of Forcenature

Groundsure director, David Kempster, explains some of the risks that climate change poses to commercial properties

In 2022, perhaps more than any other year, we came face to face with the reality of climate change as businesses, communities and homeowners. Temperatures soared above 40C for the first time, we were exposed to bushfires and water shortages. But we also experienced some of the strongest wind gusts ever recorded along the southwest coast thanks to Storm Eunice earlier in the year.

Businesses are starting to comprehend how both their property assets and the welfare of their staff can be directly impacted. This is what drives us here at Groundsure to provide commercial property owners and their lawyers with the tools to be able to make informed and sustainable decisions about their investment.

We give land and property professionals expert information on environmental and climate risks to advise their clients in a property transaction or commercial mortgage offer. Each of these risks could have significant impacts on the long-term valuation of the property asset, interrupt business operations and affect access to insurance and lending.

Climate risks fall into two camps – physical and transitional risk. Physical risks include flooding from rivers, surface rainfall, coastal/ tidal flooding from sea level rise; natural subsidence and coastal erosion.

According to our ClimateIndex™ analysis, nationwide by 2070, 98,000 homes will be at risk of coastal erosion while 3,000,000 homes will be at risk of flooding. 3,600,000 will be at risk from subsidence, up from 449,000 today. Not only is the probability of incurring a loss growing; the scale of that loss is significant.

Aviva estimates that 1 in 3 commercial properties are at risk of flooding1. The average cost of a flood claim to insurers is £50k.2

According to the British Geological Survey (BGS) the number of properties in Great Britain which are highly or extremely likely to suffer “shrink-swell” subsidence was 3% in 1990 (750,000 homes) and is predicted to grow to 6.5% of buildings by 2030 (1.625M homes)

Looking at Cornwall specifically, dozens of properties are at risk on the coast from crumbling cliffs and their fate will be determined by national and local policies on whether to defend, retreat or abandon sections of coastline. Not everywhere can be saved and The Environment Agency does not have an infinite pot of money.

Downderry, Marazion and Perranuthnoe are among the 21 most at-risk communities from encroachment by the sea. If left to the mercy of the waves, these communities are part of the estimated £584 million worth of property damages and loss of value to land that could be hit by coastal erosion by 2100.

Properties lost off cliffs represent a total loss in value of course and you would be hard pressed to find any lender who would be prepared to write a mortgage offer on these if it looks likely the property could succumb within the life of the loan. But persistent flood risks may also mean limited or no insurance cover which could also mean no mortgage. Flood Re is a support scheme designed to help the most vulnerable communities, but there is no such safety net for business owners.

Let’s not forget the impact of former tin mines across Cornwall too. Localised heavier rainfall may also wash away informal or poorly capped former mine entrances, exposing commercial buildings, car parks and infrastructure to structural risks that they hadn’t anticipated. This is where our well-known and trusted mine risk assessment team based in Pool near Redruth come in.

The other type of climate risk – transition risk – could have even more significance for businesses. The Government have a clear drive to decarbonise property, to retrofit energy efficiency measures and achieve Minimum Energy Standards for businesses in the next ten years. There may be significant costs that businesses could be required to consider with their heating and ventilation, power consumption, renewable and sustainable energy generation including wind and solar power to jump these hurdles.

So, this is where we at Groundsure are focusing our support and attention. Tying together the complex impact of climate change with existing environmental risks across Cornwall and looking ahead to see if these could impact on business success.

For more information about our ClimateIndex™ data and how we work with lawyers and lenders on how to advise clients on managing these risks alongside our mining risk assessment support, visit www.groundsure.com/climateindex or call us on 01209 218861

1 https://www.aviva.com/newsroom/news-releases/2021/09/one-in-three-business-properties-at-risk-from-flooding/ 2 https://www.insurancetimes.co.uk/abi-uk-floods-to-cost-insurers-13bn/1416942.article