Research takeaways and implications for commercial real estate
Following the conclusion of the Climate Action: Sustainability Innovation Forum in Glasgow yesterday our Head of Research & Economics Dr Walter Boettcher sums up his takeaways from the event and the whole COP26 summit.
The new decarbonisation economy: You may choose to continue questioning the science behind global climate change. You may also choose to question whether the sustainable emissions targets are robust enough, and whether the metrics that support them are reliable. However, from a business and investment point of view, these metrics may matter far less that the critical mass of support for ESG reforms that is now clearly evident. This support is evident across governments and businesses large and small, and by a variety of groups seeking to attach themselves to the climate agenda to further their own related or unrelated causes. The critical mass looks sufficient to have formed a solid foundation for a new decarbonisation economy. This was clear to me from my experience at COP26.
Accommodating existing behavioural patterns: This new decarbonisation economy as it was presented at the Sustainability Innovation Forum, is based implicitly on the idea that existing behavioural patterns are unlikely to change radically in the short and medium-terms and therefore must be accommodated. Road transport growth will continue, cars (increasingly electric) will remain a key means of transport for large parts of the population, and HGVs will continue to be the primary means of conveying all the essential and non-essential goods that are relied on, certainly across the western advanced economies. Simply put, consumerism, while no longer in its infancy, may have merely entered a mid-life crisis. Considerable life is left in this behavioural model, that provides a key foundation for capitalism, and the vested political organisation that supports it. Nothing short of global social upheaval and revolution is likely to change this in the short-term. Barring new and unexpected extreme environmental events, behavioural change will be inter-generational.
What this means for commercial real estate: The new decarbonisation economy is already providing considerable work for landlords playing “catch-up” with existing ESG legislation compliance, as well as preparing for anticipated new regulations that will arise in order for the UK government to reach its international carbon emission targets. Increasingly, they will require sophisticated advice from real estate advisors. Likewise, investors will need advice in evaluating the sustainability of assets offered to the market, especially with respect to anticipated capital expenditure requirements over their anticipated hold periods. Sustainable investment will increasingly require sustained investment! Regulation will continue to present challenges, as will evolution of the ways that tenants seek to use space.
About the author:
Dr Walter Boettcher is our Head of Research & Economics with more than 20 years UK and European experience in the commercial real estate sector. He regularly participates in industry panel discussions, engaging with our wide range of clients, as well as providing commentary to the media.
To contact Walter, email Walter.Boettcher@colliers.com