No city – and few buildings within – is immune from the growing impact of climate change.

It’s not just dealing with events that make international news headlines. Those already on the front line of climate change are suffering from repetitive smaller events which may be growing quickly in scale and intensity. In the U.S. the impacts of climate-fueled extreme weather events have cost US$612 billion in the last five years, according to NOAA’s National Centers for Environmental Information

However, for some companies, climate risk remains a blind spot. Part of building a strong business case will involve understanding the risks of disruption to business operations and potential damage to buildings.

Taking action for long term resilience

One of the biggest challenges in assessing climate risk is the wide range of approaches and the lack of consensus on standardization. Some providers are thinking about value at risk in terms of insured value, others are looking at change in asset value or replacement cost.

Nonetheless, climate modeling and scenario analysis tools are becoming more sophisticated, enabling more companies to understand their risks and develop plans to take appropriate action. These short-term resilience measures should be integrated into broader decarbonization plans which are key to reducing longer-term risk.

Supply and demand dynamics vary significantly between major cities depending on factors such as the main type of industry and corporate space requirements as well as property features of existing stock.

City spotlights

New York

New York is dominated by finance and professional services, sectors that tend be highly carbon conscious. Across the leased footprint of the top 100 occupiers, 72% is tied to a carbon commitment. Demand from these corporates, at an estimated 2.2 million square meters by 2030, is expected to be twice the current development pipeline of suitable space.

Paris

Paris is amongst the most climate progressive cities in Europe. Across their leased footprint, 80% of the top 100 corporate occupiers in Paris are signed up to carbon commitments, with 17% of those being SBTi, NZC committed. This amounts to roughly 1.5 million square meters of future occupational requirements by 2030, compared with just over 800,000 square meters of best-in-class sustainable office space. As such, future demand is likely to exceed supply by 54%.

Sydney

Sydney, too, is facing its own significant supply issues. In June 2023, the National Australian Built Environment Rating System (NABERS) formally introduced a Renewable Energy Indicator as a parameter in its rating scheme, with the focus on rewarding buildings transitioning to electrification and procurement of renewable energy for operations. As the proportion of all-electric buildings in Sydney remains low, the city will see a deficit of NZC ready stock. Demand will be five times larger than future supply of all-electric 100% renewable energy buildings in the next five years.