29 May, 2019

Global Investors Focus on Future-Proofing Their Portfolios

 

The resilience of property portfolios to environmental stresses is a growing concern for real estate investors with a long-term horizon. With financial costs of environmental hazards apparently reaching new highs,1 there is renewed focus on how assets can be made more resilient.

CBRE Research conducted a six-month study, including interviews with global investors and property managers, to understand current resilience strategies. Explore our findings below and download the full report to learn more.

1 https://www.swissre.com/dam/jcr:2a4b927e-23bc-4b66-9cda-fdd60b729021/nr_20181218_sigma_estimates_for_2018.pdf


Why Have a Resilience Strategy?


In 2018 alone, hurricanes Michael and Florence wreaked significant property damage in the U.S. and typhoons Jebi, Mangkhut and Trami impacted properties throughout Asia. The World Economic Forum’s “Global Risk Report” ranks extreme weather events, climate change and natural disasters as the top-three global risks in 2019.2

2 http://www3.weforum.org/docs/WEF_Global_Risks_Report_2019.pdf

Natural Hazards by Country of Property Manager Interviews

Fig 2 list

How Investors Are Employing Resilience Strategies

1) Pre-Acquisition Due Diligence

1) Pre-Acquisition Due Diligence

Identify exposure to significant events that may reduce investment value during the due-diligence stage.
2) Mitigate Insurance Claims

2) Mitigate Insurance Claims

Understand asset-level risk, potentially involving extensive modelling of various catastrophe scenarios.
3) Review at Portfolio Level

3) Review at Portfolio Level

Measure exposure to environmental hazards at a portfolio level.
4) Review at Building Level

4) Review at Building Level

Identify buildings that likely need some action taken depending on the severity of the potential risk.
5) Reporting & Disclosure

5) Reporting & Disclosure

Adopt new reporting standards on resilience, such as GRESB and TCFD.
6) Partner with Property Managers

6) Partner with Property Managers

Managers interface with building owners, tenants, contractors and local authorities, enabling them to help enhance building-level resilience.

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