Will the Current Energy Crisis Impact Real Estate?

Winter is around the corner, which is concerning, especially considering the potential blackouts in Europe as the country battles an energy crisis of massive proportions. There seems to be a lot of hesitancy surrounding politicians’ claims that they will not let people go without power.

And, understandably, this is a concerning thought for citizens in the EU and onlookers alike. Going without heat in the winter or being unable to cook is not just a discomfort — it’s life-threatening.

With a new awareness that these kinds of situations are still feasible in developed countries, some are worried that the crisis could happen here. Read on to learn about the European energy crisis and how it could impact the U.S. and beyond.

The energy crisis in Europe

The EU has begun to rely heavily on affordable natural gas and oil as they transition away from “dirty energy” in an effort to meet climate change initiatives. But what was once “cheap energy” isn’t so cheap anymore. Gas prices are soaring; supply lines are shaky, with Putin in Russia saying it’s a self-inflicted wound and prioritizing his country’s needs; and energy reserves have been depleted within the EU because of the pandemic.

And now, they are heading into winter, when energy demands typically increase to keep folks warm at night. If they run out of sufficient energy sources, a brownout or blackout may follow. Politicians have assured the citizens that they will make sure residences have power, even if they have to shut down commercial operations to do so. Is it just tough luck for those on the other side of the pond, or is this something U.S. investors need to consider as well?

What is a brownout or blackout?

A brownout is when the energy companies intentionally reduce the amount of electricity being distributed through the grid. This results in electricity still coming into the home but at a reduced voltage. Once the power company is able to rebalance the supply and demand of energy, they can easily readjust back to normal voltage.

READ  Five ways to use Instagram to maximise your Christmas marketing campaign success!

Brownouts can last for a few hours or a few days and generally do not affect large appliances, lighting, or heating and cooling systems, allowing the residents to mostly proceed as usual.

A blackout occurs when there is a complete disruption in the supply of energy or damage to the grid. This is a total termination of power into homes and businesses — meaning no lights, no fridge, no heating, no stove, no gas pumps, no nothing. Think ‘power outage,’ but on a grand scale.

Usually, it’s just a neighborhood, perhaps even a city. But in extreme cases, like those being experienced in Europe, there is the potential for a nationwide energy crisis. A first step is usually to conduct intentional rolling blackouts to ease the situation, but longer blackouts are possible.

How can an energy crisis impact real estate?

Many think this kind of event in today’s world is an anomaly at best. But others believe that shaky supply lines and global distension could make this situation more common than we would hope. COVID-19 certainly proved that the unthinkable is actually possible. So, how could this impact positioning yourself as a just-in-case measure?

As to whether this is a reality for the United States, it is not very likely. We have a reasonably diversified energy supply that we generate domestically. In decades past, we were a major importer of oil, but the shale revolution has changed that. Since 2019, we have generated more oil and natural gas than our country consumes.

We also still have functioning nuclear power plants with domestic uranium production and a growing base of renewable energy power. All in all, the United States should fare reasonably well in an energy crisis. Although, this is just looking at supply, not affordability.

Commercial real estate would be the first to see impacts from brownouts or even rolling blackouts, as most are considered nonessential like they were during the pandemic shutdowns.

READ  Real Estate news: Commercial sector continues above pre-pandemic performance

As for residential real estate, living in cities that don’t require driving or have high walkability would be more attractive than those where you need to depend on gas to get around. In addition, owning any type of real estate in warmer climates would likely be a better scenario because being without heat in the dead of winter can be lethal.

The Millionacres bottom line

An energy crisis — or even a growing awareness of the potential for an energy crisis — can absolutely alter the retail buyers’ or business owners’ perspectives, just as it has for considering climate change impacts. Perhaps, this isn’t the first thing on your checklist of factors to take into account, but when you are comparing which market to enter, maybe this can help sway your decision one way or another.

You probably know that real estate has long been the playground for the rich and well connected, and that according to recently published data it’s also been the best performing investment in modern history. And with a set of unfair advantages that are completely unheard of with other investments, it’s no surprise why. But those barriers have come crashing down – and now it’s possible to build REAL wealth through real estate at a fraction of what it used to cost, meaning the unfair advantages are now available to individuals like you.

To get started, we’ve assembled a comprehensive guide that outlines everything you need to know about investing in real estate – and have made it available for FREE today. Simply click here to learn more and access your complimentary copy.

The Motley Fool has a disclosure policy. Editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. Editorial content from Millionacres is separate from The Motley Fool editorial content and is created by a different analyst team.

Leave a Reply

Your email address will not be published. Required fields are marked *