Georgetown’s Steers Center for Global Real Estate Convenes Experts to Simulate Climate Change Effects on D.C. Infrastructure
The Steers Center for Global Real Estate at Georgetown University’s McDonough School of Business convened leading environmental, financial, and governmental stakeholders to discuss the issue of flooding and rising sea levels as it pertains to the future of real estate infrastructure in the Washington, D.C., area.
The event featured a flash flood simulation targeting neighborhoods in the nation’s capital to help participants comprehend the real-life physical and social implications that climate disasters would have on various communities and demographics.
Participants in the simulation included academics, district and federal government employees, and private investors. They drew from their own experiences and professional expertise to roleplay a post-event damage assessment meeting where office properties and apartments in several D.C. neighborhoods were evaluated. The participants in the damage assessment meeting discussed how resources could be prioritized for recovery, each bringing their own ideas on how to best present solutions to climate change challenges in the region.
“The first takeaway the participants took from the simulation was that climate risk is growing and that one needs new tools to measure and model these risks. The old backward-looking systems simply aren’t a solution,” said Jeremy Healey, adjunct professor and ESG fellow at the Steers Center.
Office properties in the simulation included district-leased assets focused on vulnerable citizens and critical citywide services. Apartments and residential buildings in the simulation included a subsidized building for lower-income seniors and a building with one of the few grocery stores in the surrounding area.
The climate change summit produced key findings for the future of real estate infrastructure in the area, which will be detailed in a forthcoming whitepaper from the Steers Center.
According to Healey, one major takeaway from the simulation was how participants would effectively allocate resources to accommodate flooding and climate change-related challenges.
“During the simulation, the participants allocated resources not by the amount of economic damage, or to reflect prior efforts to harden the asset against damage, but from a combination of limited owner and operator resources and key social impact. That feels realistic, but poses a real challenge for private asset owners.”
“There are real opportunities to mitigate risks through public-private partnership, but it will take years of concerted efforts to make it happen,” he said.
The D.C. region remains vulnerable to tidal flooding due to its close proximity to the Potomac and Anacostia rivers. A 2014 study by Climate Central found that Washington, D.C., faces the possibility of record flooding by 2040 under a mid-range sea level rise scenario, which could affect around $4.6 billion worth of property and 1,400 people across 400 homes.
Healey believes that conversations, including those held at the Steers Center’s “Underwater Assets – D.C. Climate Change” event, will help stimulate more conversations surrounding the impact of the climate crises and will allow experts to find new solutions for these pressing issues that impact everyday life.
“2022 feels like an inflection point, whether it is Hurricane Ian, which may prove the most expansive windstorm in United States history, or the West Coast wildfires, which are creating major tension between insurers and state regulators, there is near-daily evidence of growing risk,” Healey said.
“We also see a growing move to address climate risk through regulated businesses, particularly insurers and lenders,” he added. “It is not a moment too soon to try to bring all of these major actors into conversation and try to create new solutions.”
Sarah Welton, BentallGreenOak’s sustainable investing director, believes it is important to facilitate ongoing conversations at the intersection of climate, sustainability, real estate, and investments.
“Ultimately, the economic viability of real estate is dependent, in part, on its sustainability performance – both environmentally and socially. To ignore environmental considerations exposes a real asset to physical and climate risk, with direct impacts on future occupancy and asset value,” Welton said. “Industry leaders must work collaboratively to address environmental challenges they may not have direct knowledge of, to avoid exposure to climate risks, and to capitalize on opportunities to improve the future resilience of their assets.”
Welton also added that she hopes climate change considerations in real estate grow from “nice to have” to “need to have.”
“Recent laws like the Clean Energy D.C. Omnibus Amendment, Local Law 97 in New York City, and Boston’s Building Emissions Reduction and Disclosure Ordinance have spurred important conversations around the country between the real estate industry and sustainability experts and have accelerated the pace of change. These conversations happening at the local level need to expand to other local jurisdictions and federal governments, and they need to make their way into the equity and debt capital markets’ models,” she said.
To learn more about the Steers Center and to join the conversation on climate change’s effects on real estate, visit globalrealestate.georgetown.edu or follow @georgetownsteerscenter on Instagram or Steers Center for Global Real Estate on Facebook.