Will Climate Change Concerns Impact Real Estate Investment Strategies?

Abstract

Many cities like Phoenix in the U.S. are increasingly thinking about climate change impacts like extreme heat. In general, real estate investments have a 10-year horizon, so it may not make the most sense for investors to be so worried about a looming climate crisis in places like Phoenix, at least for right now. According to Macomber, many real estate investors flocking to Phoenix may not be thinking of climate risks because of shorter-term thinking, but that changes with organizations and investors with longer investment timelines. Moody's research says many developers in Miami, a city with potential climate change risk, haven't integrated the climate risk analysis into property assessments yet. A recent report from ULI and Heitman, a real estate management firm, said climate change could trigger a substantial shift in real estate demand. The report recommends that real estate investors build their capacity to assess and manage market-level investment risks and understand key markets' climate change adaptation needs. Only a handful of real estate investors are factoring in climate risks now, using data from property research firms and climate models, but it could be a sign of things to come.