Real estate professionals cite infrastructure and climate change as top concerns
Research - JULY 3, 2019

Real estate professionals cite infrastructure and climate change as top concerns

by Drew Campbell

Infrastructure in the United States is at the top of the list of concerns of real estate professionals as identified by Chicago-based consultancy Counselors of Real Estate’s Top Ten Issues Affecting Real Estate report. The CRE announced the results during the keynote address at the National Association of Real Estate Editors’ annual conference in Austin, Texas.

“Inadequate infrastructure creates a hard ceiling to economic development, and real estate values are tied to sustainable growth,” says Julie Melander, CRE, 2019 chair of The Counselors of Real Estate. “The U.S. must invest in infrastructure to compete globally, but right now it is lagging other nations on infrastructure investment.”

The report highlights that roads, bridges, tunnels, railways, airports, the power grid, water systems, and levees are giving way with greater frequency.

“Counselors have first-hand experience with international commerce and the investments that have been made in infrastructure around the world. We are seen to be lagging when compared to other nations around the globe, and this is creating a drag on our economic competitiveness not only in goods flow, but in telecommunications and data management capacity,” the report notes.

“Without substantial infrastructure improvements, several large U.S. cities — including New York and Washington, D.C. — will become untenable for corporate expansions and top talent,” says a CRE member.

Other issues at the top of the CRE Top Ten list include Housing in America and Weather and Climate-Related Risks.

“For many investors, they can no longer rely on historic performance to predict future returns,” the report notes. “Climate risk has emerged as a new — and likely permanent — aspect of fiduciary duty and what it means to assess, disclose, and manage these risks for real estate investments. Increasingly, investors are demanding that climate risk be assessed and factored into future return projections and day-to-day decisions.”

Real assets, including real estate and infrastructure, are increasingly at risk of physical and operational risks due to climate-related events such as hurricanes, flooding, wildfires and landslides.

The CRE uses the National Center for Environmental Information (NCEI) — a scorekeeper of the economic impact of weather and climate data — to illustrate the dire results of climate related losses.

According to NCEI, the average insured loss per year for 1980 – 2018 is $19.3 billion. In 2017, that number was the most expensive year in recorded history for weather and climate-related insurance losses, costing the U.S. more than $300 billion, according to the CRE report.

“Our cities will survive Trump, Brexit, and even another downturn, but we cannot continue to have Houston-like events and pretend this won’t impact our industry,” a CRE member stated.

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