The Climate Risk Premium Is Rising, and Polish Hotels Are Changing Hands

01 · Climate Risk

Floods, Fires, Wind - Repricing Risk in Commercial Real Estate Valuations

Research firm AEW has published a report that could shake up commercial real estate valuation models across Europe [1]. For the first time, analysts factored into their model not only the costs of bringing buildings up to energy-transition standards, but also the real losses stemming from physical hazards - floods, fires and high winds. The analysis covered as many as 964 properties across 196 market segments in 20 European countries, making it one of the broadest studies of its kind.

The conclusions are unambiguous: factoring in physical risks alongside transition costs nearly doubles the risk premium investors should expect when valuing prime commercial assets. In other words - even the most prestigious properties, long considered a "safe haven" for capital, may be systematically underpricing their climate risk. For institutional investors operating in European markets, including Poland, this is a signal to revisit their valuation models and portfolio management strategies before the market does it for them.