MIT Center for Real Estate advances climate and sustainable real estate research agenda

Projects, publications, and academia-industry networks produce pathways for the real estate industry to address the climate crisis.

Real estate investors are increasingly putting sustainability at the center of their decision-making processes, given the close association between climate risk and real estate assets, both of which are location-based.

This growing emphasis comes at a time when the real estate industry is one of the biggest contributors to global warming; its embodied and operational carbon accounts for more than one-third of total carbon emissions. More stringent building decarbonization regulations are putting pressure on real estate owners and investors, who must invest heavily to retrofit their buildings or pay “carbon penalties” and see their assets lose value.

The impacts of acute and chronic climate risks — flooding, hurricanes, wildfires, droughts, sea-level rise, and extreme weather — are becoming more salient. Action across all areas of the real estate sector will be required to limit the social and economic risks arising from the climate crisis. But what business and policy levers are most effective at guiding the industry toward a more sustainable future?

The MIT Center for Real Estate (MIT/CRE) believes that the real estate industry can be a catalyst for the rapid mobilization of a global transition to a greener society. Since its inception in 1983, MIT/CRE has focused on the physical aspect of real estate, especially the development industry, and how the built environment gets produced and changed.

“The real estate industry is now at the critical moment to address the climate crisis. That is why our center initiated this major research agenda on climate and real estate two years ago,” says William Wheaton, a former director of MIT/CRE and professor emeritus in MIT’s Department of Economics, who is leading a research project on the impact of flood risks in real estate markets.

Producing high-quality research to support climate actions

The work of scientists and practitioners responding to the climate crisis is often bifurcated into mitigation or adaptation responses. Mitigation seeks to reduce the severity of the climate crisis by addressing emissions, while adaptation efforts seek to anticipate the most severe effects of the crisis and minimize potential risks to people and the built environment.

The fundamental nature of the real estate industry — location-based and capital-intensive — enables potential meaningful action for both mitigation and adaptation interventions. Exploring both avenues, MIT/CRE faculty and researchers have published academic papers exploring how chronic climate events such as extreme temperatures lower people’s expressed happiness and also disrupt habits of daily life; and how acute climate events such as hurricanes damage the built environment and decrease the financial value of real estate.

“This ongoing research production centers on industry’s imperative to take action quickly, the real losses resulting from inaction, and the potential social and business value creation for early adopters of more sustainable practices,” says Siqi Zheng, a co-author of those papers, who is the MIT/CRE faculty director and the STL Champion Professor of Urban and Real Estate Sustainability.

Building a global community of academics and industry leaders

In addition to sponsoring research and related courses, MIT/CRE has created a global network of researchers and industry leaders, centered around sharing ideas and experience to quickly scale more sustainable practices, such as building decarbonization and circular economy in real estate, as well as climate risk modeling and pricing. Collaborating with industry leaders from the investment and real estate sector, such as EY, Veris Residential, Moody’s Analytics, Colliers, Finvest, KPF, Taurus Investment Holdings, Climate Alpha, and CRE alumnus Paul Clayton SM '02, MIT/CRE blends real-world experiences and questions with applied data and projects to create a “living lab” for MIT/CRE researchers to conduct climate research.

At an inaugural symposium on climate and real estate held at MIT in December 2022, more than a dozen scholars presented papers on the intersection of real estate and sustainability, which will form the basis of a special issue on climate change and real estate in the Journal of Regional Science. A “fireside chat” connected scholars and industry leaders in practical conversations about how to use research to aid practitioners.

“Dissemination of research is critical to the success of our efforts to address climate change in the real estate industry,” says David Geltner, post-tenure professor of real estate finance and former director of MIT/CRE, whose research group is working on climate risks and commercial real estate. “If we produce excellent research but it is cloistered in academic journals, it does no one any good. Similarly, if we do not work with collaborators to focus our research, we run the risk of investigating levers to reduce emissions that are of no use to practitioners.”

Juan Palacios, coordinator of MIT/CRE’s climate and real estate research team, emphasizes that industry collaboration creates a two-way sharing of information that refines how research is being conducted at the center and ensures that it has positive impact.

“More and more real estate investors and market players are putting sustainability at the center of their investment approach," says Zheng. “A broad range of stakeholders (investors, regulators, insurers, and the public) have started to understand that long-term profitability cannot be achieved without embracing multiple dimensions of sustainability such as climate, wealth inequality, public health, and social welfare. Because of its unique relationship with industry collaborators and its place in the MIT innovation ecosystem, MIT/CRE has a responsibility and the opportunity to champion multiple pathways toward greater sustainability in the real estate industry.”

Fuente: MIT News