The Impact of Climate Change on Commercial Real Estate Performance In Sub- Saharan Africa VECM Aprroach
DOI:
https://doi.org/10.53840/e-jpi.v13i1.369Keywords:
Climate change, Commercial real estate, Sub-Saharan Africa, VECM, Property performanceAbstract
Climate change poses increasing risks to commercial real estate (CRE) markets worldwide, with Sub-Saharan Africa being particularly vulnerable due to rapid urbanization and limited adaptive infrastructure. Rising temperature anomalies, rainfall variability, extreme weather events, and increasing carbon emissions threaten property values, yet empirical evidence on their effects in the region remains limited. Understanding these impacts is critical for investors, policymakers, and urban planners seeking resilient and sustainable CRE markets. This study assesses the impact of climate change on commercial real estate performance in Sub-Saharan Africa, focusing on Nigeria, Kenya, South Africa, Ghana, and Ethiopia. Secondary data from 2001 to 2023 were collected, including commercial real estate price indices from national property market reports, climate variables from national meteorological agencies and global databases, carbon emissions from environmental statistics, and macroeconomic controls such as GDP growth and interest rates from the World Bank and IMF. The Augmented Dickey-Fuller tests confirm that all variables are integrated of order one, I(1), while the Johansen cointegration test identifies a single long-run equilibrium relationship. Long-run VECM results show that a 1% increase in temperature anomalies reduces CRE prices by 0.84% (t = −3.93, p < 0.01), rainfall variability by 0.32% (t = −2.44, p < 0.05), and extreme weather events by 0.28% (t = −2.65, p < 0.05). Carbon emissions also negatively affect property values (−0.49%, t = −2.85, p < 0.01), while GDP growth positively influences CRE performance (0.62%, t = 2.95, p < 0.01). Short-run dynamics indicate a moderate adjustment speed, correcting 47% of deviations annually (ECT = −0.472, p < 0.01). The findings underscore that climate change significantly undermines commercial real estate performance in Sub-Saharan Africa. Policymakers and investors should integrate climate risk assessment, resilient infrastructure, and green finance instruments to safeguard property values and market stability
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