Savills Impacts July 2023: Shifting Returns, Cities on the Cutting Edge of Climate Resilience and Adapting to New Work Models
In Savills Impacts, examine how climate resilience, new work models and climate change are poised to impact APAC investors.
With temperatures setting records around the world this summer, climate change and climate resilience have never been more critical. Climate change is also exerting an influence on how we work, and even on the return investors may or may not see. Savills Impacts explores some of the factors poised to leave their mark with real estate investors in APAC in the coming months and years.
Eyeing Returns in an Uncertain Interest Rate Environment
Rising interest rates are having an impact on the commercial real estate industry. While the trend appears to be coming to an end, the long-term implications for real estate investors are significant. Savills new report explores the pros and cons of higher or lower neutral interest rate and highlights the importance of understanding the long-term implications of each for real estate assets. Investors may need to revise their expectations on the returns available through commercial real estate as risk premiums are likely to be lower in the future than over the past decade
Climate Resilience: Real Estate and Carbon
In “Climate resilience: real estate and carbon” Savills looks at cities taking action on climate change. It’s clear more is needed from the real estate sector. Cities worldwide are making efforts to prepare for climate change impacts like rising temperatures and sea levels. However, cities account for 70% of carbon emissions globally, so reducing emissions should be a priority. The report highlights steps cities can take: transitioning to renewable energy, expanding public transit, and implementing carbon pricing schemes. Carbon taxes in places like Singapore and South Africa aim to incentivise building owners to choose greener options. Collaboration initiatives in cities like New York and Madrid are educating citizens on sustainability. Nonetheless, while cities are preparing for climate change, reducing emissions through real estate choices can mitigate the worst impacts.
Climate Resilience: Cities at the Sharp End
Proactive cities are taking steps to improve climate resilience and reduce impacts. Savills “Climate resilience: cities at the sharp end” highlights some of the global leaders taking those steps. Tokyo has world-class earthquake resistant building codes and massive storm drainage infrastructure to mitigate typhoon flooding. New York City is constructing US$52 billion worth of flood protections after Hurricane Sandy laid bare the city’s vulnerability. Inland Berlin is investigating “sponge city” designs in order to prepare for increased storms and drought. The report concludes that while some cities are reacting to disasters they’ve already experienced, global real estate needs to transition to proactive planning. As climate impacts increase worldwide, Savills urges real estate investors, developers and occupants to understand future climate risks where they operate. Learning from cities on the cutting edge can help the industry prepare assets and infrastructure for the future.
Out of Office: Adapting to New Ways of Working
Savills latest market research has revealed regional differences in offices adapting to new work patterns. An East-West divide in how cities are responding to hybrid work models emerged during the pandemic. US cities like San Francisco face high vacancy rates, while Asian cities like Singapore maintain higher in-office utilisation. Urban layout, transportation, demographics, and quality of office stock are among factors impacting a city’s ability to adapt. Younger workforces in Asian cities support continued office demand, while urban sprawl deters US commuters. Additionally, refurbishing outdated offices to meet sustainability demands is now crucial. Offices aren’t disappearing, but they must be right-sized and upgraded to attract tenants. Understanding how hybrid work trends, population growth, and quality of space drive office demand can guide real estate investment.
Read the complete reports at Savills Impacts:
