The future of real estate investment: Smart and climate-resilient buildings
By Daniel Neiditch, President of River 2 River Realty
Climate change has created a huge demand for sustainable and resilient design and construction. Climate-resilient design focuses on the design of buildings, landscapes, communities and regions to respond to natural disasters and the effects of climate change, such as rising sea levels, increasing heat waves and regional droughts. For real estate professionals, climate-resilient strategies ensure that capital doesn’t fail and continues to perform at a net positive rate, even during catastrophic events.
The interest in climate-resilient design is no surprise given the $300 billion in residential and commercial real estate damage caused in 2017 by natural disasters. Exacerbated by the climate epidemic, natural disasters will crush real estate values for underprepared investors. After all, failing to invest in climate-resilient designs and strategies can render properties obsolete and illiquid.
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How at-risk is your market? Some companies have made use of environmental risk tools to create a climate change risk index that answers that question. The index assigns scores to areas vulnerable to climate change over the next 20 years. Often, these models consider the ability of property owners to manage these risks and the ability of the country to deal with recovery. The composite area is scored from low to extreme. Considered part of the due diligence process, this index allows companies to start thinking ahead on how they’ll mitigate the risk if and when that time comes.
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Physical building adaptations to mitigate climate risk are numerous and varied. Real estate owners and investors should “harden” their assets to guard against extreme weather. Doing so reduces this risk, improving asset efficiency and the tenant’s comfort by creating energy efficient options and other mitigation measures.
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