Climate Risk: Logistics & Industrial Global Outlook

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Implications for the Economy & Property

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CLIMATE RISK LOGISTICS & INDUSTRIAL GLOBAL OUTLOOK

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THE HOTTEST TOPIC IN THE HOTTEST SECTOR

THE INDUSTRY’SMOST COMPREHENSIVE L&I CLIMATE RISKDATA SET The logistics and industrial (L&I) sector is one of the fastest growing sectors in commercial real estate. That’s why we have embarked on developing the world’s most comprehensive data set focused on L&I physical climate risk. Our data set quantifies and maps present and future risk exposure for over 7,300 buildings, 306 submarkets, and 120 cities around the world.

PHYSICAL CLIMATE RISK IMPACTS INVESTMENT DECISIONS

CLIMATE RISKANALYSIS IS COMPLEX – BUTWE MAKE IT PRACTICAL

Our data shows that over the past decade, industrial

The analysis of underlying climate-related risk is not straightforward and requires both macro and micro perspectives to fully appreciate the material risk and its financial impact. This is particularly critical when converting physical risks into financial metrics – the wrong analysis can cause confusion or lead to the wrong outcomes. Cushman & Wakefield’s data set allows for a detailed examination of these risks, providing valuable insights for occupiers and investors alike.

investment activity has surged by 43%. However, many of these transactions did not account for climate risk exposure, leaving value and opportunity on the table. As this topic matures, clients are incorporating climate risk into their decision-making process to quantify, price, and manage their exposure. This shift highlights the growing awareness and importance of climate-related factors in the decision-making process for both occupiers and investors.

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KEY TAKEAWAYS CONTENTS

IF YOUREADNOTHINGELSE…

SECTOR 1

CLIMATE RISK IN THE L&I

Climate risk analysis is critical to protect your investments

Climate risks are not theoretical. They are real, near-term challenges facing the whole industry. Understanding and mitigating these risks starts with a climate risk assessment.

RISK TYPES 2

UNDERSTANDINGDIFFERENT

MARKETS 3

DEEPERDIVE IN SELECT

Don’t assume you know the answer

Our analysis uncovered some well-known risks, such as flood or storm-prone areas, but also some surprising results now and into the future. Don’t assume you know the answer – make sure you do.

STRATEGICAPPROACHES 4

Managing risk creates value

Getting ahead now by understanding the risks is key to identifying ways to protect or create value. Ignoring a risk doesn’t make it go away.

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CLIMATE RISK IN THE L&I SECTOR

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UNIQUE CONSIDERATIONS FOR LOGISTICS & INDUSTRIAL

This report continues our analysis of eight key climate hazards 1 . However, it requires a different lens compared to offices and cities, due to the unique characteristics of L&I assets and locations.

L&I assets tend to be built on city fringes, with larger footprints, and closer to transportation infrastructure such as rail, roads, or ports. The interconnectedness of L&I with other transportation systems is critical — risk is not limited to just the building. See the comparison between the largest office (New York) and L&I (Chicago Metropolitan Area) markets in the U.S. Land and location:

New York OFFICE

Chicago Area L&I

Market size

417 msf

1,251 msf

Avg. building footprint Avg. building height

16,000 sf

105,000 sf

190ft

24ft

Long lease structures:

Buildings as batteries:

Diverse asset sub class:

Longer leases, and costly and complex fit-outs (such as automation, manufacturing, modern warehousing, or data centers) make L&I assets less resilient to disruption. An office can shut for a week when a risk occurs, with employees working remotely. That is usually not feasible in L&I assets, requiring greater focus on risk mitigation.

Large roofs and declining prices for battery technologies, make L&I assets attractive for distributed energy generation and storage. This adds resilience to the local utility grid, particularly in infill locations or urban areas, potentially underpinning or supplementing other forms of energy supply in a disaster.

L&I includes asset subclasses that may be impacted differently by climate risk. Cold storage and data centers will be particularly susceptible to increased heat stress. Ambient warehouses may be less well protected from flooding or storms.

WIND

FLOOD

PRECIPITATION

HAIL

As a result, managing risks will heavily depend on site-specific details, including asset subtypes.

HEAT

COLD

WILDFIRE

DROUGHT

Our underlying data and hazard scores were derived from Jupiter Intelligence’s Climate Score Global physical risk analysis software for each site. The hazard score is representative of the exposure risk for that location and does not take into consideration the specific building itself.

1 https://www.cushmanwakefield.com/en/insights/climate risk-global-cities-outlook

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These milestones present the largest opportunity tomanage risk and drive value WHENSHOULD I COMPLETEA CLIMATE RISKREVIEW?

Acquisition

• Design for future state, not minimums or historical requirements Planning / Design

• Invest and upgrade to minimise risk • Protect yourself and your tenants Asset Management

• Assume future buyers will conduct the same analysis • Proactively communicate risks and mitigation measures Divestment

• Understand what you are buying • Underwrite correctly • Know when to walk away

INVESTOR OCCUPIER

Milestone 1

Milestone 2

Milestone 3

Milestone4

• Short-list using climate risk intel • Understand the implications now and into the future • Negotiate with landlords on mitigation and adaptation strategies Site Selection

• Incorporate mitigation or adaptation measures into your design Planning / Design

• Plan for OpEx and CapEx changes • Update your business continuity plan with climate risk mitigation best practices Operational Management

• Actively manage your portfolio with an eye on future risks • Exit high risk locations PortfolioManagement

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UNDERSTANDING DIFFERENT RISK TYPES

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CATEGORISING LOGISTICS & INDUSTRIAL CLIMATE RISK To helpwith understanding the types of climate risk being faced, we have categorized them into four broad types. The two key parameters are the time scale over which they are expected to occur and the degree of spatial variability.

ACUTE (shorter-term)

CHRONIC (longer-term)

DROUGHT

FLOOD

HIGH

PRECIPITATION

HAIL

SPATIAL VARIABILITY

WIND

WILDFIRE

COLD

LOW

HEAT

INTERPRETINGTHE CHARTS

Highest building risk score in submarket

LOW CURRENT EXPOSURE WORSENS OVER TIME

HIGH CURRENT EXPOSURE WORSENS OVER TIME

Average submarket risk score

LOW CURRENT EXPOSURE IMPROVES OVER TIME

HIGH CURRENT EXPOSURE IMPROVES OVER TIME

EXTREME RISK.

Lowest building risk score in submarket

IMPROVING << CHANGE >> WORSENING

PRESENT DAY RISK

FUTURE CHANGE RISK

INDEX OF THE SPECIFIC RISK. 0 = NO RISK, 100 =

LOW

<< CURRENT EXPOSURE >>

HIGH

SUBMARKET 1

To show how these risks may apply, we have selected a particular location from our data. This does not indicate the market has particularly high or low risk. A different location has been selected for each risk.

Note: risks are not always directly comparable. For example, a score of 30 for one risk may have different implications compared to the same score for another risk. Generally, we consider risks to be more material as they approach 50, and certainly material between 50–100. While some scores indicate less material risk, there is not always a safe risk level—except at zero.

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HAZARDRISKSARE RISINGGLOBALLY PRESENT & FUTURE CHANGE “ALL HAZARD” RISKS

Taking a high-level view, it is evident that climate risks in aggregate are forecast to increase into the future. From a regional perspective, current risk exposures are highest in Asia Pacific and parts of the U.S., while they are lower across most, though not all, of Europe. Looking to future state, all sub-markets analysed are forecast to experience increased risks exposures – some off a high base and others off a much lower base. Of course, there is considerable nuance and granularity below these high-level trends. A market that already experiences significant heat events getting hotter may not be as impactful as a more temperate location having an increase in heat stress events. Similarly, an increase in flooding depths will have different implications depending upon current flooding levels and mitigation strategies in place. In recognition of this, in the following analysis we take a more granular approach to highlight the variation in exposure levels for some hazards within and between sub-markets. Ultimately this reinforces the need for an asset level understanding of key risks and potential management strategies.

IMPROVING << CHANGE >> WORSENING

LOW

<< CURRENT EXPOSURE >>

HIGH

EUROPE SUBMARKETS

U.S. SUBMARKETS

APAC SUBMARKETS

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ACUTE RISKWITHHIGH SPATIAL VARIABILITY FLOODING

Flooding, perhaps more than any other climate related hazard, requires granular analysis. In some cases, flooding can be widespread and extensive, though in others it can have very localized impacts. Average risk globally is usually relatively moderate, however, there is significant variation at the building level. Some locations have negligible risk of flooding, while others represent extremely high risk – i.e., approaching the maximum score of 100. To an extent, this is not surprising. Flood patterns reflect local topography, geography, infrastructure and any mitigation measures in place. As a result, there is the very real prospect that flooding can occur not only between higher and lower ground, but even between one side of the road and the other. Strategic Advice: • Flooding is a highly localised impact. It is important to understand the market characteristics and go deeper to look at your specific exposure. • Don’t rely on out-of-date flood maps, or only reference historical events. The future can be uncertain or represent changing risk exposure. • Understand what flood mitigation measures are in place. It is often more economically feasible to mitigate flood risk at the community level rather than the asset level.

HIGHEST BUILDING RISK SCORE IN SUBMARKET

AVERAGE SUBMARKET RISK SCORE

LOWEST BUILDING RISK SCORE IN SUBMARKET

CHICAGOMETROLPOLITANAREA

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CHRONICRISKWITH LOWSPATIAL VARIABILITY HEAT / COLD

Heat and cold impacts tend to be more uniform over wider areas, making temperature somewhat more predictable. This means there are notable, and obvious, differences between higher and lower-latitude locations as well as between different times of the year. The variations within the U.S. and Europe are much more significant. For example, southern markets in the U.S. (Dallas) are more heat exposed, while those in the west (Salt Lake City) are more cold-exposed. Others are exposed to both such as Nashville and Atlanta, as well as continental Europe. In contrast, the focus in Asia Pacific is much more skewed toward heat. More temperate locations need to plan for periods of both heat and cold, while others outside of this temperate band are more likely to experience one or the other. However, over a longer time period, for example through to 2050, these underlying risks are forecast to change. Heat hazards are forecast to increase, with the inverse therefore likely for cold-related hazards, though periods of extreme or damaging cold could still occur. Strategic Advice: • Resizing or rethinking HVAC strategies will be needed, particularly for cold storage or data centers. • In heat-exposed locations, rooftop insulation represents strong potential payback, particularly when considering avoided downtime or workforce impacts. • Colder locations may require operational changes to handle extreme weather, or capital changes to weatherize electrical or other infrastructure.

HEAT

IMPROVING << CHANGE >> WORSENING LOW

<< CURRENT EXPOSURE >>

HIGH

EUROPE SUBMARKETS

U.S. SUBMARKETS

APAC SUBMARKETS

COLD

IMPROVING << CHANGE >> WORSENING LOW

<< CURRENT EXPOSURE >>

HIGH

EUROPE SUBMARKETS

U.S. SUBMARKETS

APAC SUBMARKETS

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RECURRENT RISKWITH LOWER SPATIAL VARIABILITY PRECIPITATION

Precipitation patterns continue to change across the world. In some instances, this has resulted in record rainfalls, while others are encountering the opposite—and both present potential issues. In the past year, locations as diverse as Florida, Vienna, Toronto, and Sydney all broke various rainfall records. Current precipitation risk exposure is greatest in Asia’s monsoonal/wet-season markets including Seoul, Hong Kong, and Singapore, though to some extent buildings are already built to withstand these rainy periods. In the U.S, Texas is most exposed. In contrast, rainfall risks are generally low across most of the European markets. Parts of Italy and Spain are more exposed, though their risk is approximately half that of the most exposed markets in other regions. At a more granular level, intra-market variability is typically quite low, but there are a few notable exceptions. Parts of Atlanta and New Jersey have twice the risk exposure of other parts of the same market. Similar divergences occur within parts of France, Spain, and Italy. Strategic Advice: • Storm and weatherproofing sites—including considering hardstand areas, run off and nearby drainage can ensure your site continues to operate during rainy periods. • Given the large roof areas, rainwater harvesting may be feasibile, though sizing equipment correctly is critical. A large roof may be able to harvest far more water than you need.

HIGHEST BUILDING RISK SCORE IN SUBMARKET

AVERAGE SUBMARKET RISK SCORE

LOWEST BUILDING RISK SCORE IN SUBMARKET

100

FRANCENUTS2REGIONS

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RECURRENT RISKWITH LOWHIGHVARIABILITY WIND

Globally, wind risks for the most part are quite moderate, and intra-market variability is also quite low. However, there is significant variation between lower risk and higher risk locations. In Asia Pacific, risks are low in locations such as Singapore, Sydney, and Auckland but over four times greater in markets with known typhoon exposure such as Taipei and Hong Kong. Similarly in the U.S., “tornado alley”, encompassing a broad area including Texas, Oklahoma, and Kansas is at a significantly elevated risk compared to the rest of the country. Though it should be noted that even here, the risk is approximately half that of Asia’s most exposed markets. Strategic Advice: • Physical hardening measures may be required, such as removing large signage, strengthening roofs and doors. • Operational considerations are important too. What is safe to do before, during and after a severe wind event? HSE (Health, Safety & Environment) may be an even greater risk.

HIGHEST BUILDING RISK SCORE IN SUBMARKET

AVERAGE SUBMARKET RISK SCORE

LOWEST BUILDING RISK SCORE IN SUBMARKET

100

INDIANAPOLIS

NORTHERNNEWJERSEY

MIAMI

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DEEPER DIVE INTO SELECT MARKETS

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DEEPDIVE – SYDNEY

The Present: • Across Sydney, wind, heat, and cold risks are moderate, showing similar risk profiles across submarkets. • Flood risk is the most variable and also represents the highest risk in some locations. In some submarkets, average flood risk is close to zero, but the worst flood-exposed sites may be many times higher. • Precipitation risk is generally high, indicating a rainy current and future state for Sydney. The Future: • Heat risk increases significantly across all Sydney submarkets through 2050. Now is the time to begin considering measures to manage heat exposure, such as HVAC, insulation, and operational changes. • Precipitation risk increases across the board, but most significantly across Sydney’s Northwest. • Overall risks for Sydney increase, with increases in flood, rain, and heat risks in particular. Central West and Northwest experience the greatest increase in overall risks during this period.

HIGHEST BUILDING RISK SCORE IN SUBMARKET

AVERAGE SUBMARKET RISK SCORE

LOWEST BUILDING RISK SCORE IN SUBMARKET

100

West

North

South

North West

South West

Central West

FLOOD

WIND

HEAT

WILDFIRE

PRECIPITATION

COLD

ALL

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DEEPDIVE – SINGAPORE

The Present: • Singapore is well-known for its hot and wet tropical climate, and this is shown consistently across all sub-markets. By and large, these issues are well known, meaning most modern buildings are well equipped to handle the current risk profile, however a look towards the future (below) is important to consider. • Average flood risk across Singapore is relatively low, although there are pockets of significant flood risk, particularly in the Central and North East Region. Seal-level rise is also a factor to be mindful of, given Singapore is a relatively low lying island State. The Future: • Flood risk is projected to worsen in the North East of Singapore, as well as wind risks across all sub-markets. However, overall risks for these metrics remain comparatively low. • Both heat and rainfall are projected to rise / worsen into the future, with results among the most risk exposed across all APAC markets. • Hence, buildings that are borderline today, in terms of managing heat or rainfall, or may have some flood risk, should consider long-term upgrade plans to better protect them into the future. • Newer assets should be designed and operated with a hotter and wetter climate in mind.

HIGHEST BUILDING RISK SCORE IN SUBMARKET

AVERAGE SUBMARKET RISK SCORE

LOWEST BUILDING RISK SCORE IN SUBMARKET

100

Central Region East Region

West Region

North-East Region

FLOOD

WIND

HEAT

WILDFIRE

PRECIPITATION

COLD

ALL

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DEEPDIVE – DALLAS / FORTWORTH PRESENT DAY RISK

The Present: • Heat and precipitation represent the highest current risks, with consistent results across each submarket. • Flood risk is relatively low in most cases, though the most risk-exposed sites in the Great Southwest, Stemmons Corridor, and Valwood/N Stemmons have significant flood risk exposure. Here, we see maximum risk approaching 100— many times higher than the average for that submarket. • Wildfire risk is lower compared to other factors, but variability within markets requires monitoring. This is likely influenced by local topography and other physical factors, such as adjacent land use. • Cold weather risk is relatively low but worth considering, given that extreme events have historically had a knock-on impact on electrical grids and related infrastructure. The Future: • Heat and precipitation risks are forecast to increase over time across all key submarkets. • Forecasts show a decrease in hail, drought, and cold. • Overall risks are increasing, influenced more by what is rising—heat and rain—than by what is falling: hail, drought, or cold.

HIGHEST BUILDING RISK SCORE IN SUBMARKET

AVERAGE SUBMARKET RISK SCORE

LOWEST BUILDING RISK SCORE IN SUBMARKET

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DFW Airport

Eastern Dallas

Southern Dallas

Far North Dallas

Great Southwest

Valwood/N Stemmons Northern Fort Worth

D Stemmons Corridor

FLOOD

WIND

HEAT

WILDFIRE

PRECIPITATION

COLD

ALL

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DEEPDIVE – INLANDEMPIRE PRESENT DAY RISK

The Present: • The risk ranges for wind, precipitation, and cold are relatively low, with some variability around precipitation. • The higher average and maximum risks for wildfire indicates the need for active wildfire prevention and planning now and into the future, • Similarly, the variability in flood risk requires a mindful eye on flood risks, which may occur during the wet season. • Riverside has some significantly flood-exposed locations, despite the average flood risk being low. Inversely, Moreno Valley has the highest average wildfire risk, with some sites being more protected. The Future: • Heat, hail, wildfire, and precipitation risks are all projected to rise in the future across all submarkets. • Flooding and wind remain stable, but given current-day flood risks in some locations, this topic should be monitored closely. • Drought risk remains high and stable over time, while risks related to cold are projected to decline. • Overall, the Inland Empire requires careful planning around wildfire, heat, and drought, with site-specific plans required to address variable rainfall and localized flooding.

HIGHEST BUILDING RISK SCORE IN SUBMARKET

AVERAGE SUBMARKET RISK SCORE

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Rialto

Corona

Riverside

Moreno Valley

San Bernardino

FLOOD

WIND

HEAT

WILDFIRE

PRECIPITATION

COLD

ALL

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DEEPDIVE – UK PRESENT DAY RISK

The Present: • Flood risk is relatively low, but maximum flood scores are elevated in specific locations such as Derbyshire/Nottinghamshire and Bedfordshire/ Hertfordshire, driven by proximity to river systems traversing these counties. As such, asset-level exposure can differ considerably within the same regional market. • Drought presents a high and chronic risk across all submarkets, with little to no variability. This uniformity suggests widespread exposure across logistics and industrial assets, particularly where water demand is high. • Cold risk is moderate and fairly consistent, with other hazards presenting low average risk levels. The Future: • All hazard scores remain low across submarkets, suggesting minimal climate volatility at a national scale. However, changes in individual hazards highlight evolving risks. • Heat poses the greatest future change across all submarkets. Although the current baseline is low, the rate of increase is highest. • Small increases in hazard scores are projected for both drought and precipitation across submarkets. The data suggests growing chronic exposure to water stress. • Although a moderate decline in cold-related risks is projected, it does not eliminate the need for resilience in the short to medium term.

HIGHEST BUILDING RISK SCORE IN SUBMARKET

AVERAGE SUBMARKET RISK SCORE

LOWEST BUILDING RISK SCORE IN SUBMARKET

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Beds. and Herts

Derbs. and Notts.

Berks., Bucks, and Oxon

Outer London — W / NW

FLOOD

WIND

HEAT

WILDFIRE

PRECIPITATION

COLD

ALL

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DEEPDIVE – GERMANY PRESENT DAY RISK

The Present: • Darmstadt and Karlsruhe exhibit pronounced spatial variability in flood risk, underscoring the importance of localized, site-specific assessments. These variations are often linked to topography or proximity to rivers. • Cold risks remain consistently high across all regions. Although these risks are well understood, they require attention in asset planning and design. • Other risks are relatively moderate. The Future: • The overall forecast changes remain low; however, individual hazards require more attention. • Heat exhibits the highest change score among all hazard types, indicating a rapidly evolving risk. Risk managers should prioritize not just the magnitude of change but also absolute future hazard levels to accurately assess asset vulnerability. • Despite current variability, projected changes for flood risk are low, though the current variability requires local-level planning. • Although a moderate decline in cold risk is anticipated across submarkets, the risk remains material in the near term and should continue to be monitored.

HIGHEST BUILDING RISK SCORE IN SUBMARKET

AVERAGE SUBMARKET RISK SCORE

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Darmstadt Kassel

Karlsruhe

Brandenburg

FLOOD

WIND

HEAT

WILDFIRE

PRECIPITATION

COLD

ALL

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STRATEGIC APPROACHES

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PRESERVING ASSETVALUE

Case Study – Climate Risk Due Diligence

For a recent fundsmanagement client, Cushman &Wakefield completed a full climate risk and sustainability due diligence process on a newacquisition, including: • A scan of climate risks and broader sustainability metrics, such as renewable power, GRESB, or certifications. • A rolling 5-year capital and OpEx projection (2025, 2030, 2035, etc.). • Key risks were identified, and budgets created around OpEx or CapEx requirements. As needed, further investigative work on-site was completed to finalize design changes or cost projections. • These physical and financial metrics were built into the Investment Committee review process, allowing final assessment and review. • By providing this analysis upfront and in the required format, the client eliminated guesswork and was able to make an informed decision about the future of this asset.

Climate risk data are now readily available, allowing firms to forecast or analyze current and future-day impacts and translate these into financial metrics. Examples include:

Certain climate risks, such as heat or cold, can readily be translated into OpEx budgets—for example, higher temperatures lead to more air conditioning and higher utility usage. These changes can be calculated very accurately. OpEx The same example of hotter weather can also be used to forecast changes or increases in capital expenditure (CapEx), such as the need to install or upgrade air conditioning, as well as adjust maintenance schedules and costs. These costs become more significant in certain asset types, such as cold storage, manufacturing, or data centers. Understanding the quantum and phasing of capital costs, and the transition toward net zero, can improve capital planning processes. CapEx

Leaseability

Sustainability performance and climate risk are key factors in modern due diligence processes. A site that falls short on these parameters may see buyers or occupiers sit out of a transaction, while participation may be better when the asset has a stronger narrative around these topics. Actively managing climate risk and other factors can drive greater market depth, bringing knock-on benefits around valuations, loan availability, and debt covenants. Information is power, and tenants can now analyze the same data as landlords. An asset with greater exposure to climate risk cannot be hidden from tenants; conversely, a less risk-exposed site is more marketable. This has a direct bearing on speed of leasing, incentives, lease length, and, of course, rent. Market Liquidity

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REFINING LOCATION STRATEGY

Case Study – Annual Portfolio Climate Risk Assessment

A major Australian financial services firm engaged Cushman & Wakefield to assess their entire portfolio for climate risks, and then compare it against internal criticality standards. This has been expanded into a rolling three-year program focused on the higher-risk sites and any new sites that have been added. Now, the client has an annual process tied to lease expiry and forecast demand to review and update their climate risk data, and build that into their stay/go analysis. Where certain risks are identified, these can be negotiated with landlords, encouraging them to invest in both the building and the relationship. In other circumstances, where the risk exposure does not match the long-term appetite of the occupier, these sites are shortlisted for lease termination. This process has been running for over two years now and has resulted in significantly improved risk management across the portfolio, and a reduction in overall physical exposure to risk.

Climate risk is nowa critical input into location strategy, including decisions onwhen to retain, invest in, or exit certain sites. How can this be applied?

Climate risks can be analyzed quickly and remotely to identify any significant issues. This can be followed up with more detailed investigation where certain risks are identified. This is cost-effective and tech-enabled—there is no reason not to act. During due diligence for a sale or lease

Portfolio optimization

Long-term planning

Risks change over time, as do your needs. When you are considering lease expiry timelines or target sale dates, that’s a good time to refresh your thinking around climate risks. You may be able to extract more value from the negotiation if you have the right information on hand, or it might be the final element that cements your decision to move on.

Headquarter buildings, data centers, cold storage, or manufacturing sites are not easy or fast to relocate. These scenarios require long range planning to inform decision-making. Ideally, such critical sites should have 5-, 10-, or even 20 year planning horizons— not only with regard to climate risk but also other key drivers, including the overall location, building quality, and access to labor and markets.

For more information on strengthening your location strategy, download Waypoint – our global analysis of L&I input costs and market outlook.

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DESIGNAND PLANNING CONSIDERATIONS

Case Study – A look into the future

Our client—a global financial services occupier— already has a sophisticated understanding of climate risk, having embedded C&W climate risk specialists into their day-to-day operations. For primary global office locations with significant headcount, C&W was engaged to review both current and potential new locations in key markets, including common residential areas for employees, providing a long list of future locations to consider. Importantly, the analysis didn’t just focus on risks, but also the proposed local government responses, seeking to identify mitigation and adaptation measures that were planned, in progress, and/or completed. This analysis allows our client to understand not only the potential risks as part of their future global expansion planning, but also the extent local climate risk mitigation and adaption measures reduce the level of potential risk identified.

The good news? Doing this upfront doesn’t have to cost a lot andwill likely save you significantly when you consider the avoided risks or downtime.

Design and planning rules differ widely around the world, including at a sub-market level, resulting in multiple rules across a single city. This creates challenges around approvals, but also in terms of managing risks—there is often no unified strategy around key topics like flood protection, wildfire management, or disaster planning. Planners have their work cut out for them now and into the future, but what should property players do? The simple answer is: don’t settle for the minimum. When it comes to climate risk protection, the planning regimes may outline the minimum expectation, but that may not necessarily protect you. It’s incumbent on asset owners to manage these factors themselves and not rely on basic planning rules.

It’s worth considering that climate risk represents a huge challenge to governments around the world, and the costs of deploying mitigation or adaptation measures are very high. Governments are not always moving quickly on this topic and do not have an unlimited budget. They must prioritize their efforts and, understandably, have historically focused on downtown areas, where people live, and other critical infrastructure. In terms of overall prioritization, commercial real estate— especially logistics and industrial areas—may be quite far down on the government’s priority list. This again indicates that smart asset owners should ensure they are covered via smart planning and design.

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REGULATORY COMPLIANCE

Case Study – EU Taxonomy Alignment

Ahead of the sale of a London asset, our client required a climate risk assessment and EU Taxonomy alignment to the ‘substantial contribution’ criteria of climate change mitigation. The client also wanted to understand the asset’s economic position with respect to climate change before going to market and to meet legislative requirements for EU purchasers. The assessment adopted a multi-faceted methodology including physical climate risk modelling, onsite vulnerability assessment, and stranding risk assessment (CRREM analysis and economic impact modelling). The results of the assessment determined: • Asset was confirmed to meet the EU Taxonomy’s substantial contribution criteria, strengthening its appeal to EU-based investors. • Asset stranding risk was identified, enabling prioritization of investment in mitigation and resilience measures • Resilience interventions were recommended, focusing on reducing vulnerability to both acute risks (e.g., flooding) and chronic risks (e.g., drought, heat stress). • The financial implications of climate risk were quantified, providing insight into future asset value and revenue implications under worsening climate conditions.

Ultimately, compliance is no longer a passive obligation but a strategic necessity. By proactively addressing climate risk through regulatory alignment, investors in logistics and industrial assets can enhance asset value, future-proof portfolios, and demonstrate leadership in a rapidly transforming market.

Regulation has continued to evolve and strengthen over recent years in relation to the identification, assessment, and management of climate related risks. The European Union has been a frontrunner in this space through the implementation of the EU Green Deal and supporting legislative frameworks such as the EU Taxonomy, the Sustainable Finance Disclosure Regulation (SFDR), and the Corporate Sustainability Reporting Directive (CSRD). These frameworks aim to align financial and corporate reporting with sustainability goals, driving increased transparency and accountability. For investors in logistics and industrial real estate assets, compliance with these regulations requires not only an understanding of current and future climate risks, but also a structured and documented approach to assessing these risks at the asset and portfolio level.

Specifically, logistics and industrial properties—often exposed to location-based climate hazards such as flooding, extreme heat, and physical supply chain disruptions—must be subject to climate risk assessments that incorporate both physical and transition risk factors. This includes evaluating building resilience, energy efficiency, and alignment with net-zero pathways. Investors and asset managers are increasingly required to disclose how their assets align with EU Taxonomy criteria for environmental sustainability, justify classifications under SFDR categories, and provide detailed, auditable disclosures under CSRD. Failure to comply can impact access to green finance, reduce investor confidence, and pose reputational and financial risks.

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UNDERSTAND YOUR RISK EXPOSURE AND UPLIFT YOUR BUILDING OR PORTFOLIO. Climate risk has rapidly emerged as a critical consideration for real estate investors, owners and occupiers. Understanding the impact of climate change on a building or workspace can affect your site selection, property valuation, asset management strategy, or exit timing. Running a building or portfolio climate risk health check may be easier than you think. Here’s what you should do: DO YOU KNOW YOUR CLIMATE RISK EXPOSURE ?

TAKE ACTION TODAY We have a team of thinkers and doers who work with some of the world’s biggest investors and occupiers to create practical and achievable sustainability strategies. Get in touch to create value through sustainability and make your asset more resilient.

REQUEST A CONSULTATION:

AMERICAS JAKOB SCHENKER Sustainability Advisory Lead, Americas [email protected]

SCAN your portfolio & location-level risk exposure

ROADMAP climate adaptation &mitigation measures

UPLIFT your assets & Implement the resiliency roadmap

APAC MIKAKANIA Sustainability Advisory Lead, APAC [email protected]

WE MAKE IT PRACTICAL We take steps to pinpoint climate-related hazards in your physical environment, embed climate risk management into your processes and disclose your risks and opportunities:

EMEA BECCASAVVIDES Climate Risk Lead, EMEA [email protected]

CLIMATE RISK SCENARIO ANALYSIS

CLIMATE RISK ASSET ANALYSIS

RESILIENCY ROADMAP DEVELOPMENT

ASSET UPLIFT

CLIMATE RISK DISCLOSURE

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LOGISTICS & INDUSTRIAL SERVICES DRIVING LOGISTICS FORWARD, NO MATTER THE CHALLENGE

REQUEST A CONSULTATION:

AMERICAS JASONTOLLIVER President, Logistics & Industrial Americas Advisory Services [email protected]

APAC TIMFOSTER

Our Logistics & Industrial advisors will never stop driving progress for our clients and empowering them to meet global supply demands, no matter how complex. By proactively solving problems and harnessing our interconnected, global network, our clients can scale operations with speed and flexibility. We focus on looking ahead, anticipating outcomes and creating innovative solutions that integrate supply chain and real estate strategies to ensure our clients stay agile. Services for investors

Head of Supply Chain & Logistics Advisory [email protected] DENNIS YEO Head of Investor Services and Logistics & Industrial [email protected]

Project & Development Services

Agency Leasing

Capital Markets

EMEA TIMCRIGHTON

Energy & Sustainability Services

Asset Services

Valuation & Advisory

Head of Logistics & Industrial [email protected] MICHAEL CARSON Head of Supply Chain & Logistics Advisory [email protected]

Services for occupiers

Corporate Sustainability Services

Location & Labor Analytics

Supply Chain & Logistics Advisory

Project & Development Services

Facility Services

Tenant Representation

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AUTHORS

Sustainability Services:

Youmay also be interested in:

CLIMATE RISK – GLOBAL CITIES

WAYPOINT - our global analysis of L&I input costs and market outlook.

JESSICA FRANCISCO Chief Sustainability Officer [email protected] MATT CLIFFORD Head of Sustainability, APAC [email protected] JAMES WOODHEAD Head of Sustainability, EMEA [email protected]

OUTLOOK This report

highlights present and future climate hazard exposure in 100 global cities.

HOWTO MANAGE CLIMATE RISK Simple steps to help you identify and mitigate physical climate risks.

Research &Analytics:

DR. DOMINIC BROWN Head of International Research [email protected]

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