Climate Risk: Logistics & Industrial Global Outlook

RISK CLIMATE LOGISTICS& INDUSTRIAL

GLOBALOUTLOOK

REFINING LOCATION STRATEGY

Case Study – Annual Portfolio Climate Risk Assessment

A major Australian financial services firm engaged Cushman & Wakefield to assess their entire portfolio for climate risks, and then compare it against internal criticality standards. This has been expanded into a rolling three-year program focused on the higher-risk sites and any new sites that have been added. Now, the client has an annual process tied to lease expiry and forecast demand to review and update their climate risk data, and build that into their stay/go analysis. Where certain risks are identified, these can be negotiated with landlords, encouraging them to invest in both the building and the relationship. In other circumstances, where the risk exposure does not match the long-term appetite of the occupier, these sites are shortlisted for lease termination. This process has been running for over two years now and has resulted in significantly improved risk management across the portfolio, and a reduction in overall physical exposure to risk.

Climate risk is nowa critical input into location strategy, including decisions onwhen to retain, invest in, or exit certain sites. How can this be applied?

Climate risks can be analyzed quickly and remotely to identify any significant issues. This can be followed up with more detailed investigation where certain risks are identified. This is cost-effective and tech-enabled—there is no reason not to act. During due diligence for a sale or lease

Portfolio optimization

Long-term planning

Risks change over time, as do your needs. When you are considering lease expiry timelines or target sale dates, that’s a good time to refresh your thinking around climate risks. You may be able to extract more value from the negotiation if you have the right information on hand, or it might be the final element that cements your decision to move on.

Headquarter buildings, data centers, cold storage, or manufacturing sites are not easy or fast to relocate. These scenarios require long range planning to inform decision-making. Ideally, such critical sites should have 5-, 10-, or even 20 year planning horizons— not only with regard to climate risk but also other key drivers, including the overall location, building quality, and access to labor and markets.

For more information on strengthening your location strategy, download Waypoint – our global analysis of L&I input costs and market outlook.

CLIMATE RISK: LOGISTICS & INDUSTRIAL GLOBAL OUTLOOK 23

CUSHMAN & WAKEFIELD