NAREIM Dialogues: Evaluating physical climate risk

This article first appeared in the Fall 2024 edition of NAREIM Dialogues.

LaSalle’s Julie Manning writes about our latest report with ULI that provides an industry-wide framework for commercial real estate to address how physical climate risk data can be used in decision-making and supporting investment performance.

Using data to evaluate physical climate risk

Measuring physical climate risk is of growing importance to institutional real estate managers and their investors, at both the individual property and portfolio levels. Of the $850 billion of commercial real estate assets tracked by NPI, LaSalle estimates $285 billion, or 34%, is situated in high and medium-high climate risk zones in the US.

Increasingly, being able to assess an asset’s risk exposure, and knowing how to price that risk into management strategies, are essential parts of operating a portfolio. While data is key to this assessment, understanding how to leverage the right data is even more important. With so much climate risk data available in the market, how can organizations manage and find data that gives them manageable, impactful and usable insights? And more importantly, what should managers do with these insights?