Climate Migration and CRE: Weather-Driven Relocations are Redefining Markets

What is Climate Migration?

In recent years, climate change has become a key driver of human migration worldwide. As extreme weather events, rising sea levels, and resource scarcity intensify, millions of people are being forced to relocate in search of safer, more stable environments.

This phenomenon, known as climate migration, is not only reshaping global demographics, but also has major implications for various sectors of the economy, including commercial real estate (CRE).

According to the Institute for Economics and Peace, by 2050, roughly 1.2 billion people could be forced to migrate due to weather-related disasters. Rising sea levels will negatively affect many coastal areas. For instance, much of the Miami metro area is expected to be swallowed by the rising seas – Harold Wanless, a professor of geography and sustainable development at the University of Miami, estimates that 60% of Miami-Dade County will be submerged by 2060.

In this article, we will explore how climate migration is influencing the commercial real estate sector, the challenges and risks it presents, and the opportunities it creates.

What are Climate Refugees?

Climate refugees are people forced to leave their homes due to climate change and global warming. Unlike other refugees, environmental refugees are not recognized by international laws and cannot apply for refugee status based solely on climate-related disasters.

Hence, most climate refugees migrate internally, shifting to different areas within their own country. Take, for example, the millions of people who moved to Florida’s shorelines since the devastation of Hurricane Andrew in the state in 1992.

As climate refugees migrate, the regions they leave behind can experience a decline in economic activity, which can negatively impact the demand for CRE. This results in vacant office buildings, retail spaces, and industrial properties, which can drive down property values and rents.

Over time, these areas may also face challenges in attracting new investors, as the perceived risks associated with climate-related events increase, further destabilizing the local CRE market.

On the other hand, regions that receive climate migrants often experience a surge in demand for CRE. The demand for sustainable commercial properties also rises, pushing developers to adapt buildings to meet higher environmental standards.

Climate Migration: Impact on Commercial Real Estate

The influx of climate migrants into certain areas presents both opportunities and challenges for commercial real estate developers, investors, and urban planners. Below are some of the primary ways in which climate migration is affecting commercial real estate.

• Increased Demand in Certain Areas

  As people flee areas most affected by climate change, they often migrate toward regions perceived as more stable. These could be cities situated inland or in areas with less exposure to natural disasters.

  This shift is increasing demand for residential properties, and also has implications for commercial real estate. Areas that were previously less attractive for business operations are now seeing growth in office spaces, retail developments, and industrial real estate.

  For instance, companies may relocate their headquarters to cities that are less prone to hurricanes or wildfires, leading to a spike in demand for office buildings.

  As a result, commercial real estate developers may target these growing cities for new developments, from office parks to mixed-use complexes. This could lead to rising rents and real estate values in those areas.

• Net-Zero Transition Risks

  Climate change poses a growing threat, pushing CRE businesses to adapt to new laws and expectations aimed at reducing climate migration.

  The real estate sector is responsible for 42% of global greenhouse gas (GHG) emissions due to its role in building and operating properties worldwide.

  Achieving net zero emissions will require significant changes in the sector and introduce various risks associated with transition, including:

  • Reputation risk: Investors and stakeholders increasingly expect real estate companies to factor climate risks into their investment decisions.
  • Tighter regulations: New laws focused on climate change, such as stricter building standards, climate risk disclosures, carbon credits, and carbon pricing.
  • Decreasing market appeal: Submarkets may become less attractive due to rising costs and higher vulnerability.

  Furthermore, transition risks in the CRE sector can affect the communities and workers that depend on it for income and jobs.

  In the US, insurance costs are expected to double in states with the greatest risk of extreme weather.

• Diminishing Demand in Vulnerable Areas

  Regions most at risk from climate change, particularly coastal and flood-prone areas, may experience a decline in commercial real estate demand.

  The rising frequency of extreme weather events such as hurricanes, floods, and wildfires has already made some areas less attractive for both residential and commercial investments. Additionally, the CRE market in some coastal cities has started to experience stagnation in property values as the threat of rising sea levels and frequent flooding becomes more pronounced.

  Investors and businesses are increasingly aware of the risks that come with operating in vulnerable areas, which is reflected in their hesitance to make long-term commitments.

  For example, properties in flood-prone areas may face higher insurance premiums. Indeed, in the US, insurance costs are expected to double in states with the greatest risk of extreme weather, according to a 2024 article by Deloitte. By 2030, the cost of living in a higher-risk, extreme weather state could be 24% higher than the national average.

• Increased Focus on Resilience and Sustainability

  As the effects of climate change become more pronounced, CRE developers are being forced to reassess their approach to construction and building design.

  There is an increased demand for resilient buildings and properties that can withstand climate-related events like floods, storms, and heatwaves.

  Green building standards, such as Leadership in Energy and Environmental Design (LEED), have become more prominent as businesses and investors increasingly prioritize sustainability. For example, developers are incorporating flood-resistant features, sustainable energy sources, and advanced building materials to ensure that properties can endure climate-related stressors.

  The trend is also influencing tenant preferences. Companies are seeking office spaces that meet high environmental standards, not only to reduce their carbon footprint but also to protect their operations from future climate risks.

• Economic Disparities and Urbanization

  The migration of people from vulnerable regions to urban areas can exacerbate existing economic and social disparities.

  As climate migrants flood into more secure urban centers, the demand for housing and commercial real estate in those cities can skyrocket, leading to rising rents and gentrification. This can put pressure on the affordability of housing and increase competition for commercial spaces in already crowded markets.

  In cities where climate migration is on the rise, the influx of new residents can push up housing costs, which can spill over into commercial real estate.

  Local businesses may struggle to maintain their presence in gentrifying neighborhoods, while large corporations may capitalize on the growing demand for office space by pushing out smaller, local enterprises.

  At the same time, as the need for jobs in rapidly expanding cities increases, there is a growing demand for warehouses and industrial properties. These spaces are essential for the logistics, eCommerce, and manufacturing industries, all of which may see increased activity as businesses adapt to meet the needs of changing populations.

Conclusion

Climate migration is a growing phenomenon with far-reaching consequences for the CRE sector. As more people relocate due to climate-related events, the demand for commercial properties will shift, creating both opportunities and challenges for developers, investors, and urban planners.

Those who can adapt to this changing landscape by focusing on resilience, sustainability, and long-term risk mitigation will be better positioned to thrive in the CRE market.

For businesses, investors, and governments alike, understanding and responding to the dynamics of climate migration is crucial to shaping the future of CRE.

Do you want your CRE business to adapt to climate migration and remain resilient in this ever-shifting landscape? Our commercial real estate services will help you get there.

We support CRE stakeholders through property and fund accounting, loan management, lease abstraction and administration, and more. In this way, we help you reallocate resources toward climate-resilient geographies and assets, manage exposure in regions impacted by migration, and facilitate quicker response to emerging market conditions.

With expertise across the US, UK, and other global markets, Silverskills enables investors, lenders, and asset managers to adapt strategies and maintain performance in a dynamic, climate-influenced CRE environment.

Contact us now to begin your transformation.