Journal of Property Investment & Finance

Publisher:: Emerald Group Publishing Limited
Publication date:: 2021-02-01

ISBN:: 1463-578X

Issue Number

No. 40-4, June 2022

Latest documents

Guest editorial: Sustainability and climate change; the challenge ahead. With dedication to Sarah Sayce
Guest editorial: Sustainability and climate change; the challenge ahead. With dedication to Sarah Sayce
Climate risks and their implications for commercial property valuations
Purpose: The authors outline a framework that captures the channels through which physical climate risks could affect cash flows and pricing of income-producing real estate. This facilitates detailed consideration of how the future performance of real estate investments could be affected by such risks. Design/methodology/approach: This is a literature-based investigation that draws on work commissioned by UNEP-FI (Clayton et al., 2021a, b). It extends this work to consider in more detail the channels through which climate risks may impact property performance and the implications for the valuation community. Findings: Recent empirical studies have identified more instances where pricing is reflecting both current and anticipated climate risks. Market valuations cannot properly incorporate climate risk without clear evidence that it is priced by market participants, but valuers can advise clients on the potential for future impacts. Research limitations/implications: While inferences can be made from studies of residential real estate, more research on commercial real estate pricing and climate risk is required to assist valuers and their clients, as well as other stakeholders in the real estate market. Practical implications: Differences between a Market Value and an Investment Value context are considered, and how valuers could and should account for climate risk in each setting is discussed with reference to existing professional standards and guidance. Originality/value: The article synthesises a wide range of literature to produce a framework for the channels by which real estate values could be influenced by climate risk.
Climate risks and their implications for commercial property valuations
Purpose: The authors outline a framework that captures the channels through which physical climate risks could affect cash flows and pricing of income-producing real estate. This facilitates detailed consideration of how the future performance of real estate investments could be affected by such risks. Design/methodology/approach: This is a literature-based investigation that draws on work commissioned by UNEP-FI (Clayton et al., 2021a, b). It extends this work to consider in more detail the channels through which climate risks may impact property performance and the implications for the valuation community. Findings: Recent empirical studies have identified more instances where pricing is reflecting both current and anticipated climate risks. Market valuations cannot properly incorporate climate risk without clear evidence that it is priced by market participants, but valuers can advise clients on the potential for future impacts. Research limitations/implications: While inferences can be made from studies of residential real estate, more research on commercial real estate pricing and climate risk is required to assist valuers and their clients, as well as other stakeholders in the real estate market. Practical implications: Differences between a Market Value and an Investment Value context are considered, and how valuers could and should account for climate risk in each setting is discussed with reference to existing professional standards and guidance. Originality/value: The article synthesises a wide range of literature to produce a framework for the channels by which real estate values could be influenced by climate risk.
Editorial: 40 years of the Journal of Property Investment & Finance
Editorial: 40 years of the Journal of Property Investment & Finance
The increasing importance of environmental sustainability in global real estate investment markets
Purpose: Within the context of ESG (Environment, Social and Governance), environmental sustainability has taken on increased global importance in recent years. Similarly, real estate investment managers in developing their global real estate investment portfolios need a fuller understanding of the ESG and environmental sustainability dimensions of these global real estate markets for more informed real estate investment decisions. Using the JLL GRETI sustainability sub-index, this paper examines the environmental sustainability transparency status of 99 global real estate markets over 2016–2020 and explores various strategic issues regarding ESG and environmental sustainability; particularly the critical issues relating to climate risk mitigation, climate resilience and zero-carbon. The current status of environmental sustainability in these 99 real estate markets is assessed, with areas for “best practice” improvement identified to the benefit of real estate investment managers; particularly the improvements needed in ESG to support real estate investment in the emerging real estate markets. Design/methodology/approach: The JLL GRETI sustainability sub-index is analysed to examine strategic issues relating to environmental sustainability transparency. 99 real estate markets are assessed globally for a range of critical ESG issues over 2016–2020. Differences between the developed and emerging real estate markets are highlighted. Findings: Considerable variation was seen in the ESG and environmental sustainability practices, procedures and frameworks across these 99 real estate markets. This was particularly evident amongst the emerging real estate markets. Compared to the other five dimensions for real estate market transparency, environmental sustainability was seen to be well behind these other dimensions in most markets. Progress has been made in recent years, but it has been slow and steady rather than at a dynamic level. Clearly, more is needed globally to enhance the stature of environmental sustainability in the context of an increasing focus on ESG and specifically on climate risk mitigation, climate resilience and zero-carbon in real estate investment. Practical implications: With ESG and environmental sustainability taking on increased importance across the international real estate markets, it is important that real estate fund managers have a full understanding of the ESG and environmental sustainability status of these real estate markets where they may be considering real estate investment opportunities; this includes both the developed and emerging real estate markets. This is essential to ensure future capital raising for new funds, as well as supporting the global ESG agenda by the real estate investment community. Specific strategies are also identified for emerging real estate markets to improve their environmental sustainability practices and ESG status. Originality/value: This is the first paper to use the JLL GRETI sustainability sub-index to assess the environmental sustainability status of 99 real estate markets globally; providing strategic insights for real estate investment managers as they develop their global real estate portfolios and more fully embrace the challenges of ESG and environmental sustainability in the real estate space going forward. Specific strategies are clearly identified for all markets to improve their environmental sustainability ratings to the benefit of both global real estate investment and the broader communities.
The increasing importance of environmental sustainability in global real estate investment markets
Purpose: Within the context of ESG (Environment, Social and Governance), environmental sustainability has taken on increased global importance in recent years. Similarly, real estate investment managers in developing their global real estate investment portfolios need a fuller understanding of the ESG and environmental sustainability dimensions of these global real estate markets for more informed real estate investment decisions. Using the JLL GRETI sustainability sub-index, this paper examines the environmental sustainability transparency status of 99 global real estate markets over 2016–2020 and explores various strategic issues regarding ESG and environmental sustainability; particularly the critical issues relating to climate risk mitigation, climate resilience and zero-carbon. The current status of environmental sustainability in these 99 real estate markets is assessed, with areas for “best practice” improvement identified to the benefit of real estate investment managers; particularly the improvements needed in ESG to support real estate investment in the emerging real estate markets. Design/methodology/approach: The JLL GRETI sustainability sub-index is analysed to examine strategic issues relating to environmental sustainability transparency. 99 real estate markets are assessed globally for a range of critical ESG issues over 2016–2020. Differences between the developed and emerging real estate markets are highlighted. Findings: Considerable variation was seen in the ESG and environmental sustainability practices, procedures and frameworks across these 99 real estate markets. This was particularly evident amongst the emerging real estate markets. Compared to the other five dimensions for real estate market transparency, environmental sustainability was seen to be well behind these other dimensions in most markets. Progress has been made in recent years, but it has been slow and steady rather than at a dynamic level. Clearly, more is needed globally to enhance the stature of environmental sustainability in the context of an increasing focus on ESG and specifically on climate risk mitigation, climate resilience and zero-carbon in real estate investment. Practical implications: With ESG and environmental sustainability taking on increased importance across the international real estate markets, it is important that real estate fund managers have a full understanding of the ESG and environmental sustainability status of these real estate markets where they may be considering real estate investment opportunities; this includes both the developed and emerging real estate markets. This is essential to ensure future capital raising for new funds, as well as supporting the global ESG agenda by the real estate investment community. Specific strategies are also identified for emerging real estate markets to improve their environmental sustainability practices and ESG status. Originality/value: This is the first paper to use the JLL GRETI sustainability sub-index to assess the environmental sustainability status of 99 real estate markets globally; providing strategic insights for real estate investment managers as they develop their global real estate portfolios and more fully embrace the challenges of ESG and environmental sustainability in the real estate space going forward. Specific strategies are clearly identified for all markets to improve their environmental sustainability ratings to the benefit of both global real estate investment and the broader communities.
Cash flows or cap rates?
Cash flows or cap rates?