Climate Change and Commercial Real Estate: Evidence from Hurricane Sandy

47 Pages Posted: 23 Jul 2018 Last revised: 17 Mar 2021

See all articles by Jawad M. Addoum

Jawad M. Addoum

Cornell SC Johnson College of Business

Piet M. A. Eichholtz

University of Maastricht - Limburg Institute of Financial Economics (LIFE)

Eva Steiner

Pennsylvania State University - Smeal College of Business

Erkan Yönder

John Molson School of Business, Concordia University

Date Written: March 17, 2021

Abstract

This study examines how sophisticated investors capitalize flood risk in commercial real estate markets. Using a detailed property-level transaction database, we document that New York commercial properties exposed to flood risk trade at a large persistent discount following Hurricane Sandy's landfall. Additionally, commercial properties in Boston, which largely escaped direct hurricane-related damage, exhibit persistent post-Sandy price penalties. In contrast, property prices in Chicago are unaffected by the storm. These results are consistent with a persistent shift in the salience of flood risk along the northeastern seaboard following Sandy's landfall, and reflect the northward migration of hurricanes induced by climate change.

Keywords: Climate change, flood risk, asset prices, investor sophistication, real estate

JEL Classification: G14, Q54, R33

Suggested Citation

Addoum, Jawad M. and Eichholtz, Piet M. A. and Steiner, Eva and Yönder, Erkan, Climate Change and Commercial Real Estate: Evidence from Hurricane Sandy (March 17, 2021). Available at SSRN: https://ssrn.com/abstract=3206257 or http://dx.doi.org/10.2139/ssrn.3206257

Jawad M. Addoum

Cornell SC Johnson College of Business ( email )

Ithaca, NY 14850
United States

Piet M. A. Eichholtz

University of Maastricht - Limburg Institute of Financial Economics (LIFE) ( email )

P.O. Box 616
Maastricht, 6200 MD
Netherlands
+31 43 3883648 (Phone)
+31 43 3258530 (Fax)

Eva Steiner (Contact Author)

Pennsylvania State University - Smeal College of Business ( email )

331 Business Building
University Park, PA 16802
United States

HOME PAGE: http://https://directory.smeal.psu.edu/ems6770

Erkan Yönder

John Molson School of Business, Concordia University ( email )

Montreal
Canada

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