Climate Issues Becoming More Critical for RE Development

Considerations for severe weather and climate, in general, have real estate developers putting more focus on how they build and operate. But add to that rising insurance rates, which have dealt a big blow to budgets as premiums continue to climb, especially in some Sun Belt markets.

Breana Wheeler, U.S. director of operations at BREEAM, tells GlobeSt.com that for the real estate industry, it is essential to consult climate data and consider climate change anticipated over the lifecycle of the building to tailor design and operations to the specific environmental challenges of a region.

“Considering these elements and incorporating climate analysis into the site selection process for new buildings can help owners and operators best mitigate the impacts of rising temperatures and create more comfortable, sustainable spaces for occupants,” Wheeler said.

“Consistent surges in natural climate disasters over recent years should serve as a critical warning for the commercial real estate industry signaling the imperative need for resilient infrastructure capable of withstanding the challenges posed by climate change.”

Rising Temps, Rising Insurance Rates

Recent events such as the heat waves in California, wildfires in Hawaii and droughts across the Sun Belt region are driving increased stakeholder demands for improved sustainable strategies and resilient properties that are able to maintain value in the face of rising temperatures.

This is especially important, Wheeler said, given the expected impact these events will have on an increasingly destabilized property insurance market.

“Owners and operators must understand that access to insurance for any particular asset is a right, not a privilege — and in areas where rising temperatures are having the greatest effect on the frequency and damage caused by natural disasters, this access could dwindle significantly, if not disappear entirely,” Wheeler cautioned.

According to Brad Werner, partner and leader in Wipfli’s CRE accounting and consulting group, cities with underdeveloped infrastructure such as Austin and the Phoenix have been most acutely impacted by temperature and climate conditions.

Focus on Cooling Materials & Strategies

As temperatures rise, there’s increased energy demand to power cooling systems. Developers must prioritize sustainable development and energy efficiency.

“There were significant incentives baked into the Inflation Reduction Act that emphasized meeting Energy Star requirements and Net Zero energy standards,” Werner pointed out.

“Utilizing different building materials that are more conducive to intense heat can also help prevent intense fires and the microwaving effect that traditional pavement and materials exacerbate.”

Kobi Karp of Kobi Karp Architecture said a core principle he is using to mitigate heat islands, especially in Florida, is replacing heat-absorbing surfaces with reflective ones.

White roofs and reflective pavements help to bounce sunlight back into the atmosphere, reducing heat retention and contributing to cooler temperatures,” he said.

Werner suggests that developers partner with state and local government consortiums that are purchasing bulk sustainable energy investments, such as solar, on behalf of local residents and marketing the tax incentives that can be pushed downstream to those homeowners.

Pete Carroll, executive and head of public policy at CoreLogic, tells GlobeSt.com, “As climate-related events intensify, we will see this impact how builders and developers navigate projects in the residential side of the property sector — a $47 billion industry.

“To ensure delivery of homes that can better withstand higher temperatures and flood risks, builders will not only need to take proper steps to develop construction projects that are resilient to these changes with better materials, but they will also need to evaluate site locations for flood risk — i.e.areas that are further from bodies of water like creeks, rivers, oceans,” Carroll said. “These factors could impact all future geographical planning of residential developments.”

Not Where, But How to Build

Tony Liou, president of Partner Energy, tells GlobeSt.com that currently, he doesn’t see rising temperatures or climate change, in general, to be affecting where new construction projects are happening.

“Though it is affecting how they’re being built,” Liou said. “Whether it’s in Florida where there is flooding, or Southern California where there are risks for wildfires, new constructions are still happening in these areas, though this may change in the long run. It is important to make sure these new properties can withstand regional climate hazards by adopting property resiliency measures.”

Brian Haines, chief strategy officer with FM:Systems tells GlobeSt.com that, traditionally, “once a new building is completed, architecture and design firms move on to their next project. This leaves the sustainability and health of the building’s performance to the building owner and facilities team.

“However, with rising temperatures, increasingly unpredictable weather conditions, and evolving government regulations that address reducing emissions and more, organizations know they can no longer move forward with a new building purely based on location and cost.”

Haines said the hybrid work boom has caused organizations to rethink how to better optimize their workplaces for their people and their bottom lines.

“Looking ahead, we’ll also start to see them factor in optimizing the overall health of a building — whether it’s part of their company’s ESG goals or in response to evolving government regulatory requirements focused on reducing emissions, or both.”

At the same time, he adds, “Organizations can’t do it alone and neither can A&D firms. In the next few years, we’ll start to see A&D firms collaborate more with real estate owners and their facilities teams on the front end of the design taking into account a much broader set of inputs including environmental modeling all the way through after the completion of a building.”

Richard Piacentini, president and CEO of Phipps Conservatory and Botanical Gardens, tells GlobeSt.com that “rising temperatures are not just a challenge to our geographical plans for new buildings; they are a stark reminder that we need a significant shift in the way we build and operate our buildings.

“It’s essential to recognize that these temperature increases are, in part, a consequence of how we construct our buildings,” Piacentini continued. “Buildings are the single largest source of carbon emissions, contributing significantly to climate change and taking a severe toll on public health.

“Conventional buildings are often constructed with a focus on cost savings at the expense of our planet’s well-being. While tools designed to mitigate harm in the construction process do offer some relief, they only scratch the surface of the problem.”

Piacentini said that to truly address this issue, there must be a shift in focus from just the construction phase to the entire building lifecycle.

“We need to consider how these structures will operate not just in the short term, but over the next 10, 25, and 100 years,” he said.

“This entails rethinking our approach to real estate design, construction and operation to align with a sustainable and resilient future for new buildings. It’s not merely about constructing buildings; it’s about reimagining how they can coexist harmoniously with the environment and serve as responsible contributors to a sustainable future.”