Vancouver, Toronto and Montreal are among 75 world cities seen to be exerting some degree of climate action pressure on the commercial real estate sector in JLL’s newly released analysis of the interplay between local regulations, decarbonization and resilience. It finds that local governments in major global markets are evolving from initially setting largely voluntary targets for the reduction of greenhouse gas (GHG) emissions to now implementing reporting and building performance mandates with penalties for non-compliance.
Vancouver is notably grouped with 11 cities deemed to be “global accelerators” with established, enforceable policies and rules related to emissions reduction, transition away from fossil fuels and climate change adaptation. Others in the cohort include New York City, Seattle, Amsterdam, Copenhagen, Helsinki, London, Oslo, Paris, Stockholm and Sydney.
“Regulation is accelerating real estate’s transition toward a low-carbon, climate-resilient future — and city governments are leading the charge,” JLL analysts observe. “For the CRE sector, local policy is often the most significant regulatory force impacting operational costs and investment strategies. As regulation gains enforceability and scope, real estate leaders must anticipate these shifts to safeguard asset value and manage transition risk.”
That’s evident in the findings that 82 per cent of global investment in commercial real estate over the past decade — roughly USD $4.1 trillion worth of expenditures — has occurred in markets where there is a target to achieve net-zero emissions by 2050. More than 40 per cent of the surveyed cities now have some form of building performance standards that set allowable and increasingly tightening thresholds for energy intensity and/or GHG emissions, while “dozens more” are on track to introduce them by 2030.
A significant subset of 17 cities, mostly in Europe, already have requirements in place to effectively prohibit fossil-fuel-fired systems in new construction. As well, Vancouver is flagged as one of three cities, along with London and Amsterdam with policies to address embodied carbon, while all cities in California are captured by the statewide mandate for large, non-residential buildings.
About 60 per cent of the surveyed cities also have policies related to resilience and climate change adaptation, although mostly still confined to risk disclosure or voluntary planning mechanisms. Meanwhile, building owners/managers in more than two-thirds of the surveyed cities can tap into some form of local financial incentives for retrofits and energy efficiency upgrades, building electrification or on-site renewable energy generation.
“These local tools increasingly sit alongside state, national and supranational programs,” JLL analysts report. “As these instruments mature, they help to de-risk projects and attract private capital, and enable owners to undertake more ambitious upgrades at scale.”
Toronto is slotted into a larger group of 22 “market mobilizers” that lags the global accelerators’ pace, but is seen to have “clear regulatory traction” through programs such as mandatory benchmarking and reporting. The group also includes Boston, Chicago, Denver, Los Angeles, Portland, San Francisco, San Diego and Washington, D.C. in the United States, seven European cities and six in Asia Pacific.
Montreal has more company from the Americas in its group of 22 “policy builders” at earlier stages of policy and regulation implementation and what’s characterized as “still patchy” coverage and enforcement. This group includes Atlanta, Austin, Miami, Minneapolis, Pheonix and Salt Lake City in the U.S., along with Medellin, Mexico City and Rio de Janeiro, six European cities and five cities in Asia Pacific.
Another 20 cities are identified as “emerging implementers” at the early stage of policy development with few mandatory requirements in place. This cohort is largely located in South America, Africa and the Asia Pacific, but also includes Houston and Tampa in the United States.
