TY - JOUR
T1 - Climate change and commercial real estate
T2 - Evidence from Hurricane Sandy
AU - Addoum, Jawad M.
AU - Eichholtz, Piet
AU - Steiner, Eva
AU - Yönder, Erkan
N1 - Publisher Copyright:
© 2023 The Authors. Real Estate Economics published by Wiley Periodicals LLC on behalf of American Real Estate and Urban Economics Association.
PY - 2024/5
Y1 - 2024/5
N2 - We study how professional investors capitalize flood risk in commercial real estate (CRE) markets after hurricane Sandy. We show that New York CRE exposed to flood risk trades at a large, persistent discount. CRE in Boston, which mostly escaped direct hurricane-related damage, also exhibits persistent price penalties. These price effects are driven by asset-level capitalization rates, not building occupancy. Results from a placebo test using real estate prices in Chicago show that our inferences are not driven by coincidental, unrelated price trends for waterfront real estate assets. Our results are consistent with professional investors responding to a persistent shift in the salience of flood risk post-Sandy, even in locations spared by the disaster.
AB - We study how professional investors capitalize flood risk in commercial real estate (CRE) markets after hurricane Sandy. We show that New York CRE exposed to flood risk trades at a large, persistent discount. CRE in Boston, which mostly escaped direct hurricane-related damage, also exhibits persistent price penalties. These price effects are driven by asset-level capitalization rates, not building occupancy. Results from a placebo test using real estate prices in Chicago show that our inferences are not driven by coincidental, unrelated price trends for waterfront real estate assets. Our results are consistent with professional investors responding to a persistent shift in the salience of flood risk post-Sandy, even in locations spared by the disaster.
UR - http://www.scopus.com/inward/record.url?scp=85152433474&partnerID=8YFLogxK
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U2 - 10.1111/1540-6229.12435
DO - 10.1111/1540-6229.12435
M3 - Article
AN - SCOPUS:85152433474
SN - 1080-8620
VL - 52
SP - 687
EP - 713
JO - Real Estate Economics
JF - Real Estate Economics
IS - 3
ER -