13 February 2025
Cameron McLaren, Senior Climate Consultant
The UK’s real estate sector faces escalating challenges from climate-related hazards, driving the need for proactive resilience strategies which can safeguard assets and ensure long-term viability. With the increasing frequency of extreme weather events, such as floods and heatwaves, it is imperative for stakeholders to implement comprehensive adaptation measures.
Current Climate Risks Impacting Real Estate
The UK has witnessed a notable rise in climate-related incidents affecting the built environment. Flooding, exacerbated by inadequate drainage in urban areas, poses significant threats to property integrity and value. Heatwaves have also become more prevalent, leading to overheating in those buildings not designed to withstand high temperatures. These conditions not only compromise tenant comfort and health but can also result in increased maintenance costs and reduced asset desirability.
Projections
Climate models predict that these adverse trends are likely to continue. The Environment Agency warns that without substantial investment in flood defences, the annual cost of flood damage in England could rise to £1 billion by 2050. Additionally, urban areas are expected to experience intensified heat island effects, adding further stress to building systems and occupants. These projections underscore the urgency for the real estate sector to integrate climate resilience into planning and operations.
National and regional legislation will also need to become more stringent to meet decarbonisation targets; as is already becoming the case in the UK with the Minimum Energy Efficiency Standard (MEES), and Future Homes and Future Buildings Standard. Pressure to comply with such regulations will mount, while lack of alignment may lead to fines or other adverse effects on stakeholders.
Strategies for Resilience
To adapt to these risks, real estate stakeholders should consider the following strategies:
- Investigating Physical Exposure: Asset owners should analyse which climate-related hazards their assets are exposed to and will therefore require a vulnerability analysis for. They should ensure that they use data sources which account for future climate projections, ideally using SSP[1] scenarios where applicable.
- Ensuring Regulatory Compliance: Staying up to date with evolving policies is crucial to limiting transition-related exposure. For example, the UK’s Environment Act 2021 mandates a 10% biodiversity net gain for new commercial developments, requiring developers to enhance natural habitats. Additionally, upcoming regulations such as the Future Buildings Standard, set to be implemented in 2025, will require new commercial properties to significantly reduce carbon emissions and improve energy efficiency to align with net-zero targets.
- Nature-Based Solutions: Incorporating green infrastructure, such as permeable pavements and green roofs, can reduce surface runoff and lower urban temperatures, thereby increasing the resilience of an asset. The “sponge city” concept, which integrates natural water management systems, has been effective in mitigating flood risks in urban settings.
- Structural Adaptations and System Capacity Enhancement: Structural improvements are essential to increasing the resilience of an asset against potential risks. Whilst implementing these structural adaptations can present challenges when it comes to standing assets, intervention such as foundation strengthening, as well as insulation and ventilation efficiency improvements, should still be considered on a case-by-case basis. Existing system capacity should be assessed and enhanced where feasible, as standing assets are often not adapted to perils, such as the extreme heat waves experienced in recent years.
- Implementation of Policies and Procedures: Standardised operational procedures for energy management, emergency response, and climate adaptation can enhance long-term sustainability and ensure a structured approach when adapting to risks. Additionally, implementing best practices, such as regular risk audits, compliance monitoring, and proactive checks and maintenance, supports adaptive and forward-looking resilience strategies. Ensuring that best practices are followed in these areas helps mitigate risks before they escalate into major issues.
Market and Investment Implications
Investors are increasingly prioritising Environmental, Social, and Governance (ESG) criteria, with a focus on climate resilience, especially during the due diligence process. Properties that demonstrate robust adaptation measures are likely to attract higher demand and command premium valuations. Conversely, assets lacking resilience may face depreciation and obsolescence. A 2019 academic study[2] estimated that, globally, approximately $5 trillion worth of commercial assets are at risk of becoming stranded due to the costs associated with upgrading buildings to meet energy and emissions standards, which may exceed potential rental income.
Conclusion
The imperative for the UK’s real estate sector is clear: stakeholders must proactively integrate climate resilience into acquisition, asset management, and development strategies. By doing so, they can mitigate hazards and risks, comply with regulatory requirements, and capitalise on market preferences for sustainable and resilient properties. The path to future-proofing real estate assets lies in embracing adaptive measures today to withstand the climate challenges of tomorrow.
To start future-proofing your assets, the initial stage should be climate exposure and vulnerability analyses, to ascertain specifically where the climate resilience capex should be focussed.
Our Climate team at Longevity Partners can assist you with this, as well as improving the resilience of your assets through portfolio level climate analyses, relevant policy reviews, nature-based solutions support, as well as net-zero and energy audits. To find out more, please contact our Senior Climate Consultant, Cameron McLaren: cm@longevity.co.uk
[1] Shared Socioeconomic Pathways scenarios are standardised narratives used in climate modelling to describe possible future socioeconomic developments which influence greenhouse gas emissions and climate change mitigation and adaptation efforts.
[2] “Mind the gap: An investigation of polarised perceptions of the risk of commercial property obsolescence” by Kevin Muldoon-Smith and Paul Greenhalgh