This summer in the UK has further highlighted that concern. It must now be expected that periods of extreme heat will become the norm and the Climate Change Committee’s ‘A Well-Adapted UK’, published in May and referenced during the conference, highlighted the need to design, operate and maintain buildings for a changing climate. There is subsequently a very clear business and economic case for making buildings more resilient.

At the conference, there was considerable discussion about what happens to productivity as workplace temperatures rise. An office that regularly overheats isn’t performing its basic function. For industrial occupiers, where employees generally cannot simply work from home, the problem is potentially greater still. The same applies to retail – extreme weather that prevents customers or employees getting to a property can quickly become a trading issue.

This ultimately matters to property owners because as a building becomes less attractive to occupy, it becomes less attractive to lease and eventually that feeds into the value of the property.

Investors are seemingly already paying attention. One point raised at the conference was how normal it is now becoming during due diligence to ask whether a climate risk assessment has been undertaken and importantly, what is being done about the risks identified. For an existing portfolio, climate risk can be monitored and managed. For a new acquisition, a significant physical climate risk could influence whether the investment goes ahead at all.

The answer cannot always simply be to install more air conditioning. There needs to be much more thought around stopping buildings from overheating in the first place – using better ventilation, shading and other passive measures, alongside flood resilience and nature-based solutions. Air conditioning will inevitably be part of the answer, particularly when older buildings are refurbished, but good adaptation should start with the building itself. Planning departments should encourage rather than reject external passive measures.

There is, however, a significant cost to this. Property owners are already facing competing demands for their capital, while the benefits from climate adaptation may only fully come to the fore over a number of years. This could be where the tax system plays a greater role.

Government already uses tax incentives to encourage investment in certain energy efficient and low-carbon technologies. There is a case for going further and specifically incentivising expenditure that makes existing buildings more resilient, whether through passive cooling, improved ventilation, shading, flood protection or other adaptation measures. More resilient buildings should be more productive places to work, more attractive to occupiers and therefore better able to maintain their value.

The conference can be summed up by – “the question is no longer whether climate change will affect a property portfolio, but how ready that portfolio is for it”.

Would you like to know more?

If you have any questions about the above, please get it touch with your usual Blick Rothenberg contact or Mark using the form below.