Climate change impacts could prompt realignment of assets for commercial property developers

Strategies include reducing exposure to properties in flood-prone areas.

October 03, 2018 |

The threat of rising sea levels could prompt commercial property developers and owners to reduce their assets in vulnerable areas, according to at least one prominent investment manager.

Owners of rental properties and other commercial real estate assets in coastal areas that face increased flood risk would be wise to adjust their portfolios over time, Marc Singer, co-founder of investment advisory firm Singer Xenos told GlobeSt. Taking this into account would mean selling properties in areas such as South Florida and directing new investments to areas less likely to suffer damage from the impacts of climate change.

Climate change should be taken seriously, as scientific evidence mounts indicating that significant coastal flooding will impact the real estate industry this century, Singer noted.

That doesn’t mean an immediate large-scale sell-off. Rather, a more gradual reduction of vulnerable properties over the coming decades would be prudent.

Recent studies have shown that a quarter of Boston could be underwater by 2045, and catastrophic flooding in New York City may become more common over the next few decades, he said. One impact within a decade might be a change in the way FEMA’s National Flood Insurance Program is administered to more realistically assess flood risk, resulting in higher premiums.

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