Abundant water resources and a low-carbon electricity grid are two key attributes earning Toronto, Montreal, Ottawa and Winnipeg favourable ranking as resilient bases for commercial real estate. A new report from CBRE Econometric Advisors identifies the four central Canadian cities among 10 North American markets where property values are best placed to withstand the physical and transitional risks of climate change.
Researchers assessed 66 markets on 10 factors related to: vulnerability to extreme weather events and negative environmental conditions; the cost of achieving greenhouse gas emission reductions as a percentage of total building value; and measures in place to support climate change adaptation and mitigation in the commercial real estate sector. The top 10 are listed alphabetically with no further differentiation by merit and also include Austin, Boston, Denver, New York, San Franciso and Washington D.C.
“Physical and transition risks can affect buildings, directly or indirectly, by having an impact on the markets with which the assets interact,” the report maintains. “Cities that can demonstrate climate resilience are likely to benefit from a halo effect on property values and will attract more occupiers that are challenged to meet their own net-zero goals.”
All 10 cities have set targets to achieve either net-zero or carbon neutral status in the period from 2040 to 2050 and eight have implemented building performance standards. While perhaps posing a near-term cost for developers and building owners/investors, these are considered positive factors from a transition risk perspective because they should drive emissions-reducing initiatives and leave a smaller percentage of total assets exposed. As well, all 10 cities have gained more renewable energy supply over the past five years, suggesting a concomitant reduction in energy-related emissions.
The four Canadian cities stand out for their predominant reliance on renewable electricity supply — at 99 per cent in Montreal and Winnipeg and 94 per cent in Toronto and Ottawa — and relative insularity from physical climate risk. Building damage in Toronto, Ottawa and Montreal is judged most likely to occur from flooding, winter storms and tornadoes or severe thunderstorms, while drought and wildfire are added to that list of probable hazards in Winnipeg.
Nevertheless, water capacity is considered sufficient to meet demand in all four Canadian cities. They also register a stable or decreasing number of heating degree days over the past five years, whereas there has been an increase in cold weather necessitating heating, with associated greater emissions output, in many of the U.S. cities.
San Francisco, New York City and Austin all carry “relatively high” risk for building damage due to natural disasters. Although San Francisco’s arguably most ominous threat — earthquake — is not directly tied to climate, building owners/managers are advised to be particularly wary of extreme temperatures, hail, lightning and tornadoes in Austin and strong winds, heat waves, coastal flooding and hurricanes in New York.
Air pollution is singled out as one of Toronto’s challenges, but the city is praised for its growing share of LEED-certified commercial buildings (although falling short of the percentages that New York, San Francisco, Boston and Washington boast). Toronto, Montreal and Ottawa also earn mention for various incentives and programs to support climate initiatives.
“The cities that take the lead on sustainability today will have a competitive edge as the economy shifts to a low carbon, more sustainable future,” asserts Rob Bernard, CBRE’s chief sustainability officer. “With over 50 per cent of the world’s population living in cities, cities will be critical in driving sustainability and helping communities adapt to climate risks.”
