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Rising sea levels could influence commercial lending

The effects of climate change, such as rising sea levels, are likely to have a significant impact on the way people in California live and do business in coming decades. As sea levels continue to slowly rise, commercial real estate investors and developers could face new challenges when trying to obtain financing for projects in areas that may become at risk for flooding.

This is important because significant portions of California's land area fit for commercial real estate development, as well its largest population centers, are located at relatively low elevations. In the future, the potential difficulties in accessing the financial capital to pursue projects in markets where they can become profitable could force many developers out of business. Furthermore, the combined environmental and economic impact of rising sea levels due to climate change would likely ignite a political frenzy and possibly new legislation and regulations to address it. Not surprisingly, the way governments respond to rising sea levels through new laws, regulations or infrastructure spending could influence the way commercial lenders provide funding for commercial real estate developers.

According to the executive vice president of First National Bank of South Miami, rising sea levels are a concern when dealing with coastal properties especially and the way local governments handle the situation is something lenders are paying close attention to. She also noted that those at-risk communities that are investing in infrastructure improvements and public policies designed to make them less vulnerable to flooding will have a potential advantage when it comes to future developments.

The impact of environmental change on the commercial real estate market of California will likely change the way developers, financiers and governments do business. These changes will probably include legal challenges involving construction litigation, zoning laws and contract negotiation as well. An attorney may be able to assist participants in the commercial real estate business in managing the legal issues that might arise.

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