Act now: Climate change is already happening, so 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 here and there’s more to come
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.
The business case for resilience and the cost of inaction
As weather patterns become more unpredictable and extreme weather events become more frequent, the risks to asset values will mount. One estimate has put US$1 trillion of real estate at risk of coastal flooding in the U.S. alone.
Organizations which don’t implement climate mitigation and adaptation strategies face disruption, damages, higher maintenance and insurance costs, coupled with lower revenues:
- More frequent and severe climate events will increase maintenance costs and insurance premiums. Less resilient buildings will become harder to insure, see lower tenant demand and thus fall in value.
- Disruption to operations and property downtime will lead to reduced revenues and increased costs.
- Resources such as energy and water will become more expensive for companies which haven’t adopted measures to reduce consumption.
- Increased regulations around climate risk reporting, such as the SEC legislation in the U.S. and CSRD in Europe will impose compliance mandates for large businesses.
Investors without climate mitigation or adaptation strategies are experiencing reduced liquidity and pricing impacts on asset sales. While this is not a new trend, it is becoming more prevalent as the understanding of the impacts and implications of climate risk increases.
For example, in the UK, a prime retail park situated within a flood zone was recently brought to market without a full flood risk assessment (FRA), leading to a reduction in interested parties and likely material impact on pricing.
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This article is part of JLL’s Future Vision: A global research program exploring the future of real estate.
