Rental yields, capital appreciation and location are a few of the factors that usually drive real estate investment decisions. However, developer Lendlease is seeing more and more investors concerned about the impact climate change may have on a property.
“In our conversations with investors over the years, it is very clear more are not just aware of the impact of climate change but also asking what developers are doing to adapt to it. The focus is now about resilience, both in how the asset is equipped to deal with the physical aspects of a changing climate but also how the asset can adapt to corresponding changes in the way society will live, work and play,” Eric Chan, Head of Practices, Asia and Project Director of TRX Residences, states. “We believe that there has to be a combination of the two elements of built environment and its community to create good levels of resilience.”
Failing to understand the impact climate change is already having on real estate investment will end up costing investors in the long run. That means it is increasingly important to examine what a developer is doing to ensure their projects have the resiliency necessary to achieve strong returns and capital appreciation both today and well into the future.
“That is precisely why they need to pay heed to a development’s sustainability credentials because their goal is to secure good returns on their investments over the long run, up to decades. They need to know the buildings they invested in will stand the test of time and are designed to be adaptable, resilient and sustainable,” Chan points out.
An example of this can be found at TRX Residences, the residential component of Lendlease’s The Exchange TRX in Kuala Lumpur. The homebuilder has incorporated climate resilient design features that take into account physical risks from climate change events, such as heat waves, wildfire and flooding, that are immediate and severe. Additionally, chronic challenges like water scarcity, temperature increase and rising sea levels that will affect developments incrementally over a longer time period have also been addressed.
“At TRX Residences, we pay attention to ensure that the sustainability initiatives directly and actively benefit our residents. For example, incorporating a mechanical ventilation system throughout each residential unit ensures good circulation and fresher air thus reducing the risk of inter-unit contamination. Besides that, optimal design, right materials and low-energy appliances also contribute to lower utility costs,” Chan details.
However, climate change is not bound by borders. For a developer like Lendlease that is active in multiple countries, the firm must not only understand how its impact varies from location to location, but they also must consider local regulations.
The homebuilder’s One Sydney Harbour development is an example of that approach. Located in Barangaroo, Australia’s first certified carbon neutral precinct, the project features a number of innovations tailored to its surroundings.
“From construction to ongoing cooling of buildings at One Sydney Harbour, we are ensuring we are as green as we can be, right down to removing heat from the water used for air conditioning before we return it to the harbor. Going beyond requiring water efficient appliances in every building, we also created a lot of water catchment areas to capture rainwater, and mine the adjacent public sewer for additional recycled water,” Chan says. “More than 80 percent of the operational waste from residential and commercial buildings are diverted from the landfill as well, among many other sustainability initiatives beyond planting lots of greenery.”
Sydney and Kuala Lumpur are two different cities that are being impacted by climate change in unique ways. The one constant is an increased awareness among consumers of the issues it causes. Lendlease notes this is already changing real estate investment preferences globally.
“Thanks to climate change and growing scrutiny by consumers, more and more investors are valuing not just sustainable developments but ones that can respond to the needs of the community for the longer term and resilient to further climate change impact,” Chan states. “Builders are aware they need to start looking beyond the dollars and cents, because the value of their development is no longer just that.”
Making sure sustainability maintains livability
While climate change is affecting real estate investment in new and unforeseen ways, it’s vital for developers not to lose sight of the fact people must want to live in these places. Resilience is one aspect of the residential experience. Livability is another important element that needs to be factored into the equation.
“Sustainability is not just about going green. Especially for homes, it should be about placemaking–to enliven the spaces and communities around the home. This is a collaborative process because every community has its own nuance and quirks, and the development has to mesh seamlessly with the location it sits within to thrive and be a place you want to live in,” Chan explains.
He continues, “And it goes without saying that homes should be well connected. There should be provisions for alternate commuting modes to and fro the home – not just public transport and roads but end-of-trip facilities if you should choose healthier options like biking or running.”
For homes and buildings to be sound, long-term investments, they must be able to last for decades. However, climate change poses a real and significant threat to that. For Lendlease, that requires the incorporation of meaningful greening that actually creates places capable of responding to the physical risks of climate change proactively.
“What buyers appreciate most about our developments is that we go beyond just going green. Sustainability also means longevity–where the project’s value keeps appreciating well into the future. To achieve this, we engage with experienced property managers and incorporate lessons learned from different parts of the world to ensure a high level of building management efficiency even years after handover,” Chan concludes.