The climate inflection point

Act now. Climate change is already happening. We must act now to avoid its most detrimental effects and mitigate costly damages. All buildings will be affected, even in temperate climates.

Intensify collaboration. The climate resilience of assets and urban infrastructure is inextricably linked; resilient buildings require resilient cities. Collaboration between governments, owners, developers, occupiers, architects, and insurers is essential.

Be radical. Developing climate resilience will require radical hard engineering, nature-based and AI-powered solutions. 

Climate change is a reality. Extreme climate events – heatwaves, flooding, storms and droughts – are increasing in both severity and occurrence.

No longer confined to the realm of academic discussions or distant headlines, the impacts of climate change are seeping into the very fabric of real estate, demanding attention, adaptation, and action.

Targets to keep global temperatures within the critical 1.5°C threshold in line with the Paris Agreement are almost certain to be missed, and temperature rises are already baked in. Mean global temperatures have risen by 1°C in the past two decades, while 2023 turned into the hottest year on record and 2024 is likely to be even warmer.

Considering these trends, a recent survey of climate scientists by the Intergovernmental Panel on Climate Change (IPCC) found 77% foresee at least 2.5°C of global heating above pre-industrial levels this century if radical action is not taken.

Governments, owners and occupiers must make the built environment resilient to climate change, in tandem with decarbonization efforts.

Imagine a world where all buildings have to comply with strict ESG standards and climate adaptation becomes a necessity.

How could an existing building be retrofitted to be more sustainable and resilient? Our creative team has helped us visualize the opportunities.

In addition to the roof-top garden, electric car charging stations and cycle lanes, behind it are less-obvious changes, such as smart glass; passive design solutions for improved light and ventilation; key infrastructure moved to higher floors; heat pumps; and integrated building technology.

Around the world, cities will have to prepare and adapt to climate change in different ways.

Permeable pavements to reduce the risk of flooding, misting stations to help residents cope with more frequent and intense heat waves, buried power lines and reinforced foundations to mitigate storm damage are just some of the solutions that can make cities more resilient.

Although some cities are feeling the effects more acutely than others, all will face long-term challenges to existing buildings, infrastructure, and supply chains. For example, while European cities rank among the world’s lowest climate hazard scores, temperatures across the continent are increasing at a rate that is about twice as fast as the global average.

Extreme climate events are already affecting asset pricing and liquidity. Prices typically decline after climate events, particularly in locations not used to extreme weather. Overtime, repeated events can lead to significant price discounts and a drop in demand. In Hong Kong, for example, following a typhoon in October 2018, a multifamily residential building saw unit prices fall by 14% and not recover to pre-typhoon levels still four years later.

Even today’s prime buildings will need to adapt to a rapidly changing climate to maintain their appeal. More than 90% of the world’s largest companies will have at least one real estate asset financially exposed to climate risks by the 2050s, according to S&P Global.

Owners:

• Demand will shift in response to climate risk, so incorporate climate risk modelling into investment strategies. Avoid assets in places most exposed to climate hazards.
• Crucially, factor in city resilience strategies and the potential vulnerability of local transport infrastructure, power and water supplies to climate events. 
• Adopt a holistic approach: evaluate physical climate risk and resiliency planning alongside decarbonization and asset repositioning.
• Identify the most vulnerable assets and work on resilience measures. Keep abreast of change and review climate risks annually.
• Engage and collaborate with other stakeholders to create and implement integrated resilience strategies.

Occupiers:

• Identify those sites most vulnerable to climate hazards and infrastructure failure, then strategize. 
• Engage with landlords to establish contingency plans for extreme weather events and identify areas for longer-term collaboration. Ensure these are clearly outlined through green lease clauses.
• Develop and integrate resilience strategies to add long-term value with employee health and wellbeing needs, social impact and creating inclusive spaces.
• Communication and alignment between stakeholders at all levels, from suppliers to C-Suite, is imperative to climate mitigation and adaptation policies.

As the world grapples with the escalating consequences of climate change, the real estate industry finds itself standing at a precipice. In the coming years, the effects of climate change are set to deepen, presenting the industry with tangible and increasingly urgent material threats.

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