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Real Estate Resilience：Building for an Uncertain Future
“ Investors are choosing assets in areas that will be resilient and are avoiding areas that will be exposed to increasing risks. They also are investing in the resilience of individual assets through measures such as energy efficiency, innovative design, and operational planning. ”
Brodie Boland
Partner at McKinsey & Co.
With regulators developing new reporting standards, governments enacting laws that restrict emissions and tenants demanding sustainable buildings, the industry has the chance to play a critical and leading role in the transition, according to “ Climate Risk and the Opportunity for Real Estate,” a February 2022 report by McKinsey & Co.
Because real estate generates some 39% of global emissions, the report notes, “real estate is central to global climate change mitigation efforts.”
The industry has already begun to lead the way.
Helen Gurfel, head of sustainability and innovation at CBRE Investment Management, a global real assets manager, says resilience is an ongoing process that includes “ effective governance, responsiveness, dependable infrastructure, vision and active planning, financial resilience, adaptive capacity, and investment in technology/innovative solutions. ”
Savvy real estate investors, she says, take a holistic approach to sustainability as climate risks “ will have significant impacts on real estate markets and assets.
” Those impacts — insurance risk, business continuity, disaster recovery, bottom-line expense, obsolescence risk, reputational risk, and regulatory risk — can, in the long term, lead to the displacement of communities, she says. ”
It is not only a question of the location of a property that might determine potential risks but also the resilience of the asset itself,” she says. “ Was the asset designed and built with features to withstand climate-related hazards? ” At CBRE Investment Management, they use “industry and proprietary tools to evaluate risk for each investment during due diligence and throughout the investment life cycle,” she says.
A focus on climate change, she adds, “ is fundamental to maximizing long-term investment returns by mitigating risk and taking advantage of opportunities to enhance value. ”
She says investors should evaluate not only the physical property but also the ability of the community to respond and adapt.
Gurfel says investors should focus on climate adaptation — reducing the environment’s physical impact on assets — as well as climate change mitigation — reducing the impact of assets on the environment to enhance their value to users and prospective purchasers.
“ Climate change mitigation is done through decarbonization efforts, focusing resources on efficiency, electrification and renewable energy, ” she says.
Source: Sotheby's International Realty. |
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