Successful investors in Wisconsin and around the country anticipate market trends and act accordingly. These trends are generally either economic or social, but it is scientific developments that are currently causing the most concern in the commercial real estate sector. This is because the latest science suggests that climate change could drastically alter the real estate landscape over the next half-century and wreak havoc on some of the nation’s most lucrative markets.
Changing weather patterns are already having an impact. Natural disasters such as wildfires, floods and mudslides cost the economy more than $300 billion in 2017, and most of the damage was done to commercial and residential real estate. However, it is anticipated sea level rises over the next few decades that have developers and investors most concerned. To get a better understanding of what this means for real estate markets, some of the most prominent investment firms have opted to put significant resources into climate-change-related risk assessment.
In traditional risk assessment, experts weigh the impact of anticipated events on specific projects or assets, but climate change research focuses on how soaring temperatures, increased precipitation and rising sea levels will affect entire metropolitan areas. Experts say that savvy investors who consider climate change when making decisions or during due diligence could potentially outperform the market, but those who are unprepared could find the next few decades extremely difficult.
Anticipating risks is especially important for commercial real estate developers as the loans taken out to fund new projects must generally be paid off or refinanced within a few years. When perceived risks are high, and traditional banks are unwilling to extend credit, attorneys with experience in this area could help developers assess the loan packages offered by alternative lenders. Nontraditional lenders are generally more flexible than banks, but they are not subject to the same federal and state regulations and should be approached with caution.