Asia Pacific property owners focus on resiliency: CBRE

Asia Pacific property owners focus on resiliency: CBRE

14 June 2019

Asia Pacific commercial property owners and managers are deploying greater resources towards ensuring buildings are more resilient to long-term environmental challenges.

The deepening industry focus on enhancing resiliency in commercial real estate assets is resulting from the coordinated efforts of building owners, tenants, contractors and local authorities, according to CBRE’s Global Resilience & Property Management 2019 report.

The resilience of property portfolios to environmental stresses is a growing concern for real estate investors with a long-term horizon.

This was backed up in a statement by property group Blackrock in The Financial Times which said: “Investors who are not thinking about [environmental] risks, or who view them as issues far off in the future, may need to recalibrate their expectations.”

According to respondents, key environmental considerations driving increased focus on building resilience in commercial real estate assets include:

  • Resilience as a capital generator: Allowing buildings to sustain capital values and an uninterrupted flow of operating income following a catastrophic event.
  • Future-proofing portfolios: Global investors are increasing their focus on various opportunities and resilience strategies when deploying capital.
  • Partnering with property managers: Partnership seen as enhancing building-level resilience and increase long-term performance for the building owner.
  • Enhancing asset lifecycle practices: A growing understanding that specific practices can be adopted before, during and after damaging environmental events.
  • Strategies vary by property type: Retail, industrial and data centre properties face sector-specific resilience challenges and are customising strategies to align.

Interviews with top property professionals globally show that commercial property owners, in partnership with their property managers, are taking more deliberate steps to ensure safety and resiliency against rising sea levels, hurricanes, earthquakes and wildfires. Among the strategies being employed:

  • Increasing due diligence process on risk assessment prior to acquisitions.
  • Assessing the resilience of their entire portfolio rather than just for individual buildings.
  • Considering new reporting methods for resilience such as GRESB, an environmental, social and governance (ESG) benchmarking platform used by institutional investors.
  • Using available data to help make smart real estate decisions, including city- and federal-level hazard-assessment tools.
  • Forging earlier and stronger relationships with local elected officials and safety leaders, which helps to improve coordination when responding to environmental event.

The report also discusses the key role property managers play in understanding and assessing the vulnerability of a property to risks, based on location and region, and and in navigating a risk should one arise.

“Buildings with comprehensive resiliency plans more effectively overcome challenges when they inevitably arrive, which has a direct and positive impact on marketplace competitiveness and investment return,” said Craig Hudleston, Head of Property Management, Asia Pacific, CBRE.

“With investors taking increasing notice of environmental risks, it is important for property managers to be proactive in enhancing building-level resilience,” said CBRE’s Richard Barkham, Chief Economist, Global & Head of Americas Research. “A proactive approach to property management supported by a long-term view from the ownership is a winning combination for implementing a resilience strategy.”

In conclusion, the report stated that leading investors are taking resilience seriously and analysing potential risks more thoroughly. A proactive approach to property management will only succeed if property owners keep a long-term view.