Natural disasters and severe weather are increasingly destructive —and expensive. According to Gallagher Re’s Natural Catastrophe and Climate Report: 2024, disasters and weather cost the global economy $417 billion, $154 billion of which were insurance costs.
“Whether you own or operate an apartment complex, mixed-use development or retail property, you’re likely to see higher costs, not only for insurance, but also repairs and operations,” said Matt Felsot, Central Region Sales Manager, Commercial Term Lending at Chase.
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To reduce costs and prepare for the future, property owners should invest in climate-resiliency efforts now. Felsot detailed three ways to prepare for a warmer climate.
“There are several measures that can be taken to protect properties—especially older ones—from the impacts of a warmer climate,” Felsot said. “That starts by increasing resiliency and efficiency.”
Owners and operators should examine a property’s physical qualities and surroundings, then retrofit the building to withstand extreme weather events. For example, if a property is in a flood-prone area, elevating the building or installing flood barriers can help prevent water damage. Other retrofits include installing double- or triple-glazed windows to minimize heat loss and gain.
“Proptech plays a crucial role in adapting buildings to a warmer climate by providing innovative solutions that enhance resilience, efficiency and sustainability,” Felsot said. For example:
“These upgrades not only improve resilience but also align with potential future energy-efficiency regulations, such as net-zero building mandates, which require new buildings to produce as much energy as they consume,” Felsot said. For instance, Washington state’s Clean Buildings Performance Standard mandates that large buildings meet specific energy performance targets, contributing to emissions reductions.
“Energy efficiency and smart thermostats also play a role during heatwaves when energy demand historically spikes, to manage building energy demand and help ensure grid resilience,” said Dr. Sarah Kapnick, Global Head of Climate Advisory, J.P. Morgan. “They were mandated during previous California and Pacific Northwest heatwaves to avoid blackouts.”
“Installing renewable energy systems can not only mitigate climate impact but also provide a hedge against rising energy costs,” Felsot said. Property managers can:
These efforts may also qualify multifamily properties for Fannie Mae or Freddie Mac green financing incentives. For example, borrowers may receive better pricing and higher proceeds from the government-sponsored entities reducing the entire property’s annual energy and water consumption by 30% or more.
Preparation and monitoring are critical to improving a property’s climate resiliency. That’s why owners and operators should regularly:
“Building resilience isn’t just for eco-conscious individuals. “These efforts can lower operating costs through reduced insurance rates, water bills, repairs and energy use,” Kapnick said.
“By taking these steps, investors can not only prepare for future climate change and energy-efficiency requirements, but also enhance their properties’ value ,” Felsot said.
Natural disasters’ damages may be unprecedented, but there are still ways commercial real estate owners and investors can reduce insurance costs.
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