Temperature Extremes and Commercial Real Estate
67 Pages Posted: 8 Nov 2021 Last revised: 29 Feb 2024
Date Written: February 28, 2024
Combining granular data on temperatures across the continental US with micro-level commercial real estate (CRE) data from 1980 to 2020, we study the impact of exposure to extreme temperatures on investment performance of CRE at the individual asset level. We find that exposure to extreme temperatures over the holding period significantly reduces average realized total and asset returns in CRE, as well as sale prices, with no significant effect on income returns. Our results are driven by the recent extreme temperature events’ impact on sale prices. Heterogeneous treatment analysis by property sector also lends support to consumer demand channel.
Keywords: ccommercial real estate, temperature extremes, climate change
JEL Classification: R30, F64, C21
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