The Federal Office for Building and Regional Planning

Publication ImmoRisk - Risk assessment of future climate impacts in real estate economy

Forschungen 159, Ed.: BMVBS, Berlin 2013

Series: Forschungen Published: July 2013

Project management BBSR: Ute Birk (project leader) ute.birk@bbr.bund.de , Tobias Held

Abstract

The growing concern of the housing and real estate industry regarding climate change and related loss events did not lead to sufficient consideration in real estate risk management up to now. In particular there are no explicit risk analysis tools supported by reliable and valid climate data. In research, the field of climate change adaptation strategies has been neglected in favor of mitigation. This is no wonder because the construction and real estate industry is responsible for about 40% of global emissions of greenhouse gases. However at the same time, the number and monetary damages caused by extreme weather events is already increasing considerably. Nevertheless, the industry is predominately reactive; no sincere proactive preparation for the upcoming changes is noticeable. External risks, including those arising from natural hazards are generally indirectly considered in the real estate industry in terms of classical input parameters such as rents, yields or costs. Existing approaches for example, to account explicitly in the valuation process for risk arising due to increasing extreme weather events, are not yet available.

One of the main reasons for the slow realization of the integration of climate change, or even of climate data in real estate risk management is certainly the lack of public available, valid as well as comprehensible information. The aim of the project was therefore to make the actual existing sources of information accessible for application in real estate research for the first time, and to develop a user-friendly tool (initially for 15 selected sites) that provides real estate owners with property-specific, object-precise, quantitative and practical data in terms of natural risk at one location.

Based on insights of the ExWoSt-research project "Real estate and housing industries' strategies and potentials on climate change" the ImmoRisk-tool should be a first step towards an estimation of future climate risks. This facilitates an adequate consideration of possible monetary losses resulting from extreme weather events. Existing approaches to quantify climate impacts work mostly not object-precise, provide no information about climate change and consider only individual natural hazards. The development of the ImmoRisk tool should help to overcome these shortcomings by providing a powerful platform that meets the demands of different players in the real estate economy. The information required for this kind of risk assessment does already partly exist, however it isn't concentrated at one institution and cannot be used without sophisticated editing (i.e. complex results from climate models).

To meet the prerequisites of the ImmoRisk tool, a multidisciplinary approach was chosen which links the information from engineering, meteorology, insurance business and real estate industry in a meaningful way.

The tool applies a three-part approach of hazard, vulnerability and property value in order to quantify potential future risks within different timeframes. Subsequently, data regarding hazard situations were acquired for each of the 15 sites (thereunder the ImmoKlima pilot sites). Apart from the German Weather Service (DWD) particularly the Karlsruhe Institute of Technology (KIT) and the German Research Centre for Geosciences of the Helmholtz Association in Potsdam (GFZ) provided the required information. By using these sources, high-quality data from complex climate models could be integrated and further processed for the calculation derived by the developed program. To estimate the possible damage, caused by extreme weather events, damage functions are necessary in order to establish a correlation between the intensity of some extreme weather events and the possible resulting damage. These functions were obtained from relevant technical publications and cooperation with the insurance industry. After some preprocessing they could be integrated into the tool. Together with a cost based valuation approach using stan-dard construction costs, the tool allows the calculation of the quantitative risk from extreme weather events (by storm, hail, flood, etc.) within different prospective periods. The results presented to the user are the annual expected loss in Euro (AEL) as well as a damage ratio (proportion of AEL on building value), which is also applied by the insurance sector. Additionally, the user will receive a risk profile of his specific property with information on the location's exposure to extreme weather events, forest fires, heat, lightning and voltage.

Furthermore, in the framework of the project it was to develop a conceptual design for a Germany-wide comprehensive geographic information system (GIS) for the identification of future climate impacts. This tool, which would be designed as a Geographic Information System (GIS) could be created on the basis of the results gathered by ImmoRisk. The basic procedure for determining risk from site-specific building-related hazard, vulnerability and value is proposed as an adequate solution. The two main challenges for a GIS are the data acquisition of hazard-data as well as its technical implementation, which is much more complex than with a small number of predetermined locations as in ImmoRisk.

The knowledge gained during the project allows direct conclusions for further requirements of research within the discipline of real estate risk management related to climate change. Particularly, a better coordination between meteorological research institutions and the needs of risk research is recommended.

Originally classified as a very experimental project, it has demonstrated the basic feasibility of a complex natural hazard information system and offers distinct reasoning for further advances in the transparency of future climate risks with regard to the real estate industry. As part of the currently observed intensity in the research on climate change a steadily improving data base for the broadening and deepening of the system can be expected in the near future. Further research according additional building types as well as the correlation between particular extreme weather events could be considered.


The abstract is part of the German publication "Risikoabschätzung der zukünftigen Klimafolgen in der Immobilien- und Wohnungswirtschaft (ImmoRisk)", Forschungen 159, Hrsg.: BMVBS, Berlin 2013
ISBN 978-3-87994-491-0, urn:nbn:de:101:1-201308029207
Download (PDF, 4MB, File meets accessibility standards)

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