What strategies can real estate developers use to ensure the long-term viability of their projects in changing climates?

In the wake of the climate change crisis, the real estate sector is grappling with a significant challenge – ensuring the long-term viability of its projects. The nature of the challenge is two-fold. First, there is a need to reduce the sector’s own carbon footprint. Real estate is responsible for about 40% of the world’s total energy consumption and a third of humankind’s greenhouse gas emissions. Second, as the effects of climate change intensify, developers must build resilience into their projects to safeguard their economic returns. This means that buildings and infrastructure need to be constructed in a way that can withstand extreme weather events and changes in water levels. So, how do real estate developers adapt to these new realities? This article will outline five key strategies: embracing green building practices, risk management, community resilience, data-driven decision making and economic resilience.

Embracing Green Building Practices

As the climate continues to change, real estate developers are adopting green building practices to reduce their carbon footprint and create energy-efficient buildings. Green building practices are not just environmentally friendly; they also make economic sense over the building’s lifecycle, through reduced energy and water costs. Green buildings also have healthier indoor environments, making them more attractive to tenants, thereby enhancing the economic viability of real estate projects.

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Green building methods incorporate several strategies, such as the use of renewable energy sources, like solar and wind, to power buildings. Developers are also implementing energy-efficient appliances, lighting, and HVAC systems, as well as efficient insulation techniques to reduce energy consumption. Water conservation is equally crucial in green building practices. Developers can install rainwater harvesting systems, greywater recycling, and efficient irrigation systems to reduce water use.

Risk Management in a Changing Climate

Risk management has always been at the heart of real estate development. However, climate change presents new and complex risks that require a more sophisticated approach. These range from physical risks, such as water damage from increased flooding, to transition risks related to policy changes and market shifts towards green buildings.

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To manage these risks, developers must first conduct thorough climate risk assessments. These assessments will help developers understand the potential impacts of climate change on their projects, including rising sea levels, increased temperatures, and more frequent and severe weather events. Based on these assessments, developers can then design their buildings and infrastructure to withstand these impacts, for example, by constructing properties at higher elevations or using more durable materials.

Building Community Resilience

Real estate developers play a crucial role in building community resilience to climate change. Developers can make a significant contribution to community resilience by designing and constructing buildings and infrastructure that can withstand extreme weather events and changes in water levels.

For instance, constructing buildings with resilience features, such as flood barriers and storm-resistant windows, can protect not only the building itself but also the surrounding community. In addition, developers can design properties to function as community resilience hubs in times of disaster, providing essential services like shelter and electricity. This approach, while benefiting the community, also enhances the attractiveness and long-term viability of the developer’s projects.

Data-Driven Decision Making

As the saying goes, "what gets measured gets managed." In the era of climate change, data will play a pivotal role in helping real estate developers make informed decisions about their projects. Developers can utilise data around climate risks, energy performance, and tenant preferences for green buildings to inform their building design, compliance strategies, and marketing approaches.

For instance, developers can use climate data to identify regions that are less vulnerable to climate change impacts, such as flooding or wildfires. They can also leverage data on energy usage to identify opportunities for energy efficiency improvements, which can reduce operating costs and enhance the appeal of their properties to tenants. Moreover, by collecting data on tenant preferences, developers can ensure their projects align with the growing demand for green and resilient buildings.

Economic Resilience

As climate change impacts become more apparent, economic resilience will be critical for the long-term viability of real estate projects. Developers will need to factor in the potential risks and costs associated with climate change and build these into their financial models and investment strategies.

For instance, potential increases in insurance premiums due to climate risks, or the need for additional investment in resilience features, should be considered when calculating the project’s return on investment. At the same time, developers can also tap into new funding sources aimed at promoting climate resilience, such as green bonds and resilience bonds. These strategies will ensure that their projects remain financially viable in a changing climate, while also contributing to the global efforts to mitigate climate change.

Utilizing Climate Adaptation in Infrastructure Planning

Climate change-induced shifts such as sea-level rise, increased storm frequency, and changes in water quality necessitate a fresh approach towards infrastructure planning. Real estate developers must keep pace with these changes to ensure the longevity of their projects. Emphasizing climate adaptation in infrastructure planning is one effective strategy.

By adopting a climate adaptation approach, developers can create infrastructure that can withstand and even thrive under changing climate conditions. This includes considering future climate scenarios while planning new projects, assessing the vulnerability of existing infrastructure to climate change impacts, and creating adaptation plans to mitigate these risks.

Building green infrastructure is one aspect of climate adaptation. This involves incorporating natural elements into development projects, such as creating green roofs and walls to provide insulation, reduce energy consumption, and absorb stormwater. It also includes designing water-sensitive urban landscapes to manage stormwater, enhance water quality, and promote urban cooling.

Other approaches include strategic placement of new developments to account for potential sea-level rise and incorporating climate-resilient construction materials and designs. For instance, using rust-resistant coatings on steel structures to resist the corrosive effects of increased humidity and salinity, or developing elevated buildings and roadways to adapt to potential sea level rises.

The Role of Policy and Regulation in Promoting Climate Resilience

Policy and regulation play a significant role in supporting climate resilience in real estate development. Across the United States and globally, governments are progressively recognizing the need for climate action in the real estate sector, leading to several policy initiatives aimed at promoting sustainability and resilience.

Incentive programs such as tax credits, grants, or reduced fees can encourage developers to adopt green building practices and resilience measures. Regulatory measures, such as building codes and standards, can ensure that new developments are designed to withstand specific climate risks. Planning policies can direct new development away from areas at high risk of climate impacts or ensure that appropriate adaptation measures are implemented in these areas.

Recognizing and leveraging these policy tools can assist real estate developers in their pursuit of climate resilience. By keeping abreast of changes in policy and regulation, developers can identify opportunities for support, comply with new requirements, and align their projects with future policy directions.

Conclusion

In this era of unprecedented climate change, it’s evident that the real estate sector must play its part in climate action. Coupled with the need to ensure the long-term viability of their projects, developers have a compelling case to incorporate climate resilience strategies into their practices. By embracing green building practices, managing climate risks, building community resilience, making data-driven decisions, ensuring economic resilience, focusing on climate adaptation, and understanding the role of policy and regulation, developers can future-proof their projects and contribute to broader efforts to mitigate climate change. In turn, these practices will help to safeguard their economic returns and contribute to the sustainability of the sector in a changing climate.