6 Steps for Effectively Managing Environmental Property Risk in 2023
Article
Often, as real estate managers and investors, when we think about property risk, the first thing that comes to mind are the risks that can negatively impact market value.
Market value can be negatively impacted by such things as the economy, community political issues, current building and/or property conditions, and crime rates. We may also define property risk associated with non-payment or borrower debts. But environmental risk is not normally a top concern for real estate managers and investors… until it’s too late.
The true danger of delaying action on environmental property risk is the potential for contaminated soil and/or groundwater that spreads pollutants to nearby properties, causing harm to the local ecosystems, health risks to tenants and neighbors, regulatory violations and fines, legal liabilities, decreased property value and revenue loss due to reputational damage. These environmental risks point to prevention and mitigation, which require a planned management strategy. To effectively manage a real estate portfolio for environmental risk, you need to consider the following six steps:
- Conduct regular risk assessments: Regular risk assessments can help to identify the potential environmental hazards or risks to real estate.
- Implement preventative measures: Once potential hazards have been identified, create measures to prevent incidents from occurring and/or to help minimize impacts of hazards that are unpreventable.
- Initiate mitigation measures: In the event that environmental hazards are identified, determine practical mitigation measures that help to reduce long-term impacts to property value, minimize or prevent exposure to tenants and ensure greater property resilience.
- Stay up to date on regulations: Remain informed on the latest laws and regulations related to environmental hazards to ensure compliance with them. New regulations on emergent chemicals (such as PFAS) may impact real estate value and require mitigation at sites where impacts by these chemicals have now been identified.
- Engage stakeholders: Share the above plan with your team, but also involve all relevant stakeholders in the risk management process, including property owner, tenants, contractors, and local authorities. The more informed stakeholders are on why risk management is important, the more they will accept the adoption and implementation of your emergency response plan.
- Leverage PropTech: Use innovative PropTech solutions, such as RiskFacts, to simplify the process of managing property risk by gaining a comprehensive view of potential hazards.
Staying on top of all six of the above steps will put you well on your way to successfully manage environmental risk for real estate. If you need to speak with an expert on how to make sure you have covered all your basis when it comes to environmental property risk, feel free to reach out to me directly.
Discover the Power or RiskFacts’ Property Risk Forecasting.
Sustainability Tooltip: Incorporate sustainable practices into property management to promote long-term resiliency. Sustainable practices may include upgrades to energy efficiency, upgrades to alternative sustainable energy sources and use of smart technologies to help control or minimize building, heating, cooling and lighting costs.
