Book a Demo

In recent years, climate change has moved from an outlying concern for those in the real estate industry to one of pressing importance.

Many organisations are now pledging to net zero commitments, due in part to the proliferation of regulatory changes in building standards and the increasingly conspicuous threat of climate change on the built environment.

With the number of players in or adjacent to the property sector beginning to heed the warnings issued by governments and non-profit organisations across the world, now is the right time to put the impact of climate change on real estate under the microscope to see if there are any changes you can make to mitigate the risk to your assets.

The increasing number of extreme weather events, including flooding, adverse temperatures and storms have brought to light the urgency to contain or eliminate the threat of climate change on the built environment.

Anyone and everyone working in the real estate industry, from investment to development and agency to surveying will each have a role to play in this pressing global concern.

climate change data real estate

Building emissions and decarbonisation

Whatever side of the debate you sit on regarding climate change, the numbers are unarguable. Approximately 6% of total global emissions can be attributed to the construction industry, while 27% account for building operations, which includes the energy that powers the buildings. All told, the real estate industry accounts for around 39% of total global emissions.

It’s a significant slice of the pie, so you can see exactly why the responsibility falls on leaders across the real estate industry to do what they can to manage the transition to decarbonisation by 2050, a widely used target for governments and regulatory bodies all over the world.

One of the areas that needed some serious realigning was real estate market valuations. According to McKinsey, an analysis by one prominent North American bank on its assets found that its portfolio would suffer sizeable devaluations over the course of the next decade, due in part to increased rates of flooding and other factors.

Other studies have found that annual returns on real estate investments could reduce by up to 40% by the end of the decade due to climate risk. This is prompting real estate investors and property developers across the world to reevaluate their assets, using insight to make better decisions around management, operations and investments.

Additionally, with the trillions of dollars pledged to net zero initiatives, there has also been a rush by some of the biggest property industry players to decarbonise their portfolios so they can enjoy the economic benefits linked with greener, carbon-neutral properties.

Rising Temperatures and Adverse Weather

Last year, the UK endured a season of record-breaking heatwaves, dubbed a milestone in UK climate history by the Met Office. The event garnered attention from a range of property professionals, especially those working in the surveying and property inspection sectors who correctly predicted a rise in cases of subsidence.

The Independent reported on the matter, with a number of the UK’s foremost insurers revealing data around increasing numbers of subsidence-related claims in areas severely affected by drought due to rising temperatures.

At the time, scarcity of water led to drier soils, which put properties at heightened risk of subsidence, especially in areas like the southeast and the midlands, whose clay-rich soils have not historically faired well in this sort of scenario. The Royal Institute of Surveyors (RICS) also had its say, urging property professionals to pay particular attention to older housing stock, which typically has shallower foundations.

In the commercial sector, an increase in temperature made its presence felt in another way. With more building occupants and tenants relying on cooling during the heatwaves, the increased use of HVAC systems meant more energy consumption, placing significant strain on the national grid and, as a result, inflated energy costs.

Philip Box, Public Affairs and Policy Officer, UK Green Building Council, said: “Our built environment is not prepared to cope with these conditions. Around 1.8 million people in the UK already live in areas of significant flood risk. If the frequent occurrence of major flooding events continues – which it has done in the UK nearly every year since 2007 – it is estimated that the number of homes at risk of flooding will rise by 40% to 2.6 million in as little as 20 years.

“On overheating, the picture is similar. Roughly 20% of homes in England already experience overheating issues, even during cooler summers. Furthermore, the proportion of green space, which can provide a local cooling effect, has dropped from 63% to 55% between 2011 and 2016.”

While the costs were burdensome then, some industry experts are levying the argument that this year, against the backdrop of the cost of living crisis and on the precipice of a recession, increased energy use due to rising temperatures is unsustainable and largely unaffordable for many.

Across the pond, things aren’t looking much brighter. The United States' southeastern coast has endured some of the worst extreme weather events in living memory, with September 2022’s Hurricane Ian the deadliest hurricane to hit the area since 1935. The hurricane, which eventually dissipated in early October, wreaked havoc across several southeastern states, including South Carolina, North Carolina and Florida, causing $113.1 billion in damage.

Evidencing this, researchers and climatologists at the EPA identified a marked increase in the frequency of hurricanes over the past two decades, which inevitably leads to an increased risk of property damage in coastal areas due to flooding and other severe weather events.

real estate climate change facts uk

Mitigating climate risk in real estate

Weather-related damage to property due to rising temperatures or severe weather events can significantly impact a real estate organisation’s profitability. Greater operating expenses, an increased risk of devaluation and a hit to the overall desirability of a location or asset can all be traced back to climate change in some shape or form.

Areas at a heightened risk of severe weather events are seeing market prices drop, making the sale of those properties, whether commercial or residential, a profitless exercise. Although climate events aren’t anything new, the increasing number of extreme weather events attributed to climate change is producing dire financial consequences shouldered by everyone – insurers, owners, tenants, plus local and national governments.

Although steps can be taken to mitigate the physical risk associated with climate change, a more widespread cultural shift must be adopted. This will inevitably be spurred on by sweeping regulatory reform the closer we get to deadlines and targets, but we can still play a part now.

In the case of existing buildings, that might mean smarter energy use and sustainable retrofitting, while new buildings will need to be planned according to a range of factors – risk-free location, greener materials, renewable energy, more efficient construction, and so on.

People undoubtedly want to live and work in more comfortable, energy-efficient and sustainable buildings. Whether that's a single-family home, an HMO or a healthcare facility, building better with less carbon-intensive construction materials is the first real step towards meaningful change. We must ensure we do not add to an existing problem.

Thereafter, for many property professionals, it’s all about how we assess and monitor existing buildings. Estate agents, lettings agents, property surveyors and facilities managers, among many other property professionals, will all be brought into the fold to lend their expertise to the reevaluation of the built environment in the context of climate change.

After all, those on the frontline working with building owners, occupiers and tenants are best positioned to gather first-hand data and information that makes for meaningful insight and a valuable contribution to the debate.