AEW's European Research & Strategy team present their latest report focused on how physical climate hazards impact European real estate returns:
- This research report is our seventh on climate-related risks, with this edition focusing on a more complete quantification of the impact of physical climate hazards on projected European real estate market-level returns.
- Even if this summer’s record number of wildfires and droughts across Europe is not yet reflected in the latest available data, annual Earth System Science Data (ESSD) confirms the long-term trend that global surface temperatures have increased by 1.39°C relative to pre-industrial levels. Additionally, sea levels have risen by 23cm over 1901–2025.
- Climate change, through wildfires, droughts, floods, and rising temperatures, reduces economic growth. It also increases inflationary pressures, via higher energy costs, for example, possibly triggering higher interest rates. Moreover, damage to river shipping, agriculture, tourism, energy and health systems reduces output and productivity.
- Our data partners’ latest analyses allow for a more precise estimate of climate-related physical hazard impacts, considering both direct impacts on landlords and indirect impacts on tenants. Most can do this across several accepted future climate scenarios, with some also able to reflect current and future flood defenses.
- As in prior reports, we apply our relative value approach to a market-representative portfolio of 964 buildings, assuming a 20-year holding period (2026–45) and a single climate scenario, SSP2. Using four data partners allows us to compare results. We compute aggregate estimates of the climate risk premium by geography and property type.
GLOBAL SURFACE TEMPERATURE (DEGREES IN CELSIUS CHANGE FROM THE 1850-1900 REFERENCE PERIOD, LHS) AND SEA LEVEL RISE (CENTIMETERS FROM 1901, RHS)
Please click on the links above to access the full report.
For more information, please contact:
HANS VRENSEN CFA, CRE
Managing Director, Head of Research & Strategy Europe
hans.vrensen@eu.aew.com
This material is intended for information purposes only and does not constitute investment advice or a recommendation. The information and opinions contained in the material have been compiled or arrived at based upon information obtained from sources believed to be reliable, but we do not guarantee its accuracy, completeness or fairness. Opinions expressed reflect prevailing market conditions and are subject to change. Neither this material, nor any of its contents, may be used for any purpose without the consent and knowledge of AEW. There is no assurance that any prediction, projection or forecast will be realized.
