November 05, 2021
While the calendar says it’s still a few weeks away, the weather-gurus on my team tell me that meteorological winter officially arrived on November 1!
They also tell me that winters are changing. Patterns of cold weather, precipitation, and snow are shifting. Some regions are experiencing milder winters with less snow while others are suffering the exact opposite. As weather patterns change, winter storms are growing more volatile. Volatility is making “business as usual” simply impossible for real estate professionals with weather sensitivity.
Last year’s extreme snowstorms in the South and West dropped more than 500% of typical winter snow in spots from Texas to Louisiana! February’s Snowmageddon brought an estimated $20.8 billion in damage to homes, businesses and municipalities, and caused an estimated 172 deaths.
“Conventional wisdom is that while global warming means more heatwaves, it will definitely lead to less cold spells and snowfall,” says Judah Cohen, a climate scientist at the Massachusetts Institute of Technology in Cambridge, and lead author of a recent study on the Polar Vortex. “But that’s not quite true. There are mechanisms by which climate change can contribute to more severe winter weather too.” (Nature)
In the Northeast United States, extreme winter storms have been more frequent in recent years. Between 2008 to 2018 there were three to four times more big winter storms than in the previous five decades. Twice as many extreme snowstorms hit the eastern two-thirds of the United States in the second half of the 20th century than in the first.
Demex’s Climate Center visualizes extreme snow patterns in the United States. The map above highlights all regions where snowfall has strongly increased in recent years highlighted in blue. Notice the trends in the Northeast and Midwest U.S.
Real Estate Budget Planning
Extreme snowstorms can cause major shocks to snow removal budgets for both facilities managers as well as snow removal contractors. Storms cause dramatic disruptions in revenue and operating costs. Demex estimates that there is $350 billion global climate risk addressable, $50 billion of which is linked to cost overruns and revenue shortfalls in the snow removal market.
Every property has unique risk exposure based on local conditions and these must be individually assessed.
Demex patent pending technology starts by measuring the customers’ specific climate risk at each and every customer location. We go on to assess your specific sensitivities unique to your operating margins. Our process completes by forming a financial safeguard that issues a recovery payment when you suffer a weather-linked cost overrun or revenue shortfall. We’re part of an ecosystem teeming with new tools for ‘climate intelligence’ to help businesses understand the risk of volatile weather for assets, operations and budgets. Our competitors narrowly serve to assess climate risk or forecast extreme weather or sell insurance. We are the only company that bridges all elements.
Over 6 million weather time series are available on demand and we have processed over 200,000 single location snowfall contracts in the last 5 years.
REITs: Climate Value at Risk
For example, we assessed a portfolio of real estate holdings for an alternative asset manager. Leveraging a comprehensive grid of weather-data, we assessed and scored every property in the portfolio for sensitivity to multiple climate variables. Then we combined this climate assessment with the operating margins at each property in the portfolio to assess the financial impact of each severe weather event. We calculated the total climate value at risk and quantified the unique exposure for this customer.
Shopping Malls: Controlling Winter Weather
After identifying the climate value at risk, we form complete climate resilience by offering financial protection from cost overruns and revenue short-falls. For example, we’ve developed climate resilience solutions for one of the world’s largest alternative asset managers over the past several winters as well as the upcoming winter of 2021-2022.
This customer manages their variable snow removal costs at malls across the Midwest. We assess cost sensitivity at each mall and lock-in a fixed budget for the winter ahead. This allows them piece-of-mind because they know exactly what to budget for the highly volatile winter months.
Our snow removal budget programs stabilize costs and, on average, save clients 20% in overall costs.