September 4, 2020

It’s a Hot Mess!

A Correlation between Extreme Heat and Real Estate

“Somebody call 911! Shawty fire burning on the dance floor” as Sean Kingston would put it in his 2009 massive dance hit.

 Fast-forward to 2020, the song could play as a good metaphor to the extreme heat that the world is experiencing these days. Indeed, it creeps in like wildfire!

Soaring temperatures and dangerous heat waves are the uncomfortable reality in communities across the United States. Extreme heat risks are not limited to historically hot environments or summer months; heat is the most widespread and deadly weather-related hazard in the United States.

With the projected impacts of climate change and continued urban development, many communities are likely to experience higher-temperature days; longer, more frequent heat waves; and intensified impacts in cities where “urban heat islands” (UHIs) form because of the heat-absorbing properties of urban surfaces. Urban areas are the most at-risk locations from extreme heat in the United States. This heat has the potential for devastating public health consequences—as seen in the Chicago Heat Wave of 1995, the European heat wave of 2003, and more recently, the near global summer heat wave of 2018.

Real Estate IQ, the number one brand of choice for deal finding, takes a closer look at the relationship of extreme heat and real estate investment. Join us as we scorch the degree of truth and create sustainable plans to help the real estate industry cope up with this natural phenomenon.

Extreme Heat as a Natural Phenomenon

Extreme heat is a pressing public health risk, particularly for low-income and elderly communities. Extreme heat compromises human cardiovascular and respiratory systems and causes the greatest damage in populations with other vulnerabilities, such as preexisting health conditions or lack of available coping strategies. Cool design strategies, combined with public health and effective emergency responses, can offset heat-related mortality to a significant degree.

Broadly, developments can prevent the absorption of heat with light-colored surfaces and materials, provide direct cooling with increased shade from built and natural shade canopies, and better cope with extremes through “heat-aware” building envelopes and heating, ventilation, and air conditioning (HVAC) choices that stabilize indoor temperatures even during power outages. Although managing extreme heat has no one-size-fits-all approach, particularly given different humidity levels and other local conditions, a suite of potential options is available.

Moreover, extreme heat worsens wildfires, drought, and air pollution and decreases electrical grid stability. Heat also presents tremendous public health risk: more than 65,000 people in the United States visit emergency rooms each summer for acute heat illness. If greenhouse gas emissions continue, the United States is expected to have twice the number of hot and humid days that feel like 100° F or higher by midcentury.

Extreme Heat to Real Estate

Both climate change and urban development are leading to increased extreme heat, which includes higher temperature days as well as longer and more frequent heat waves. Without intervention, the current and potential future impacts of extremely high temperatures—on real estate developments, infrastructure, and the economy—could be substantial. Research links extreme heat to as much as a 4 percent decrease in U.S. GDP for midsized cities through reduced growth rates and increased expenses. For buildings, high temperatures in urban areas increase building cooling load by 13 percent.

Extreme heat also has the potential for long-term impacts on local economies and consumer market preferences. In response, U.S. real estate developers, designers, and policymakers increasingly acknowledge the consequences of extreme heat and are seeking solutions to make buildings, neighborhoods, parks, and outdoor spaces more adaptable to environmental conditions and comfortable for occupants. Policymakers are considering how to address extreme heat in land use and building regulations as well as through social services and emergency preparedness. Urban greening programs and community resources to protect the most affected demographics are well-established approaches.

Implications of this phenomenon relate to the durability of building materials, energy demand and consumption, outdoor space design, consumer location preferences and amenity expectations, regulation and taxation, and practitioners’ insurance costs and professional liability risks. Many of these implications could ultimately impact real estate development projects’ net present value.

 Leading developers and designers are focused on creating ways to make buildings simultaneously more adaptable to external high temperatures and more comfortable for occupants. Thermal comfort design approaches include increasing shade through built or natural canopies; choosing reflective materials; integrating vegetation cover onto buildings; implementing energy efficiency strategies; and using passive cooling, wind channeling, and sometimes air conditioning. Some industry leaders are designing for heat projections for the 50-year lifetime of a building, taking into account projected temperature increases caused by climate change and urbanization.

New programs and technologies are seeking to better understand and apply the nuances of urban heat dynamics to planning policies that can improve climate resilience through extreme heat mitigation and adaptation. The built environment is ultimately both a contributor to and a solution for extreme heat, especially in cities, and presents numerous opportunities for mitigation and adaptation at the building and neighborhood scales. Although designing for extreme heat is an emerging issue that is not yet mainstream in many U.S. markets, it is likely to become more prevalent as extreme heat increases and is acknowledged by both consumers and local regulators and as economic, infrastructural, and public health impacts make the risks of extreme heat more visible.

Extreme Heat and the United States

More cities in the United States are or will be at risk of extreme heat because of climate change and increased urban development. High temperatures are already influential factors in real estate design, construction, and maintenance in the Southeast, Southwest, California, and increasingly, in the Northeast; moreover, the scientific consensus is that temperatures are continuing to increase in these locations. Rising temperatures, heat waves, and urban heat islands are not limited to warm environments. The relative change in temperature causes more damage—to people, infrastructure, and landscapes—in cooler places and where fewer heat-mitigation and adaptation strategies are in place.

Heat-related land use policies often support other city goals related to greenhouse gas (GHG) emissions reduction, stormwater management, public health improvement, decreased social inequity, and effective emergency response. Heat-related policies involve building safety and efficiency standards, urban greening, public space design, and provision of social services. These policies have the potential to significantly reduce urban heat island effects, thereby decreasing temperatures, improving quality of life, and preventing infrastructure damage in metropolitan areas. Investments in addressing extreme heat also support public health by protecting communities who are most vulnerable, including the elderly, the young, and low-income households.

Some interventions addressing extreme heat can be counterproductive to long-term “heat resilience.” In many markets, a key extreme heat response may be more widespread air conditioning, which can be costly for developers and consumers. Air conditioners give off heat and may increase local temperatures and, through the emission of greenhouse gases, perpetuate climate change.

 Over the long term, extreme heat could impact consumer preferences as well as economic opportunities in various markets. Research suggests that extreme heat is likely to impact U.S. gross domestic product (GDP). There is considerable speculation among investors, developers, and public officials about whether, how, and when extreme heat–related risks could influence market dynamics either directly (i.e., decrease in investment capital or reduced asset values) or through secondary channels such as increased wildfire and drought risk. Extreme heat will affect tenant and consumer preferences: Changing temperatures mean changing thermal and energy needs, affecting building design or leading to costly retrofits. For example, air-conditioning demand has become a factor in Seattle’s competitive rental market. Before the 2010s, 6 percent of Seattle rentals had central AC; responding to rising temperatures, record apartment construction, and demand, that percentage has climbed to over 25 percent.

The Heat is On

The built environment offers numerous solutions to the emerging problem. Unlike in the fashion industry where we usually see unisexual clothing or  “one size fits all”, there is no generic approach to managing extreme heat, but numerous available and specific building- and district-scale solutions can reduce outdoor and stabilize indoor temperatures, and lower operating costs in an inhospitable climate. For example, developments can prevent the absorption of heat with light-colored materials, provide direct cooling with shade from built and natural canopies, and better cope with extremes through “heat-aware” building envelopes and HVAC choices.

Many studies explore how extreme heat is emerging as a growing risk factor and planning consideration across the United States and why this trend is likely to continue. There are also reports that explore how the land use, design, and real estate sectors are responding with design approaches, technologies, and new policies to mitigate the infrastructure impacts of extreme heat and to protect human health.

Now is not the time for prevention, but the time for cure is still relevant. We have contributed in creating a worldwide phenomenon by keeping our wrongdoings, malpractices and negligence. Today, we can only try to start facing the consequences and explore possible options along the way in order to downgrade the negative effects of extreme heat. We added up to the dilemma, now let us create better solutions in hopes of keeping this world still a better place to live in.

Source: “SCORCHED, Extreme Heat and Real Estate”, a research project of Urban Land Institute in cooperation with The JPB Foundation

Recommended bibliographic listing: Burgess, Katharine, and Elizabeth Foster. Scorched: Extreme Heat and Real Estate. Washington, DC: Urban Land Institute, 2019

The blog articles are intended for educational and informational purposes only. Nothing in the content is intended as legal or financial advice.