Climate change and real estate values are increasingly intertwined, especially for convenience stores and quick-service restaurants facing unprecedented challenges in 2025. Property investors who once considered only location and traffic patterns must now factor in flood risks, extreme weather events, and changing consumer behaviors driven by environmental concerns.
According to industry experts like Lawrence Todd Maxwell, QSR real estate valuations have shifted dramatically in climate-vulnerable regions, with some areas seeing up to 15% devaluation over just 24 months. C-store properties face similar pressures, particularly those in coastal zones where rising insurance premiums have increased operational costs by an average of 23% since 2023. Consequently, savvy investors are reassessing traditional metrics and incorporating climate resilience into their due diligence processes.
This article examines how environmental factors are reshaping commercial property values, which regions face the greatest risks, and what forward-thinking investors can do to protect their portfolios in this rapidly evolving landscape.
Climate Change’s Direct Impact on C-Store and QSR Property Values
The insurance industry serves as the proverbial canary in the coal mine when it comes to climate risk assessment. For convenience store and quick-service restaurant property owners, the financial impact of climate change has moved beyond theoretical concerns to tangible costs affecting bottom lines throughout 2025. Insurance firms are effectively pulling forward future climate change liabilities through their pricing and coverage decisions, signaling significant shifts in property valuations nationwide.
Rising insurance premiums in high-risk zones
The most immediate financial consequence of climate change for C-store and QSR properties is the dramatic increase in insurance costs. Data from the Deloitte Center for Financial Services projects that the average monthly insurance cost for a commercial building in the United States could surge from $2,726 in 2023 to $4,890 by 2030, representing an 8.7% compound annual growth rate. For properties in states with severe weather exposure, the situation looks even more challenging—current costs of $3,077 could nearly double to $6,062 per building per month by 2030, a 10.2% CAGR.
The disparity between high-risk and low-risk locations continues to widen. Commercial buildings in the ten states with the highest expected annual loss totals (based on FEMA assessments) have experienced a 31% year-over-year increase in insurance costs and a staggering 108% increase over the past five years. In comparison, properties in lower-risk states saw increases of 25% and 96%, respectively.
For QSR operators, this insurance spike has been particularly painful. Restaurant industry experts report that most operators’ rates have increased between 20% and 60%. This escalation is driven by several factors:
- More frequent and severe weather events (28 separate billion-dollar weather events in 2023 alone, totaling $92.9 billion in recovery costs)
- Rising construction costs inflating repair and replacement expenses
- Withdrawal of major insurers from high-risk markets like Florida and California
The regional disparities in insurance costs are striking. Orlando and Tampa—metros vulnerable to hurricanes—face insurance costs representing 4.6% and 4.1% of income, respectively. Conversely, Chicago, with lower physical climate risk exposure, sits at just 1.3%.
David DeLorenzo, who specializes in restaurant insurance, notes that while insurance typically remains less than 1% of sales for most establishments, those in high-risk categories might see costs rise to around 3%. Furthermore, the insurance burden has been growing across all commercial real estate segments, with average costs nearly doubling over the past decade from $1,558 per building per month in 2013 to $2,726 by the end of 2023.
Decreased buyer interest in vulnerable locations
Beyond rising operational costs, climate risk is fundamentally altering buyer behavior and property liquidity in vulnerable markets. While historical data shows that property prices typically declined only modestly and temporarily after climate events, this pattern appears to be changing. Research indicates that certain events now lead to long-lasting declines in prices or liquidity, particularly in areas previously unexposed to extreme weather.
The shift seems driven primarily by evolving buyer demand rather than lender or insurer behavior, though these factors inevitably follow. Professor Benjamin Keys’ research found that U.S. counties in the top fifth for climate-driven disaster risk saw home premiums leap by 22% in just three years to 2023, compared to an overall average increase of 13% in real terms.
Moreover, trading volumes and time-on-market metrics often provide early signals of market reaction through decreased liquidity before price adjustments fully materialize. This creates particular challenges for C-store and QSR real estate, which typically rely on stable traffic patterns and consistent consumer behavior.
Andrew Hoffman, an expert in environmental sustainability policy, observes that “the cost of insurance will start to change people’s equations” when considering property investments. This recalibration affects not just coastal areas but also regions facing secondary impacts like increased hailstorms and extreme rainfall events.
The flood risk alone presents a substantial threat to property values. One study found that U.S. homes exposed to flood risk are overvalued by $121-$237 billion, with lower-income households facing “greater risk of losing home equity from price deflation”. Though this research focused on residential properties, commercial real estate follows similar valuation patterns, albeit with different timelines and investor motivations.
Shifting consumer traffic patterns due to extreme weather
For C-store and QSR operations, location-based traffic is essential to business success. However, climate change has begun disrupting established consumer behavior patterns through various mechanisms.
Extreme weather events directly impact immediate consumer mobility and purchasing patterns. Before natural disasters, households stock up on durable goods like building tools (18% increase in projected households), automotive tools (17% increase), and lighters (14% increase). Consumables such as nutrition bars and ice also see increased demand as consumers prepare for power outages.
These purchasing patterns shift dramatically during and after extreme weather events. Following disasters, consumers focus on repair tools and refrigerated foods as they restore homes and restock essentials. For QSRs and C-stores, this creates both challenges and opportunities—those equipped to serve changing consumer needs during extreme weather may gain market share, while others face temporary or permanent traffic reductions.
Besides, severe weather disrupts normal operations through:
- Operational interruptions during extreme events
- Increased energy costs due to higher cooling or heating demands
- Compromised customer experiences due to discomfort or service delays
The food service and retail industries must adapt to increasingly unpredictable weather patterns affecting supply chains and customer traffic. In 2023, there were 28 separate billion-dollar extreme weather events, and assuming a similar trajectory, this could increase to 42 such events annually by 2030.
Additionally, climate change has altered traditional seasonal shopping patterns. With temperatures trending upward across regions, businesses focused on cold-weather products face existential threats. The Midwest and Northeast have experienced temperature increases of 5-6 degrees Fahrenheit above historical averages, necessitating targeted marketing strategies.
Impact on cap rates and investment returns
Climate change impacts extend beyond operational costs to fundamentally affect key investment metrics like capitalization rates and returns. Interestingly, convenience stores have shown some resilience in this shifting landscape. Against the general trend of rising cap rates, C-stores saw a slight decrease, staying relatively steady at 5.20% on average as of Q3 2023.
Nevertheless, the transaction volume for C-stores slowed, with 32 observed trades in Q3 compared to 40 in Q2 2023. The average term remaining on C-Store transactions increased to approximately 13.77 years, partly reflecting continued new construction in the sector.
Climate risk creates several mechanisms that affect investment returns:
- Capital expenditure requirements: Property owners must factor climate risk into investment decisions to avoid increased operating costs and potential stranded assets. This necessitates significant capital expenditures for more resilient building materials, redesigned layouts, and relocated critical systems like HVAC to accommodate weather impacts.
- Infrastructure vulnerabilities: Even well-reinforced buildings diminish in value if surrounding infrastructure (roads, power grid) fails during extreme weather events. For C-stores and QSRs, which rely heavily on accessibility and power for food storage, these external vulnerabilities pose significant risks.
- Portfolio concentration risk: The more concentrated a real estate portfolio is in areas with high greenhouse gas emissions and climate risk, the less resilient it will be and the more capital it will require. Research suggests investors generally underestimate this capital need, potentially leading to lower returns for the most vulnerable portfolios.
- Financing risks: Property hold periods may be 8-10 years, while insurance premiums are priced annually and secured lending agreements typically range from 3-7 years. This creates cash flow and financing risks that exert downward pressure on prices where physical climate risks increase post-acquisition.
- Valuation practice gaps: Current valuation practices, which rely largely on lagging indicators, suffer from a paucity of specific climate risk evidence and available data. This creates potential for mispriced assets, particularly in newly vulnerable areas.
Fast food companies face additional pressures from investors concerned about climate impacts in their supply chains. An $11 trillion investor coalition has called for more ambitious action from major brands including McDonald’s and Burger King. Investors have specifically requested aggressive targets to reduce greenhouse gas emissions and water usage throughout meat and dairy supply chains.
Of the six major fast food companies engaged by this investor group, only two (McDonald’s and Yum Brands) have set or publicly committed to science-based emission reduction targets aligned with limiting global warming to well below 2°C. None have established specific climate and water requirements for meat and dairy suppliers. This regulatory and investor pressure adds another dimension to climate-related property value considerations for QSR operators.
Forward-thinking investors see climate adaptation not only as a risk management strategy but also as a potential source of value creation. McKinsey suggests that climate change “not only creates new responsibilities for real estate players to both revalue and future-proof their portfolios but also brings opportunities to create fresh sources of value”. These opportunities include redeveloping and “climate-proofing” at-risk properties, potentially allowing climate-conscious operators to gain competitive advantages in vulnerable markets.
Despite these challenges, C-stores and QSRs in certain markets maintain strong fundamentals. Consumer spending has shown resilience despite macroeconomic headwinds, allowing the net lease sector to outperform peers. However, future valuations will increasingly depend on climate resilience, location-specific risks, and adaptation investments rather than traditional metrics alone.
Regional Vulnerability Assessment: Winners and Losers
The geographic distribution of climate change impacts reveals a stark reality for QSR and C-store real estate investors in 2025: location now determines vulnerability more than ever before. Across the United States, climate risks are reshaping property valuations in predictable yet dramatic ways, creating clear winners and losers in the commercial real estate market.
Regional Vulnerability Assessment: Winners and Losers
Coastal areas facing increased flooding and storm risks
Coastal regions face the most immediate and severe climate-related devaluation pressures. In 2023 alone, the U.S. experienced 28 separate climate disasters, each costing at least $1 billion and totaling $92.9 billion in damages. This marked a 21% rise in billion-dollar disasters since 2020 and a 35% increase over the last decade.
Gateway markets along coastlines are particularly exposed to erosion and flooding risks. South Florida, despite its historical appeal as a population and commercial real estate investment magnet, now faces greater value-loss risk than even New Orleans. Properties in Miami’s 100-year flood zone have already experienced value reductions between 9% and 18% per square foot.
The market response to these risks is becoming increasingly visible in buyer behavior. Homes in Virginia Beach stayed on the market 32% longer in early 2025 than they did in 2024, whereas Wilmington, North Carolina properties lingered 19% longer. This declining buyer interest directly impacts C-store and QSR properties, as commercial real estate tends to follow residential trends in climate-vulnerable areas.
Population migration patterns further illustrate the shift away from high-risk coastal zones. Between 2019 and 2023, more than 500,000 people moved from Miami to cities like Tampa, Jacksonville, and Orlando. This demographic redistribution is gradually transforming coastal communities, with local families being replaced by investors or second-home owners.
For QSR operators in coastal regions, infrastructure vulnerability presents additional challenges beyond direct property damage. Recent disasters in New Orleans and New York demonstrated that business disruptions often resulted more from infrastructure failures—loss of electricity or transit availability—than from direct storm damage. Fast food establishments, which rely heavily on consistent power for food storage and preparation, face particular operational challenges in these scenarios.
Drought-prone regions and water access challenges
Away from the coasts, drought-prone regions face their own set of climate-driven real estate challenges. The National Centers for Environmental Information currently assesses at least $9 billion in annual losses related to drought—a figure likely to increase in coming years. For C-stores and QSRs in these areas, water scarcity presents multifaceted risks:
- Disrupted supply chains for agricultural inputs
- Increased operational costs for water procurement
- Compromised customer access during extreme drought events
- Potential regulatory restrictions on water-intensive operations
Fast food companies face mounting pressure regarding water usage throughout their supply chains. An $11 trillion investor coalition has called for major brands like McDonald’s and Burger King to take “faster and deeper action” to tackle climate and water risks. Aarti Ramachandran, head of research at the FAIRR Initiative, noted: “Investors are concerned about the climate impacts of our burgers and burritos. Feed for livestock alone uses around a third of annual global water withdrawals and is a major emitter of greenhouse gasses”.
The implications extend far beyond direct operational costs. Climate-related droughts contribute to various health issues, including malnutrition, infectious diseases, and mental illness. These impacts can destabilize communities and alter consumer behavior patterns, ultimately affecting QSR and C-store traffic and sales.
California’s agricultural vulnerability illustrates the complex interrelationship between drought, food supply, and QSR operations. The state’s position as an agricultural powerhouse means drought impacts cascade through restaurant supply chains. Recent drought conditions in Mexico, for instance, made it difficult for Huy Fong Foods to source enough peppers for its Sriracha hot chili sauce, while wet conditions in France spread a fungus endangering grapes used for wine.
As a result, drought-resistant regions with secure water access are emerging as unexpected winners in the QSR and C-store real estate market. Properties in areas with robust water infrastructure and lower drought risk now command premium valuations relative to their climate-vulnerable counterparts.
Areas facing other climate vulnerabilities
Beyond coastal flooding and drought, other climate-related risks are reshaping regional property values. Wildfire vulnerability has emerged as a major factor in western states. The destructive wildfire in Lahaina, Hawaii in 2023 highlighted how rapidly fire can devastate commercial areas. For C-stores with fuel storage, wildfire risk creates particular concerns for insurers and investors.
Temperature changes also influence property values in unexpected ways. Regions experiencing significant warming may see altered consumer traffic patterns and operational challenges. Los Angeles properties, for instance, may need to revise their “location premium” estimates if the city loses its prized beaches and experiences weather more typically associated with Phoenix.
These climate shifts create both challenges and opportunities for strategic C-store operators. During extreme weather events, consumer purchasing patterns change dramatically. Before natural disasters, households stock up on building tools (18% increase), automotive tools (17% increase), and lighters (14% increase). After disasters, consumers focus on repair tools and refrigerated foods. C-stores positioned to meet these changing needs can maintain higher valuations despite climate risks.
The convenience store sector has demonstrated some resilience through climate adaptation. During recent hurricanes in Florida, SunStop maintained operations in part because twelve of its Florida locations—those in areas prone to power outages—had permanent generators installed. This allowed stores to “stay open for longer” and serve communities when other chains couldn’t operate. Such adaptations increasingly factor into property valuations.
In many climate-vulnerable regions, C-stores serve essential community functions during disasters. After Hurricane Helene made landfall on Florida’s Gulf Coast in September 2023, followed by Hurricane Milton two weeks later, convenience stores faced significant challenges but also fulfilled critical needs [1]. The hurricanes disrupted key gasoline supply chains, leaving nearly 30% of Florida gas stations without fuel on October 11, 2023.
Interestingly, climate vulnerability assessments reveal that nine of the top ten global cities most exposed to climate change by total at-risk population are in Asia—including major commercial centers like Mumbai, Kolkata, Guangzhou, and Shanghai. For QSR chains with global footprints, this international dimension of climate risk adds another layer of complexity to real estate valuation.
In this rapidly shifting landscape, the “winners” in QSR and C-store real estate appear to be properties in regions with moderate climate risk profiles, robust infrastructure, and forward-thinking climate adaptation strategies. The “losers” increasingly include properties in areas facing multiple, compounding climate threats without sufficient resilience investments.