Hurricane‐induced risk contagion in commercial real estate: Evidence from Hurricane Sandy

Abstract This study examines how hurricane‐induced destruction affects the prices of nearby undamaged commercial real estate properties, using Hurricane Sandy as a natural experiment. Using Real Capital Analytics transaction records spatially merged with Federal Emergency Management Agency building‐level damage data, we empirically employ a difference‐in‐differences and event study framework to identify price spillover effects across property types. Results show that negative spillover effects are only concentrated in the office sector, where undamaged properties located near severely Sandy‐damaged sites experienced price declines of 8%–15% that persisted for up to 4 years. These findings suggest the declines reflect a capitalization of heightened spatial contagion risk—a forward‐looking investor reassessment of interconnected physical and market vulnerabilities.