WHY GEOGRAPHIC DIVERSIFICATION IS CRITICAL TO CRE INVESTORS?
Natural Disasters Increasing in Frequency and Severity
- The number of natural disasters has been increasing steadily over the last few decades
- The U.S. averaged 20 “Billion-Dollar-Plus” natural disasters per year for the last three years
Diversification Can Mitigate Risk
- Geographically diversifying a real estate portfolio reduces risks of an entire portfolio being impacted by one event
- While insurance may mitigate the hard costs of a disaster, soft costs like time, short-term cash flow and the challenges of navigating the insurance claim process will still be incurred
Natural Disasters are Pushing Insurance Rates Higher
- Apartment insurance rates increased by 33% last year – but not all areas have been affected the same.
*Through 2Q
Sources: Marcus & Millichap Research Services, RealPage, Inc.
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