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Sea Level Rise and Commercial Real Estate

Author

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  • Vikas Soni

Abstract

I study the impact of sea level rise (SLR) on commercial real estate (CRE) pricing and commercial lending. Using novel property level sale transactions from 2011-2018, I find that commercial properties exposed to a 6-feet sea level rise are sold at a 6% discount. This discount appears to be driven by local buyers and buyers’ brokers that are more sensitive to climate risks. In addition, discount significantly rises after an extreme hurricane, suggesting that salient risk impact pricing. Likewise, lenders require higher down payments for properties exposed to SLR, and this requirement is amplified following an extreme hurricane. These findings suggest that commercial real estate investors and banks are becoming more cognizant of the risks posed by sea level rise.

Suggested Citation

  • Vikas Soni, 2023. "Sea Level Rise and Commercial Real Estate," ERES eres2023_347, European Real Estate Society (ERES).
    • Handle: RePEc:arz:wpaper:eres2023_347
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    More about this item

    Keywords

    Climate Finance; Commercial Loans; commercial real estate; Seal Level Rise;
    All these keywords.

    JEL classification:

    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location

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