Goulston & Storrs Survey Explores Real Estate Industry’s Mixed Reaction on Climate Threats
Survey with Corporate Counsel magazine shows industry’s assessment of largest threats and opportunities; while some forward-looking preparedness efforts exist, 70% of executives do not conduct climate risk assessments
(Boston, November 24, 2014) – Goulston & Storrs, partnering with Corporate Counsel magazine, released the results of a survey of corporate counsel exploring the real estate industry’s reaction and response to climate threats. As part of the efforts of the firm’s Climate Change Resiliency Task Force, the collaboration with Corporate Counsel explored overall opinions about threats to the industry as a result of climate change; specific events and level of perceived risk; the use of government aid; and preparedness efforts.
Awareness, but not yet action
According to results, 70% of executives surveyed do not conduct climate-risk assessments of their assets. There is growing awareness of threats yet some respondents do not believe risk level is higher than it was in previous decades. However, of the segment that does believe climate change poses a growing threat to real estate, and overwhelming majority (69%) believes flooding poses the most significant risk followed by hurricanes (59%) and then related disruption of power and water supply (55%).
Very few respondents turn to the federal government for help and those that do leave the task up to corporate counsel to navigate the agencies.
Loss of physical assets greatest near-term risk; resulting litigation and potential regulation are longer-term concerns; planning a ten-year view
Nearly 50% of respondents noted risk to the physical structures the most immediate concern. “Climate change risks are real regardless of geography but particularly up and down the east coast where cities often occupy low-lying areas in flood zones. Real estate professionals can be great partners to their clients and tenants by assisting with basic emergency preparedness planning such as employee preparedness and business continuity and communications plans. There are ample resources available through organizations such as FEMA, the Red Cross and ULI,” said Matthew Kiefer, director at Goulston & Storrs and co-chair of the firm’s Climate Change Resiliency Task Force.
Otherwise respondents noted the longer-term risks of uncertainty over regulation and potential litigation as areas of most concern. More than a third of respondents said they bear the increased costs associated with infrastructure hardening, either absorbing them entirely or offsetting by implementing resilience measures in their structures.
Two-thirds of respondents take a decade-long view in planning new developments, which has little impact on the actual construction of the assets or on the buyers’ exits. While some believe there will be a longer-term uncertainty, few take the view more than ten years ahead. Only 30% of respondents conduct climate risk assessments of the properties once constructed; the 70% who do not choose to deal with potential loss through insurance and other avenues if damage is sustained.
While numbers suggest there is growing awareness of risk, there is still room for education in the real estate industry. Most respondents seek outside counsel in the areas of environmental regulations, contracts and liability assessments and permitting, yet few take advantage of outside counsel’s role in preventive measures.
For more information about Goulston & Storrs’ Climate Change Resiliency Task Force, visit www.goulstonstorrs.com or follow us on Twitter at @goulstonstorrs.
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