The commercial real estate industry is reaching a tipping point as climate risk data becomes more accessible, yet most transactions continue to overlook its importance. While technology now enables rapid, detailed analysis of environmental hazards, many deals still rely on outdated due diligence practices that fail to account for the growing threats posed by climate change.
Albert Slap, President and Co-Founder of RiskFootprint™, has spent his career at the intersection of environmental law and real estate risk. After decades representing clients in high-profile environmental cases, including efforts to prevent the dumping of radioactive water after the Three Mile Island incident, Slap shifted his focus to developing technology that helps property owners, investors, and lenders assess risk more accurately.
“In most commercial real estate deals, due diligence has devolved into pretty much four things: the appraisal, the environmental site assessment phase one, the FEMA flood map, and maybe an earthquake score,” Slap says. He points out that newer technologies can now provide a full range of hazard data — including current and future climate risks — in seconds, offering a level of detail and speed that was previously unattainable.
The Information Paradox
Despite these advances, comprehensive climate risk assessment remains the exception rather than the rule in commercial transactions. Industry reluctance is widespread and stems from both practical and psychological barriers.
On the buyer’s side, Slap observes that many investors are hesitant to uncover too much information about a property’s vulnerabilities. “We hear, ‘We don’t want to know too much, because then we might be obligated to disclose it or fix things, and we don’t want to pay for those things,’” he explains. This attitude often leads buyers to stick with minimal due diligence, leaving them exposed to risks that could have been identified and mitigated.
Lenders face their own set of challenges. Both banks and non-bank lenders tend to be conservative, preferring established policies and procedures. As a result, even when they receive comprehensive risk reports, many are unsure how to incorporate the findings into their lending decisions. Some may respond by raising interest rates or imposing conditions on loans, but few have developed systematic approaches to factoring climate risk into underwriting.
Real-World Applications
The value of thorough risk assessment becomes clear in the outcomes of specific projects. For example, a major hotel REIT approached RiskFootprint™ with concerns about two coastal properties that had repeatedly flooded. The central question was whether to retain the assets or sell them before climate impacts worsened.
RiskFootprint™’s analysis determined that sea level rise would not severely affect the properties for another 20 to 25 years, enough time to match the REIT’s intended investment horizon. Based on this assessment, the REIT invested $150 million in renovations and sought guidance on how best to protect the hotels from future storms.
The recommendations ranged from $250,000 for basic Category 1 hurricane protection to $10.5 million for upgrades capable of withstanding a Category 5 storm. The REIT ultimately spent a few million dollars to achieve Category 3 hurricane resilience, installing external and internal flood barriers, pitless elevators, pumps, and relocating mechanical equipment above ground level.
These upgrades proved effective. After Hurricane Ian, the hotels were closed for a year due to damage. Following the improvements, Hurricanes Milton and Helene caused only three days of downtime—demonstrating the tangible benefits of investing in climate resilience.
Evolving Standards and Practices
Industry standards for climate risk assessment are beginning to catch up with technological capabilities. The American Society for Testing and Materials (ASTM) recently introduced Standard E3429-24, titled “Property Resilience Assessment.” This standard complements traditional environmental site assessments and property condition assessments, providing a structured approach to evaluating a building’s ability to withstand climate hazards.
However, awareness and adoption of these new standards remain limited. “Most commercial real estate buyers, most commercial credit officers and underwriters do not know about the new ASTM property resilience assessment standard,” Slap notes. Even those who are aware often struggle to integrate it effectively into their workflows.
Some lenders are starting to push ahead. A handful now require risk footprint reports for every commercial and residential loan, using the data to inform decisions on pricing, loan conditions, and overall risk management. This shift marks a slow but notable change in how climate risks are treated in the lending process.
From Risk Avoidance to Value Creation
The most progressive players in the industry are beginning to see climate resilience not just as a protective measure, but as an opportunity to enhance value. Slap describes a scenario where lenders take a more active role in supporting resilient retrofits: “Maybe you can make more money by loaning more to a good client on a good building that needs help.”
In this model, lenders provide additional capital for improvements that enhance building safety and durability, preserving market value and tenant satisfaction. This approach shifts the conversation from risk avoidance to value creation, aligning the interests of lenders, owners, and tenants.
A recent project on the Texas Gulf Coast illustrates this approach. A developer constructed eight hotel buildings with high elevations and robust construction standards. RiskFootprint™’s analysis validated the project’s resilience, which helped the developer secure lower interest rates, avoid additional loan conditions, and reduce insurance premiums.
Technology Advances
RiskFootprint™ is preparing to launch the 18th version of its assessment platform, which uses artificial intelligence to estimate first-floor heights for more than 300 million U.S. buildings, leveraging Google Street View and other imagery. This advance addresses a key challenge in risk assessment: distinguishing between exposure and vulnerability.
“Just because you are exposed to wind or flood or earthquake doesn’t mean your building is vulnerable, because different buildings perform differently,” Slap explains. The updated platform integrates three essential factors—exposure, vulnerability, and historical damage—using FEMA’s National Risk Index data to estimate potential annual losses based on building value and local risk.
These improvements allow for more precise risk calculations, helping stakeholders make better-informed decisions about buying, lending, insuring, and retrofitting properties.
Current Reality vs. Future Planning
While long-term climate projections are important, Slap emphasizes that immediate risks often drive the most urgent decisions. “For current day deals — buying, selling, lending, fixing up — climate doesn’t really factor in that much. It’s the beating that buildings are getting today from Mother Nature, and you can’t look the other way,” he says. Increasingly frequent severe weather events, winter storms, extreme heat, and sea level rise are already testing the resilience of existing buildings.
The industry’s challenge is to close the gap between what technology enables and what standard practice delivers. As storms, floods, and other hazards become more common, comprehensive risk assessment is moving from an optional step in due diligence to a critical component of every transaction.
Looking Ahead
For real estate professionals, the question is no longer whether climate risks are relevant, but how quickly they can adopt comprehensive assessment tools and integrate them into routine decision-making. Those who move first are likely to gain advantages: more accurate valuations, improved lending terms, and portfolios better positioned to withstand both current hazards and future climate impacts.
As regulatory frameworks evolve and the cost of ignoring climate risks grows, thorough climate risk assessment will become a baseline expectation in the industry. Real estate leaders who embrace this shift, leveraging technology, new standards, and a proactive approach to resilience, will set themselves apart and safeguard both their investments and the communities they serve.
