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The Impacts Of Climate Change On The Real Estate Market

By News Creatives Authors , in Small Business , at March 1, 2022

Ari Chazanas is the Founder and CEO of Lotus West Properties, a property management and investment firm based in West Los Angeles. 

There continues to be a contentious debate, even now, as to the existence of climate change. But there are certainly marked changes taking place in the climate and the world in which we all live. These developments are having an impact in the real estate market as well, touching every aspect of the industry, from rising prices to the decline in popularity of specific regions.

Higher temperatures lead to more extreme weather systems and an increase in large-scale incidents, from massive hurricanes to wildfires, from gale-force storms to flooding. Where the real estate market is concerned, these incidents are making it tougher to manage the costs and condition of property on a yearly basis.

Rising Temperatures

An annual increase in the temperature of the planet is triggering climate-related incidents that bring with them dangerous levels of wind, rain and flooding. But an increase in temperature can also have a direct impact on the costs of managing a rental property. It’s projected that more tenants will rely on electricity to run fans and HVAC systems to stay cool. The same goes for an increase in water usage. These trends can place a higher burden on the electrical grid and city resources.

As a property owner, you’re paying an increased cost for those utilities along with your tenants. The more demand for these resources, the more expensive they become. We’re seeing these costs rise in real time, right now.

Weather Events

Recent studies have focused on the frequency of hurricanes in the North Atlantic. While scientists and climatologists remain at odds as to why, the fact is they are seeing an increased number of Atlantic hurricanes over the past 20 years. A rise in the frequency of hurricane activity and intensity results in a higher risk of damage to property in the path of these storms.

Coastal towns are often hit the hardest, as flooding takes a serious toll on the structural integrity of property, to say nothing of the sea level increase along the coasts due to rising temperatures. Global forecasts show the homes of up to 300 million people falling below the elevation of annual coastal floods by 2050.

Consider the areas in which wildfires have grown more prevalent in the same time frame. Larger, hotter and more destructive fires are destroying homes and property with greater intensity and consistency. This has been particularly troubling in the western part of the United States, where large, devastating wildfires have affected millions of acres of land and decimated millions of dollars in real estate.

The costs of maintaining property in all of these areas are increasing as well. Repair bills come more frequently, insurance premiums start to skyrocket, all while real estate prices and rents increase in neighboring areas that are unaffected by these impacts.

Property Damage

Weather-related property damage can have a serious impact on your bottom line. Not only are you possibly facing greater expenses over the course of each year, but as these weather-related calamities become incessant, the properties that are located in these areas start to lose their appeal. In the case of rental properties, tenants don’t want to live in weather-plagued locales under constant threat of the next natural disaster.

Selling a property in a high-risk area could mean less of a profit, if not a loss. That’s not just speculation anymore; it’s becoming reality. Home prices are seeing dramatic shifts due to climate-related impacts: Areas with an increased rate of damaging events are becoming less attractive, and prices are dropping.

Act Now

We can take steps right now to mitigate these burdens by going green in the real estate industry. That means smarter consumption, reducing our carbon footprint and choosing better materials to construct properties that are ready to face the challenges of our climate. Energy use and manufacturing are two of the most significant ways we can make the changes needed to help make our environment a more friendly place to live and succeed.

Construction of smarter, energy-efficient buildings is a big first step. Good quality tenants want to live in good quality properties. We’ve become too complacent in relying on carbon-intensive materials like concrete and steel to build today’s properties. Changes in building materials can lead to constructing properties designed to thrive in today’s conditions. More companies are turning to fire-resistant materials as well as heat-resistant materials in rising temperatures, helping to keep buildings cooler and more sustainable.

Take a closer look at how your building operates over the course of a day, a week, even a month. How much energy is required to simply keep the building operational and adequately maintained? Lighting alone can be a large expense. Cooling and heating of common areas is another. We haven’t even mentioned other amenities, from elevators to swimming pools. All of these cost money to operate, and you need to consider ways to reduce consumption and use your energy more wisely. For many property owners, making their buildings more energy-efficient through replacing windows and turning to renewable energy is far less expensive in the long run than not implementing these changes. Simply swapping out incandescent light bulbs for LED alternatives can make a difference.

If you make your property appealing to tenants, you’ll never have an empty unit. Climate change is having a larger influence than ever before on the decision process for renters looking for a place to live. Ignoring that fact could be the worst mistake you make for your business.


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