FINANCE


JAWAD M. ADDOUM ASSOCIATE PROFESSOR Charles H. Dyson School


of Applied Economics and Management Cornell SC Johnson College of Business Cornell University


Climate change and commercial real estate: Evidence from Hurricane Sandy Real Estate Economics 52, 3, May 2024 Winner: Edwin Mills Best Paper in REE, 2024 LINK TO PAPER LINK TO JAWAD ADDOUM VIDEO


Co-authors • Jawad Addoum Associate Professor, Charles H. Dyson School of Applied


Research and Management, Cornell SC Johnson College of Business, Cornell University


• Piet Eichholtz, Maastricht University, Te Netherlands • Eva Steiner, Pennsylvania State University, University Park • Erkan Yönder, Concordia University, Montreal, Canada


Summary Regulators and market participants worry about the effects of environmental


risks on the prices of real assets, and flood risk exposure of coastal real estate is central to these concerns. However, evidence from prior studies on price discounts for real estate exposed to flood risk is mixed, examining residential real estate held for consumption more than studying households buying resi- dential real estate for investment.


In this study, the authors assess the implications of flood risk exposure for real estate prices by studying real estate transactions completed by sophisticated investors around a sudden shift in flood risk salience. Tey show that profes- sional investors capitalize flood risk in commercial real estate markets (CRE) after Hurricane Sandy, and that New York CRE exposed to flood risk trades at a large, persistent discount. CRE in Boston also exhibits persistent price pen- alties, driven by asset-level capitalization rates, not building occupancy.


CONTENTS TO MAIN


| RESEARCH WITH IMPACT: CORNELL SC JOHNSON COLLEGE OF BUSINESS • 2024 EDITION


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