The Growing Impact of Climate on Commercial Real Estate

Building Resilience into Multifamily Housing

Climate-related disruptions are having an increasingly significant impact on commercial real estate markets — 
both individual assets and neighborhoods.

The industry is facing a growing range of risks from severe weather to increased operational volatility. At the same time, evolving building regulations, energy-efficiency standards, and decarbonization requirements are increasing acquisition and capital expenditures for owners and operators.

Climate Resilience Drives Value

Market pricing is already beginning to reflect the growing importance of climate resilience and risk exposure:

• Properties with higher flood or environmental exposure trade at discounts, while resilient properties may benefit from a pricing premium.
• Severe climate events have a more lasting and deleterious impact on property values and local neighborhood fundamentals than temporary disruptions.
• Key players — from investors and lenders to insurers and rating agencies — are placing greater emphasis on resilience planning and climate-risk assessment when evaluating real estate assets.

Factoring Climate Exposure into Property Fundamentals

Recently, the International Renewable Energy Agency estimated that $7.5 trillion in real estate is at risk of becoming “stranded” — deemed unusable, uninsurable, or considerably devalued because it fails to meet market expectations or new regulatory standards.¹

It is clear that climate change can no longer be viewed solely through the lens of sustainability or corporate responsibility. Climate exposure has become a consequential factor alongside traditional considerations in assessing property fundamentals and deal feasibility, influencing financial decisions from acquisition and exit strategies to underwriting and capital allocation.

Many real estate investors and owners now incorporate resilience considerations — such as infrastructure hardening opportunities, upgraded building systems, emergency preparedness, and climate-risk modeling — into capex planning and underwriting in an effort to mitigate operational disruption and preserve long-term value.

With affordable housing, the challenges of climate exposure are particularly acute as resilience directly affects both the financial stability and well-being of residents. Property damage, utility disruptions, and rising insurance costs can materially impact operating performance while also threatening housing security and continuity for tenants.

Post’s Outlook

Post approaches climate resilience through an operational and risk-management framework that is designed to support long-term portfolio performance. We review severe weather exposure across our portfolio annually, utilizing risk modeling software to quantify exposure and inform insurance purchasing decisions. In addition to transferring weather risk through insurance coverage, Post is continuously enhancing mitigation efforts through emergency response planning, procedural safeguards, and targeted property improvements.

Looking ahead, we believe climate resilience will play an increasingly significant role in real estate investing and asset management. As the industry adapts to evolving environmental and market conditions, climate-related risks will influence insurance, capital allocation, and operations. With disciplined and proactive risk management processes, market players can help preserve long-term asset value and ensure operational stability across the affordable housing sector.

¹ Source: Jean Eaglesham and Vipal Monga, “Trillions in assets may be left stranded as companies address climate change,” The Wall Street Journal, November 20, 2021.