The move to assess climate change risk has sparked the need for commercial property investors to clearly understand the difference between sustainability and the similar but relatively new concept of resilience.
Resilience is a term not commonly associated with real estate, explains Amanda Steele, CBRE’s executive managing director of property management Pacific yet its importance is growing fast.
“Growing environmental stresses and their threat to the built environment are bringing resilience to the forefront of long-term real estate investment strategy,” Ms Steele says.
“Resilience though is not the same as sustainability. Sustainability means building-level measures to mitigate negative impacts on the environment. Sustainability measures can sometimes improve a building’s resilience by reducing its consumption of resources, such as water or electricity supplies.
“Resilience, however, means the ability to survive an unexpected crisis and/or prolonged environmental stress such as sea-level rise, drought and rising temperatures.”
A CBRE report released last month into Resilience and Property Management states commercial buildings are considered resilient if they can “avoid significant damage from environmental shocks, such as floods and hurricanes, while continuing to provide an uninterrupted working environment and minimal disruption to business operations.”
Australia’s environment and extreme weather events has resulted in it being identified by peak bodies like the CSIRO and Bureau of Meteorology as among the world’s most at-risk of climate change impact.
Several weather events in recent times have been particularly catastrophic, from last year’s Townsville floods to 2017’s Cyclone Debbie that devastated the Whitsunday region as well as a number of bushfires in NSW and Victoria, plus hail-storms and dust-storms.
All have helped magnify the importance of preparing real estate assets for enduring such disasters, with property investors, developers and building managers being driven to implement resilience strategies by:
- • Rising insurance costs
- • Risk of accessing insurance (ie exclusions for coastal risks of erosion and 'Acts of the Sea')
- • Higher operational costs
- • Reputational damage resulting from inaction and lack of preparedness
- • Impacts to workforce health and safety.
Resilience strategies not only need implementing sooner rather than later but must also be comprehensive and far-reaching, analysts advise. According to CBRE, quality resilience entails:
• A correct assessment of long-term risks that involves “extrapolating current trends to form a view of risks beyond 10 years, even if the results of this exercise are contrary to the dominant popular narrative, ideology or belief.” • A comprehensive building-level strategy to prepare for these risks.
“Smart property organisations are building in resilience strategies that examine the physical robustness of assets as well as how to operationally ensure the safety of those inside and around buildings,” Ms Steele says, “and the key to minimising risk and ensuring resilience is proactive property management.”
Property managers are best placed to leverage data on environmental hazards, assess the vulnerability of the assets and how to protect them, and their success “largely hinges on a building owner’s willingness to take a long-term view of their investment,” Ms Steele adds.
Any scepticism or reluctance to address climate change impact must be overcome, advises JLL’s Asia Pacific Energy & Sustainability Services head Matthew Clifford.
“The key to action on this topic is giving investors very tangible advice on the steps to take in the immediate term,” Mr Clifford says. “It’s useful to think about potential impacts in 20 to 50 years but there are also near-term issues which demand a clear plan and instantaneous response. Sadly these extreme (weather) events are becoming more common so the need to plan and act early in even more pronounced.”
In the US, the race by property giants to gather climate data for mitigation purposes has ignited a proliferation of tech start-ups that feed intel to major real estate firms. While Australia still has a way to go in that department, CBRE’s National Director Sustainability Emma McMahon says AECOM is among the consultants known in the space for providing quality advisory.
“Also, the Insurance Council of Australia (ICA) is actively assessing the insurance risk of climate related weather events, so the better the property industry can communicate the assessment and due diligence in place to mitigate against any identified risks the more it will positively impact their premium,” ,” Ms McMahon says.
Leading the charge
First out of the starting blocks in Australia were major companies Stockland, Lend Lease and Charter Hall, now all well ahead with resilience strategies and ‘climate adaptation plans’ that reach every corner of their portfolios.
One example cited by the Property Council of Australia in its lengthy 2017 report on making buildings resilient was Lendlease’s review of climate change projections during the design process for Barangaroo South. Lendlease wanted to assess the impact of sea level rise on the precinct, and as a result of data analysis, ground plane levels were increased to allow for a 0.9 meter sea level rise with an extra buffer provided by a sea wall and landscaping features.
Similarly, Dexus upgraded its national building specifications for warehouses in order to prepare for hail and heavy rainfall events as well as provide a response to demand from insurers in the face of increasing damaging weather events.
And Stockland’s approach to climate adaptation planning has been outstanding, the Property Council of Australia noted. For instance, where extreme rainfall and localised flooding was a key risk for several of Stockland’s asset portfolios and key residential developments, stormwater drainage was improved to resist intense flooding and new resident emergency checklists for communities in regions vulnerable to extreme rainfall were implemented.
Peak industry bodies concur that the business case for investing in climate resilience is clear. It is also impossible to ignore according to The Property Council of Australia, as the move toward resilience will trigger “a transformational shift in the way we plan, design and develop our built environment” for years to come.
CBRE – Global Resilience and Property Management 2019 report
JLL – Climate change: Threat or Opportunity for Real Estate Investors?