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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. 

Public investment in resilient infrastructure can mitigate physical climate risk. Some city administrations – such as Amsterdam and Paris – have been pioneers in developing resilience. Other cities, like New York were shocked into action through events like Hurricane Sandy. Likewise, in response to recent wildfires and associated smoke haze, Australia’s state and local governments are leading the charge to protect their urban areas from climate change through a series of planning and associated legislation relating to the built form and vegetation management.

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.

Climate resilience of a specific asset is determined as much by the resilience of its supporting infrastructure – transport, power, water and sanitation – as by the resilience of the asset itself. For this reason, investors will place a higher risk premium on properties in a city affected by climate events, regardless of whether individual properties are vulnerable.

Global studies find the benefits of investing in climate-resilient infrastructure outweigh the costs. Resilient infrastructure includes hard defenses, such as sea walls and flood barriers, as well as natural infrastructure, such as wetlands. Nature-based approaches are often cheaper.

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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