It has been hotly debated for years, but the evidence shows that climate change is real. 2022 saw record-breaking temperatures with multiple extreme heat warnings and flash foods across the UK.

So what does this mean for property investors? 

There are different types of climate risks that affect property in different ways. The risks fall broadly into two categories:

• Physical risks. These are environmental issues that could affect the value of the property being acquired. For example, the property may be at an enhanced risk of flooding due to rising sea levels and increased rainfall or subsidence due to periods of extreme heat.

• Transition risks. This covers the impact of policy or legislation that sees a move away from high carbon, energy-intensive activity to Net Zero emissions. This includes, for example, changes to minimum energy performance ratings (covered by the recent Minimum Energy Efficiency Standards (MEES) regulations) and retrofitting requirements to meet new standards. 

There are several ways that we can help with this. We can interpret specialist property searches that look at the risks associated with climate change. The searches may flag specific risks that will enable you to, for example;

• Consider the insurance on offer for the property to assess any implications on increased premiums if there is an increased flood risk, or risk of coastal erosion;
• Investigate the various forms of flood resistance and resilience measures that may help protect your property in the event of a flood; and 
• Identify specific ground instability issues to discuss with your surveyor and how those ground conditions may become more extreme with climate change (due to more extreme wet and dry periods).

We can also discuss legislation with you so that you and your team of professional advisors can assess the financial impact that this may have. For example, non-domestic let buildings are now required to have a minimum energy performance rating of C by 2027 and B by 2030, which could have a potential cost implication running into hundreds of thousands of pounds. 

In summary, climate change is no longer something that we can ignore. When looking at a property purchase, you will not only need to assess the risks associated with a warmer, wetter climate but comply with your ongoing regulatory obligations as well, and this is where specialist advice is vital.

If you are considering acquiring commercial property and would like further information on how Higgs can help you, please get in touch with Emma Chater Senior Associate, emma.chater@higgsllp.co.uk, 01384 327 184.