Climate change and commercial real estate: Evidence from Hurricane Sandy

Abstract

[Jawad M. Addoum, Piet Eichholtz, Eva Steiner and Erkan Yönder] study how professional investors capitalize flood risk in commercial real estate (CRE) markets after hurricane Sandy. [The authors] show that New York CRE exposed to flood risk trades at a large, persistent discount. CRE in Boston, which mostly escaped direct hurricane-related damage, also exhibits persistent price penalties. These price effects are driven by asset-level capitalization rates, not building occupancy. Results from a placebo test using real estate prices in Chicago show that our inferences are not driven by coincidental, unrelated price trends for waterfront real estate assets. [Their] results are consistent with professional investors responding to a persistent shift in the salience of flood risk post-Sandy, even in locations spared by the disaster.

Table 2 presents the output from Equation (4). Column (1) shows the price impact regression results for New York. The estimates suggest that, all else equal, a one-mile increase in coastal proximity is associated with 21.6% slower price appreciation. The authors present the results for Boston in column (2). The estimates suggest that a one-mile increase in coastal proximity is associated with 9.5% slower price appreciation. The economic magnitude of this effect is equivalent to about 40% of the effect [they] estimate in New York. Given the absence of physical damages in Boston, [Addoum, Eichholtz, Steiner and Yönder] attribute this portion of the effect to increased salience and perception of flood risk, and the remaining 60% of the New York effect to the economic fallout from physical damages sustained during Sandy.

https://doi.org/10.1111/1540-6229.12435
by Jawad M. Addoum, Piet Eichholtz, Eva Steiner, Erkan Yönder
Real Estate Economics via Wiley

First published: 23 March 2023 

Open Access

The $64 Billion Massachusetts Vehicle Economy

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Relationship between Wind Turbines and Residential Property Values in Massachusetts

http://eetd.lbl.gov/news/article/57349/no-evidence-of-residential-prop

Press Release:

Lawrence Berkeley National Laboratory (Berkeley Lab) along with University of Connecticut analyzed more than 122,198 home sales near 26 wind facilities (with over 1,500 within a mile of operating turbines) between 1998 and 2012 in densely populated Massachusetts, yet was unable to uncover any impacts to nearby home property values.

"This is the third of three major studies we have conducted on this topic [the first was published in 2009, and the second last August], and in all studies [using three different datasets] we find no statistical evidence that operating wind turbines have had any measureable impact on home sales prices," says Ben Hoen, a co-author of the new report and  a researcher in the Environmental Energy Technologies Division of Berkeley Lab.

One of the unique contributions of this most recent study is that impacts from turbines as well as a suite of other environmental amenities and disamenities were investigated. The study found strong evidence that highways, major roads, electricity transmission lines, open space and beaches impact property values, but no similar evidence was uncovered for turbines.  

"When we find our model so accurately predicts impacts from other amenities and disamenities, we are considerably more confident of our findings for turbines", says lead author Carol Atkinson-Palombo, Assistant Professor in the Department of Geography of the University of Connecticut.

This study, the most comprehensive to-date, in terms of numbers of transactions, builds on both the previous U.S.-wide Berkeley Lab studies as well as a number of other academic and published U.S. studies, which also generally find no measureable impacts near operating turbines.

...

Additional Information:

Download the new 2014 UConn / LBNL report "Relationship between Wind Turbines and Residential Property Values in Massachusetts"

To register for a related webinar on the New 2014 LBNL / UConn Report at 12:30 PM Eastern Time, January 22nd, 2014 go here: Webinar

Download the 2013 LBNL report "A Spatial Hedonic Analysis of the Effects of Wind Energy Facilities on Surrounding Property Values in the United States"

Download the 2009 LBNL Report "The Impact of Wind Power Projects on Residential Property Values in the United States: A Multi-Site Hedonic Analysis"

...

The home sales analyzed in this study occurred in one of four periods based on the development schedule of the nearby turbines,

Despite the consistency of statistical significance with the controlling variables, statistically significant results for the variables focusing on proximity to operating turbines are either too small or too sporadic to be apparent. Post-construction home prices within a half mile of a wind facility are 0.5% higher than they were more than 2 years before the facility was announced (after controlling for

Post-announcement, pre-construction home prices within a half mile are 2.3% lower than their pre-announcement levels (after controlling for inflation/deflation), which is also a non-significant difference, though one of the robustness models suggests weak evidence that wind-facility announcement reduced home prices.

Saving Energy in Affordable Homes: $300 - $500/Year

http://www.swinter.com/Collateral/Documents/English-US/WGJune2011.pdf
About a year ago, Rural Development, Inc. (RDI) completed construction of the 20-home project “Wisdom Way Solar Village” in Greenfield, MA. The project is a mix of affordable and market-rate homes, and it was RDI’s latest effort in approaching “zero energy” homes. Through the U.S. Department of Energy’s Building America program, Steve Winter Associates (SWA) provided support during the design and construction....

The home’s envelopes are ... efficient with R-40 walls, triple-pane windows, and R-50 attic insulation.... With both solar electric and solar water heating systems, SWA estimated total gas and electricity bills for the homes would be less than $500 per year. Now, after several homes have been occupied for a full year or more, the predictions look quite accurate.

Average annual gas and electric bills for eight homes were $401 (ranging from $324 to $485 — including service charges of $140 per year). Because of the PV systems and efficient use of electricity, most residents actually had a net credit from the electric utility over the past year.

Overall, this development is an excellent example of nearing “zero energy” in homes with good design and simple, cost-effective systems.

At http://www.greenbuildingadvisor.com/blogs/dept/green-building-news/deep-energy-savings-wisdom-way-solar-village Richard Defendorf noted ... exterior walls are insulated to R-40 with 12 in. of blown-in cellulose, the roof to R-52 with 14 in. of cellulose, and the floor to R-38 with 11 in. of cellulose. Triple-pane windows were used throughout. Heat is provided by a Monitor Products GFI1800 gas space heater located in the central area of the first floor of each house. Each home also is equipped with an exhaust-only ventilation system and an additional interior fan that draws air from the ceiling of the first floor and redistributes it to each bedroom.... The airtight and well-insulated building envelopes keep the design heat loads of the houses at less than 12,000 Btu per hour. The gas heater capacity ranges from 10,200 Btu on low fire to 16,000 Btu on high fire. Prices for the houses ranged from $110,000 (for a two-bedroom) to $170,000 (four-bedroom) in the low-income category and $150,000 to $210,000 for moderate-income buyers. A two-bedroom market rate home was priced at $210,000 and a three-bedroom was listed at $240,000.

For more information contact Robb Aldrich at raldrich@swinter.com or visit http://www.ruraldevelopmentinc.org/index-wwsv.htm.

Winter Green http://www.swinter.com/resources-newsletters-wintergreen.htm
Steven Winter Associates www.SWinter.com
Volume 12, Issue 6; June, 2011