing solicitors are being brought in to asses properties and their new value given the climate change risks. What’s more, the same applies to hotels and commercial properties based on or by the water. Luxury hotels have begun to analyse the potential flood risk. It’s been predicted that by 2045, 300,000 residential and commercial properties will likely face chronic flooding and disruption.

Green Real Estate Index

FTSE Russell (a data and analytics provider) launched indexes aimed at helping investors asses climate risk in their real estate portfolios. There are plans to launch several strategies, such as the green real estate index. This evaluates green building metrics within each REIT and then rates them on how well they score. The green real estate index will help those investors looking to invest in more properties for their portfolio.

What Action is Being Taken?

There has been a huge shift in the discussions of sustainability. Houses are now being built using raw, responsibly sourced materials and eco-friendly practices. They’re also being made more durable to prevent damage from natural disasters, something that is incredibly important to potential investors. Many have been taking the advice on Manchester solicitors and holding back until it can be proven that a home will be long-lasting. There’s no doubt that climate change is greatly affecting the real estate industry, it’s now up to government officials and property builders to take action by evaluating their current practices. Hotels, for example, will need to reduce their greenhouse gas emissions per room, per year, by 66% to meet the goals of the Paris Climate agreement.