Written by: Matt Fontanesi, Vice President Structural Resilience


Credit: New York Post

Property value is an interesting expression of the ways in which people make choices. The reported value of the oceanfront house on the left is $15.9M and an estimated $13M for the A-frame house on the right. While the city hasn’t “red tagged” the house on the left —declaring it unsafe for occupancy—the desirability of the house would be expected to change over time. Buyers of at-risk properties weigh the benefits of a beautiful view against the risks related to financing, insurance and exit strategies. In areas like this, the cliffs are natural and undefended, and therefore under attack from waves below and rain above. Two consecutive wet winters saturated the soil, triggering landslides up and down the coast. Wet winters aren’t unprecedented, but climate change is increasing the frequency of wetter winters, larger storms, and more intense rainfall.  Dana Point averages 14” of rain a year, but the storm that preceded the landslide dumped 6.4” in a week. This storm was known as an atmospheric river.

Think of atmospheric rivers like giant rivers in the sky, except they’re made of water vapor, not actual water. They stretch for hundreds of miles and can carry an astonishing volume of water, surpassing even the flow of the Amazon River at times. These phenomena are crucial, especially for the western U.S., as they contribute significantly to the region’s annual rainfall.

Credit: National Oceanic and Atmospheric Administration

But here’s the tricky part: UCLA Climate Scientist Daniel Swain has estimated that climate change has increased the capacity of the atmospheric rivers we’ve experienced by 5-15%. As the planet continues to heat up the western U.S. is bracing for more atmospheric rivers—expected to not only occur more often but also grow in size. The reason being: warmer air and oceans make for storms that can carry more moisture, leading to bigger, more extreme atmospheric rivers.

The Financial Implications of Climate Change

With storms that are 15% longer and wider than before we can expect more intense rainfall and even stronger winds, ramping up the risks of damage from these already formidable weather events. A publication from the Journal of Scientific Reports reveals that by the end of this century, the damage bill from these events could go from $1 billion annually to $2.3 billion – $3.2 billion annually due to increased flooding and the potential for mudslides, as the ground becomes too saturated to absorb any more water.

A series of potent rainstorms has already accelerated the pace of landslides and intensified coastal erosion in southern California putting expensive cliffside homes in jeopardy and necessitating the shutdown of over exposed buildings. The escalating rainfall, sea level rise, and intensified droughts—all facets of climate change—are reshaping California’s landscape visibly and rapidly. This has significant implications for coastal regions, where the combination of rising sea levels and more vigorous storm activity is eroding shorelines at an alarming rate, a scenario backed by US Geological Survey predictions pointing towards significant beach loss by the end of the century.

There’s also a wildfire angle. As the climate changes, wildfires are becoming more common and more intense, which in turn increases the risk of mudslides. Why? Because fires destroy the vegetation that helps stabilize the soil. Imagine a year with severe wildfires followed by extreme rain—this could become a regular scenario, with studies predicting a significant rise in such back-to-back disasters. This evolving dynamic poses difficult questions about prioritization and adaptation in the face of a changing climate, reflecting a broader challenge of how to respond to the increasingly tangible impacts of climate change.

So, what can you do to mitigate climate risks? Our Property Resilience Assessment could help you avoid this sort of financial exposure. We combine desktop research from several natural hazard and climate change sources, on-the-ground investigations of the site for relative resilience or mitigation efforts for the hazards, and prepare bespoke recommendations that focus on maximizing your ROI or minimizing your exposure. This gives you the data to make an informed decision about your investments. 

Mitigating Climate Risks with Property Resilience Assessments

While Property Resilience Assessments provide invaluable climate preparedness insights for any real estate owner or investor, they are especially critical for certain scenarios where the stakes are highest:

High-Risk Locations:

For assets situated in vulnerable geographic areas like coastal regions, wildfire-prone zones, floodplains or other high-risk locations a Property Resilience Assessment is highly recommended. Our assessments pinpoint climate hazards through advanced risk modeling, quantify exposure through estimated loss projections, and most importantly, prescribe customized resilience implementation strategies. For example, a historic hotel property in coastal Florida has leveraged our PRA insights to implement a multi-pronged flood mitigation strategy. This includes deployable perimeter barriers, wet/dry floodproofing measures like flood doors and backflow preventers, and operational adjustments like training personnel on flood preparation protocols. The solutions allow un-inundated areas to remain dry while deliberately accommodating water infiltration in sections designed for quick recovery.

By proactively executing these tailored resilience actions prescribed through our PRAs, owners of high-risk assets can cost-effectively reduce potential catastrophic damages, devaluations, business interruptions and losses.

Portfolios with Unknown Exposures:

For real estate investment trusts, fund managers, and other investors overseeing diversified property portfolios, it can be extremely challenging to pinpoint which specific assets face heightened vulnerability to escalating climate risks. With properties spanning multiple regions, many investors lack full visibility into their exposure. By systematically analyzing each asset through climate risk modeling, hazard mapping, site walks, interviews, and research our PRAs identify the “red flag” properties facing threats from climate hazards.

For investors with multi-region, multi-asset class portfolios, PRAs are critical for targeted resilience planning. It allows you to enhance climate preparedness strategically, rather than applying costly blanket solutions portfolio-wide regardless of exposure levels. By highlighting vulnerabilities and recommending asset-level strategies and implementation, PRAs ensure you can prioritize resilience spend to safeguard your highest risk assets and maximize risk-adjusted returns.

Rising Insurance Costs:

In many high-risk markets, property owners face skyrocketing insurance premiums as natural disaster losses mount. Many have seen rates spike over 200% for certain hazard coverages, while some carriers have withdrawn coverage altogether due to the exposure. For asset owners and investors facing such dire scenarios, the costs of maintaining sufficient property insurance is becoming increasingly expensive – calling into question the long-term viability and returns of some holdings. Others have been forced to go uninsured or severely underinsured, exposing themselves to catastrophic financial jeopardy.

This is where undergoing a comprehensive Property Resilience Assessment can provide crucial evidence and justification for implementing resilience upgrades. PRAs leverage climate risk modeling and on-site evaluations to quantify the specific climate hazard exposures each property faces, including projected financial damages and losses under various event scenarios and timeframes. PRAs do not stop at identifying risks – they recommend, and document customized resilience enhancement strategies tailored to each asset’s unique risk profile and vulnerabilities. From structural strategies to protective measures and operational adjustments our assessments outline a roadmap of mitigation steps.

When armed with this risk exposure data and resilience implementation plans owners have powerful ammunition to renegotiate more favorable insurance pricing and coverage terms that better reflect the risk realities.

Preserving Asset Value:

At its core, enhancing climate resilience preserves and maximizes the value, revenue streams, and future exit optionality of real estate assets over their full lifespans. Our tailored property resilience assessments evaluate each property’s unique vulnerabilities and identify critical upgrades, adaptations, and protective measures. This data-driven approach helps maintain property valuations, avoid disruptions and losses, and ensure assets retain their marketability for eventual exits.

Final Thoughts

As the impacts of climate change accelerate, the risks to real estate investments grow increasingly severe. Unmitigated climate hazards like rising seas, intensifying storms, wildfires and flooding threaten catastrophic damages, disruptions and permanent asset devaluations that can wipe out returns.

By taking a proactive, data-driven approach to climate preparedness through our Property Resilience Assessments, owners and investors can get ahead of escalating threats and implement strategic resilience measures to safeguard holdings. Whether for high-risk coastal or wildfire-prone properties, portfolios with unknown exposures, assets facing insurance crises, or protecting property values long-term, our PRAs provide the comprehensive climate risk intelligence needed to make informed decisions that enhance climate resilience.

If you’re unsure about your portfolio’s exposure to climate risks, or if you’re navigating the tricky waters of the insurance market contact Helena Ariza at hariza@aeiconsultants.com or Matt Fontanesi at mfontanesi@aeiconsultants.com to discuss your climate risk strategy.