It’s no secret that many industries, including commercial real estate, are working towards strategies to reduce carbon and greenhouse gas emissions in an effort to mitigate climate change-related hazards.
According to JLL, regulatory bodies are also getting into the act, but in different ways. In a recently released report, “City Policy is Driving Building Transformation,” JLL author Paulina Torres noted that national-level efforts include taxation, disclosure, and subsidies.
However, at the local level, “city governments are targeting the most direct source of urban emissions: buildings,which account for about60% of total citywide emissions,compared to 42% globally,” she wrote.
The JLL report analyzed 31 cities through its “City Climate and Resilience Policy Tracker” and determined the following:
Emissions performance is driving policy
Torres stated that cities are placing the built environment at the center of their emission-reduction strategies. “One in four dollars invested globally has flowed to markets whose net-zero targets come before the Paris-aligned 2050 goal, with several aiming for 2030,” the report said. “This overlap underscores how deeply investors are exposed to cities pursuing net-zero pathways.”
Electrification and renewable generation requirements
Fossil-fuel phaseouts and all-electric building codes “are proliferating across major markets,” according to Torres. She also acknowledged that electrification is only as good as the grid supporting it. “These mandates are most impactful in cities with clean electricity grids—markets like those in the Nordics, France and Brazil, which operate on 90%+ clean energy, enabling immediate emissions reductions through building electrification,” she pointed out in the report.
An essential policy differentiator
The report said that CRE is responding to climate change initiatives. By the same token, “resilient buildings require resilient cities—creating an interdependent challenge that demands coordinated policy responses,” Torres wrote.
While the adaptation policy is lagging, the market is starting to take action. “As (insurance) premiums rise and access to capital tightens in high-risk zones, cities that embed resilience into regulation will be better positioned to protect both their infrastructure and their investment attractiveness,” the report pointed out.
Why it matters
Torres explained that local policy is “the most significant regulatory force” when it comes to commercial real estate operational costs and investments. As a result, owners, operators and developers should pay attention.
“As regulation gains enforceability and scope, real estate leaders must anticipate these shifts to safeguard asset value and management transaction risk,” she added.
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