The climate crisis and real estate: How the built environment is responding
Savills Impacts examines the city resilience, policy, technology and investment trends that are defining real estate’s response to climate change.
The global drive to carbon neutrality by 2050 has become one of the most influential trends impacting the global real estate industry since the Paris Agreement was signed in 2016. Owners, occupiers, investors, policy makers, developers and host of other real estate stakeholders are all working towards the common goal of mitigating climate change risk, reducing carbon emissions, and preparing assets and cities for the future.
On the policy front, cities are quickly realising that inaction is not an option in the face of increasing climate change-related events, from flooding to wildfires to drought. Extreme weather events are becoming more and more frequent since 2000, and existing real estate stock is not built to resilient standards. According to Savills Climate Resilient Cities Index ranks 23 of the world’s wealthiest, most populous global cities based on how prepared they are to mitigate climate change risks and continue to attract investment. Berlin, Toronto, Paris, Madrid, and Stockholm top the list for their resilience.
Another factor impacting investors and real estate is resource management — resources such as water. Water is quite literally the world’s lifeblood: it is necessary for human health and wellness, development, and food supply, but it is also a source of property damage, falling property values and loss of life and livelihood. In the first instalment of a series analysing the management of essential elements, Savills looks at efficient management of water and its impact on the built environment in its “Commercial real estate and the climate crisis: water”. The coming years will be crucial in bringing the global US$82 billion in economic damage (in 2021) under control and ensuring the security of urban centres going forward, demonstrated by innovative initiatives launched in Sydney and Cape Town.
Directly related to progressive policy and effective water management are the research, development, funding and investment that make policy and management a reality. Technology is and will be a major driver in reducing carbon emissions and developing clean energy in the future, and cities that can build clusters of vibrant research, education and business environments, urban liveability and sector specificity will be the ones that rank highest on Savills Tech Cities CleanTech and ClimateTech. Index — cities such as Boston, San Francisco, Oslo, Sydney and Tel Aviv.
Finally, despite research funding continuing to climb, the level of Investment opportunities in renewable energy infrastructure the backbone to water’s lifeblood worldwide is still only 40% of what it needs to be if we are to attain carbon neutrality by 2050. Carbon reduction, energy security and supply, and rising costs are inspiring everyone, everywhere to consider real ways to reduce use of fossil fuels, and investment is rising to a tipping point. With US$4 trillion in investment needed in the next few years, opportunities are ripe for private funds to get into clean energy infrastructure. In addition to infrastructure, real estate companies should be considering ways to diversify risk and incorporate renewables and smart technologies into existing assets. Private sector investment will be a key player in any transition to a greener, carbon neutral future.
