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Climate change and property investment

On Behalf of | Apr 15, 2019 | Commercial Real Estate |

California real estate investors know the importance of doing due diligence before purchasing a property. One issue that may have a significant impact on the long-term value of a property is climate change. Climate and weather issues can trigger incidents that damage property and communities.

Wildfires, floods, tornadoes and other weather disasters have been in the news a lot in recent years. With human-caused climate change reportedly increasing the frequency and severity of disasters, the reality is that property investors, both in the residential and commercial sectors, must understand these risks before making a purchase.

In addition to the obvious risks of property damage, commercial real estate investors should be aware that a weather incident can create a cascading effect within a community that deeply disturbs its economy. For example, weather damage to a commercial building diminishes its value and requires expensive repairs.

Another issue is that business that operated in a damaged commercial space will likely have to relocate while repairs are made. Sadly, these businesses may not recover from damages, leaving landlords with no rental income and the task of finding a new tenant when the building is repaired. This may be difficult if a community loses several businesses as the result of a disaster.

Commercial property investors may have difficulty acquiring the data they need to make good decisions. One reason for this is that insurers are often considering short-term risks during the underwriting process and may not consider the long-term impact of climate change.

In recent years, some companies have begun offering insight into possible climate change risks. This information, combined with quality legal advice from experienced attorneys, may help investors avoid the financial difficulties that result after a weather disaster.