From extreme heat and flooding to water stress and subsidence, climate risk is changing the way UK real estate needs to be managed. We explore the risks facing owners and occupiers – and the steps that can help build resilience. 

When we talk about climate risk in the UK, the conversation often starts and ends with fire and flood - but that only tells part of the story. For the real estate sector, the risk isn't just about the big event; it is also about a structural shift in conditions in which our buildings operate. 

The Full Spectrum of Risk

To effectively protect assets and people, we must recognise that climate risk is multifaceted. It isn't just about a river bursting its banks (fluvial flooding); it is also about:

• Pluvial flooding: Intense cloudbursts that overwhelm urban drainage, sending surface water pouring into ground floors and basements.
• Extreme heat: Heatwaves that are shifting from once-in-a-generation to more-than-once-a-year, threatening the viability of HVAC systems.
• Water stress: Chronic shortages that lead to supply pressure drops and significant cost inflation.
• Subsidence: High-plasticity clay soils shrinking during summer droughts, leading to structural movement and costly dilapidations.
• Storm damage: Increased frequency of severe wind gusts causing roof and cladding displacement.
• Wildfire and smoke: Particularly for assets on the wildland-urban interface, where smoke ingress can force building evacuations even if the fire is miles away.

Who is at Risk?

Climate risk is not just an environmental issue; it is also a business continuity and financial issue.

For Occupiers: 

The concerns are immediate and operational. Health and safety are paramount during extreme heat or smoke events. Beyond that, business continuity is at stake; if an office becomes unusable due to HVAC failure or a basement flood, or even just during periods of extreme heat, productivity can fall and the financial costs of downtime can be significant.

For Landlords: 

The primary concern is the long-term viability of the asset. A building that is too hot to work in or prone to recurrent flooding can become increasingly difficult to market. Landlords must focus on keeping the asset lettable, not just for the current tenant, but for future occupiers who will have increasingly stringent ESG and safety requirements.

The Questions we Can’t Afford to Ignore

As these risks intensify, the legal and financial frameworks of the past may need to evolve. Most commercial leases were not designed for a 2°C warming scenario. We need to start asking the hard questions now:

• Who pays? If a serious climate event occurs, who is responsible for the remedial costs?
• Who adapts? Who bears the cost of installing flood barriers or upgrading HVAC systems to handle 43°C+ temperatures?
• What about the contract? Does force majeure apply to a recurrent extreme heatwave?
• Who insures? As insurance premiums rise and some risks become uninsurable, who carries the ultimate liability?

Moving From Risk to Resilience: How to Adapt

We recommend a tiered approach to adaptation:

1. Immediate Physical Protections

• Flood defence: Relocating IT servers and archives out of basements and deploying temporary flood barriers at street-level demises.
• Air quality: Installing HEPA/MERV-13 filters and smoke isolation dampers to prevent toxic smoke ingress.
• Thermal control: Applying solar window films and shading to reduce solar gain.

2. Strategic Infrastructure Upgrades

• HVAC audits: Ensuring all cooling systems can operate at high ambient temperatures (>43°C) to avoid total workplace closures.
• Water efficiency: Fitting low-flow aerators and exploring rainwater harvesting to mitigate water stress.

3. Legal and Contractual Safeguards

• Schedules of condition: Executing detailed baselines on high-subsidence leases to manage dilapidation liabilities.
• Lease negotiation: Securing rent and service charge suspensions if premises become uninhabitable due to climate events.

The goal is simple: to understand the risks and prepare for them. By integrating climate risk into portfolio management and lease negotiations today, we can help avoid the expensive, short-term crises of tomorrow.

If you would like to discuss how climate risk could affect your assets or portfolio, please get in touch with our specialist team.