White House Climate Change Report Highlights Major Implications For Commercial Real Estate
Several federal agencies, including the U.S. Global Change Research Program, delivered a quadrennial report on the potential effects of climate change and the country's ability to address them over Thanksgiving Day weekend. The report's findings were sobering, but did little to sway President Donald Trump, who publicly denounced the study upon its release.
Bisnow read through the report to uncover the main risks to commercial real estate, which are listed in the following slideshow.
Roads, bridges, train tracks and everything that connects people and businesses across the country are all at severe risk, according to the report. If one extends the definition of infrastructure to include the built environment and power supply, the outlook is even more dire:
"Above- and below-grade transportation systems are at increased risk from flooding and degradation that reduces expected service life," the report reads. "Higher temperatures increase stress on cooling systems to perform as designed ... Over time, sea level rise and flooding are expected to destroy, or make unusable, properties and public infrastructure in many U.S. coastal cities. Investor costs increase when infrastructure is degraded, damaged or abandoned ahead of its anticipated useful life."
The strain on existing infrastructure is only increasing, with traffic on highways increasing by 250% since 1960, a trend that the GCRP expects to continue. The study notes that failures to address aging and ineffective infrastructure is expected to cost the U.S. $3.9 trillion by 2025 before adjusting for inflation.
The report found that in 2015, 85% of the U.S. population lived in metropolitan areas, a percentage that is expected to increase in the coming decades. Growing cities experience rising income inequality and greater strain on infrastructure and services, which will be exacerbated by climate change.
Some of the GCRP's projections expect massive growth in the two largest metropolitan areas in the country in New York and Los Angeles. The fact that both cities lie on the coast only heightens the risks involved with such urban expansion, due to the predicted rise in sea levels.
Cities are responsible for around 80% of the country's greenhouse gas emissions, according to the report, which means that they can have an outsized impact with local policies. Programs that require strict sustainability standards in new buildings, mitigate heat island effects and boost sustainable energy usage are already underway in multiple metropolitan areas.
Climate change's impacts on the economy of the future range between growing power costs and disruption of global shipping rates, the report states.
Without "significant global mitigation action and regional mitigation efforts," the U.S. economy could see losses in the hundreds of millions of dollars as a direct result of climate change by the end of the century.
With port cities growing in importance to the red-hot logistics market, rising sea levels could significantly affect U.S. companies' import and export prices. Growing numbers of natural disasters and rising temperatures will have meaningful effects on agriculture production, according to the report. That could give industrial real estate an opportunity if more demand for indoor agriculture is on the way.
The report does note that warmer temperatures could give a temporary boost to certain economic sectors, but without any worldwide changes, those benefits will easily be outweighed by the long-term costs.
Along with warmer temperatures and rising sea levels, the most catastrophic consequence of climate change could be the growing frequency of natural disasters, such as hurricanes, floods and wildfires, the report states.
Hurricane Maria devastated Puerto Rico, reducing its appeal to tourists and its ability to accommodate them. Wildfires reduce nature tourism, and the poor resulting air quality in major West Coast metros could also prove a tourism deterrent, according to the report.
Less snow each winter would also have meaningful impact on tourism in Alaska and the northern part of the contiguous 48 states. Not only could interest decline, but the cost of creating artificial snow would likely rise with less naturally occurring precipitation.
Actions And Attitudes For Change
All hope is not lost in the face of climate change if local, state and federal policies can adapt to the new reality, according to the study, though Trump's public rejection of the report may be cause for concern.
In an interview with the Washington Post on Tuesday, Trump said of climate change, "I don't see it."
"One of the problems that a lot of people like myself — we have very high levels of intelligence, but we’re not necessarily such believers," Trump told the Post. "You look at our air and our water, and it’s right now at a record clean ... And when you’re talking about an atmosphere, oceans are very small."
While the report recommended stricter regulations on emissions from automobiles, power companies and manufacturing, Trump has spent time in office relaxing regulations on those industries that were put in place under President Barack Obama.