From sandbags to solar panels

Future-proofing UK real estate is essential for climate change resilience argue Sophie Walker and Karen Williamson

The role that the UK real estate sector can play in combating climate change is increasingly under the spotlight. While the Copenhagen Accord fell short of expectations, there is already considerable political will for the real estate industry to contribute to a low carbon economy.

The 2008 Climate Change Act commits the UK to CO2 reductions of 80 percent by 2050 (based on 1990 levels). Further legislation will continue to drive change within the UK property industry, including the Carbon Reduction Commitment Energy Efficiency Scheme, the recast of the EU Energy Performance of Buildings Directive and the anticipated Flood and Water Management Act. UK real estate professionals need to take action now, both to mitigate the risks of high impact buildings and to adapt real estate portfolios to inevitable climatic changes.  

Over the course of the next decade, it is likely that capital and rental values will gradually reflect the respective energy and carbon intensity of buildings. For this reason, pressing action is required to transform the built environment into less of a climate change culprit and make it more resilient to the risks posed by climate change.

It is our belief that to effectively tackle climate change and minimise the risk of irreversible damage to both the climate system and the physical assets within a community, an industry strategy which combines both mitigation and adaptation is urgently required.

Mitigating CO2 emissions
Assessing the risk of climate change mitigation should be considered by all UK property professionals. From an investor’s perspective this requires undertaking a thorough risk assessment of its property portfolios to calculate its exposure to carbon liabilities.

Current market conditions will make disposal of second tier carbon-intense space more difficult, so decisions need to be taken relating to the upgrading of inefficient space and the potential disposal of certain assets.

Investors should be planning now for forthcoming policy aimed at improving the energy efficiency of existing stock, and engaging with policy makers to determine the trajectory and scope of future policy requirements.

For occupiers, mitigation remains closely linked to operational cost savings. Given the commitment expressed by the public sector to leading the way in transitioning towards low and zero carbon buildings, as well as the growth in green leases, voluntary Display Energy Certificates and the CRC Energy Efficiency Scheme, the onus on occupiers to reduce their building related carbon footprint is unlikely to diminish and early action is an opportunity to save money on operating costs.

Reducing climate risks
In terms of adaptation the timescales for taking action are slightly longer, unless dealing with a global portfolio. The UK is already subject to some localised weather-related risks, although the more extreme problems are not as likely as in other regions.
 
Nevertheless, investors and developers would be best advised to define a forward-looking strategy for identifying and managing climate change risks both affecting the UK directly and affecting global investments or supply chains.

Once the risks have been identified, they can be analysed to determine their timing and financial implications. Given that climate change is not a static process, adaptation strategies should be closely monitored and reviewed as scientific information is updated.   
From an occupier's perspective, large corporate occupiers have to contend with both UK and global climate risk. Workplaces could be impacted directly by heat waves and flooding through the loss of working days. Productivity and profitability could also be affected through damage to infrastructure and transport accessibility.

Occupiers should develop clear lines of communication with landlords in order to better understand the potential risks of climatic disruption and put in place business continuation plans to cope with such risks unfolding.

Sustainability is a key issue for the UK real estate industry, and will be integral to each stage of the property lifecycle in the coming years. The rationale for UK property professionals to take action is clear, with those developing climate change strategies and driving the future direction of policy most likely to reap the benefit in the future.      

Author information
Sophie Walker is senior consultant at Jones Lang LaSalle’s Sustainability Services team and Karen Williamson is an analyst for Jones Lang LaSalle’s European Research team