Large Property Investors Are Increasingly Considering Their Portfolio’s Climate Risk

• Damage control: As extreme weather events become more frequent some property investors are starting to fold climate resilience into their strategy.

• A new Breed: The new mayor of San Francisco is changing policies in order to convince the real estate industry that the city is a good investment.

• Fire in Chi-Town: Chicago’s new professional soccer stadium is designed to be a catalyst for local urban revitalization.

• Multifamily security: Robot guards were once seen as the future of multifamily security, but technical issues and public backlash have stalled adoption.

Investment Strategies

Large Property Investors Are Increasingly Considering Their Portfolio’s Climate Risk

As climate change accelerates, the commercial real estate industry faces mounting challenges. In 2024 alone, weather-related disasters inflicted nearly $100 billion in property damage, prompting savvy property firms to integrate climate risk assessments into their investment strategies. Advancements in data analytics and artificial intelligence now enable detailed evaluations of individual buildings, allowing companies like Cortland to identify vulnerabilities and prioritize upgrades that enhance resilience against extreme weather events.

These proactive measures are not only about safeguarding assets but also about financial prudence. By fortifying properties against potential damages, owners can mitigate costly repairs and minimize disruptions to cash flow caused by tenant displacement during extensive renovations. Moreover, demonstrating reduced risk profiles can lead to more favorable insurance premiums, a significant consideration given the recent surge in commercial property insurance costs. For instance, commercial property insurance premiums increased by an average of 6.0% in the fourth quarter of 2024, with some high-risk areas experiencing even steeper hikes.

Beyond weather-related concerns, seismic risks also demand attention, especially in earthquake-prone regions. While current algorithms may not fully account for such hazards, firms are beginning to incorporate seismic assessments into their risk evaluations. As the industry evolves, properties equipped with comprehensive resilience measures are poised to become more valuable, offering investors not just peace of mind but also a competitive edge in a market increasingly influenced by environmental factors.

Overheard

Multifamily Security

Chicago Fire’s Self-Financed Stadium Aims to Anchor Downtown Revitalization

Chicago’s MLS club, the Fire, is moving forward with a $650 million self-financed stadium at The 78, a 62-acre master-planned site intended to become Chicago’s seventy-eighth neighborhood. The deal offers a private-sector-driven alternative after public resistance led to the cancellation of a $1 billion taxpayer-backed proposal for a new White Sox stadium on the same land.

Fire owner and Morningstar founder Joe Mansueto is betting that a 22,000-seat stadium can catalyze broader development downtown. The 78 project, led by Related, has struggled for nearly a decade to land an anchor tenant, having previously courted Amazon, JPMorgan, and casino operators.

Now, the privately funded soccer stadium sidesteps growing skepticism over stadium subsidies. Illinois leaders have voiced strong opposition to public stadium deals, mirroring similar debates playing out in Washington, D.C., and elsewhere.

While the stadium is funded, much of the surrounding mixed-use development—including housing, retail, and riverfront amenities—remains in the early planning stages. Developers are targeting a 2028 stadium opening as momentum builds for a more self-reliant model of urban revitalization.

San Francisco Courts the Real Estate Industry to Try to Spur Growth

San Francisco has a new mayor who is trying to make the city more attractive to real estate investment. Daniel Lurie, an heir to the Levi Strauss & Co fortune, was elected last November with 56.2% of the vote. Since then, he has been hosing luncheons and meeting with industry leaders to try to convince them that San Francisco is a good place to do business.

One of the main industries he has been courting is the real estate industry. He has worked to make building in the city easier. Since significant changes were implemented in January 2024, the median time for planning approval has decreased from 222 to 133 days, and building approval from 258 to 209 days. He has also created a tax incentive for office to residential conversions and rezoned certain areas of the city to allow for more density. Larie has even gone as far as to appoint developers to the city’s historic preservation commission.

San Francisco was hit hard by the pandemic and the softened office market that followed. Now it is starting to see an uptick in leasing, largely do to the growth of AI since many of the leading AI companies are headquartered in the Bay Area. If San Francisco is able to change the narrative around the city from a crime riddled, overly bureaucratic metropolis to a save place to live and do business, it will benefit from the pent up demand to invest in one of the richest, most technologically advanced cities in the world.

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Propmodo Daily is written and edited by Franco Faraudo with contributions from readers like you and the Propmodo team.

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