Climate Change and Commercial Real Estate: Evidence from Hurricane Sandy

This study examines how sophisticated investors capitalize flood risk in commercial real estate markets. Using a detailed property-level transaction database, we document that New York commercial properties exposed to flood risk trade at a large persistent discount following Hurricane Sandy’s landfall. Additionally, commercial properties in Boston, which largely escaped direct hurricane-related damage, exhibit persistent post-Sandy price penalties. In contrast, property prices in Chicago are unaffected by the storm. These results are consistent with a persistent shift in the salience of flood risk along the northeastern seaboard following Sandy’s landfall, and reflect the northward migration of hurricanes induced by climate change.