More stories

  • in

    MIT Center for Real Estate advances climate and sustainable real estate research agenda

    Real estate investors are increasingly putting sustainability at the center of their decision-making processes, given the close association between climate risk and real estate assets, both of which are location-based.

    This growing emphasis comes at a time when the real estate industry is one of the biggest contributors to global warming; its embodied and operational carbon accounts for more than one-third of total carbon emissions. More stringent building decarbonization regulations are putting pressure on real estate owners and investors, who must invest heavily to retrofit their buildings or pay “carbon penalties” and see their assets lose value.

    The impacts of acute and chronic climate risks — flooding, hurricanes, wildfires, droughts, sea-level rise, and extreme weather — are becoming more salient. Action across all areas of the real estate sector will be required to limit the social and economic risks arising from the climate crisis. But what business and policy levers are most effective at guiding the industry toward a more sustainable future?

    The MIT Center for Real Estate (MIT/CRE) believes that the real estate industry can be a catalyst for the rapid mobilization of a global transition to a greener society. Since its inception in 1983, MIT/CRE has focused on the physical aspect of real estate, especially the development industry, and how the built environment gets produced and changed.

    “The real estate industry is now at the critical moment to address the climate crisis. That is why our center initiated this major research agenda on climate and real estate two years ago,” says William Wheaton, a former director of MIT/CRE and professor emeritus in MIT’s Department of Economics, who is leading a research project on the impact of flood risks in real estate markets.

    Producing high-quality research to support climate actions

    The work of scientists and practitioners responding to the climate crisis is often bifurcated into mitigation or adaptation responses. Mitigation seeks to reduce the severity of the climate crisis by addressing emissions, while adaptation efforts seek to anticipate the most severe effects of the crisis and minimize potential risks to people and the built environment.

    The fundamental nature of the real estate industry — location-based and capital-intensive — enables potential meaningful action for both mitigation and adaptation interventions. Exploring both avenues, MIT/CRE faculty and researchers have published academic papers exploring how chronic climate events such as extreme temperatures lower people’s expressed happiness and also disrupt habits of daily life; and how acute climate events such as hurricanes damage the built environment and decrease the financial value of real estate.

    “This ongoing research production centers on industry’s imperative to take action quickly, the real losses resulting from inaction, and the potential social and business value creation for early adopters of more sustainable practices,” says Siqi Zheng, a co-author of those papers, who is the MIT/CRE faculty director and the STL Champion Professor of Urban and Real Estate Sustainability.

    Building a global community of academics and industry leaders

    In addition to sponsoring research and related courses, MIT/CRE has created a global network of researchers and industry leaders, centered around sharing ideas and experience to quickly scale more sustainable practices, such as building decarbonization and circular economy in real estate, as well as climate risk modeling and pricing. Collaborating with industry leaders from the investment and real estate sector, such as EY, Veris Residential, Moody’s Analytics, Colliers, Finvest, KPF, Taurus Investment Holdings, Climate Alpha, and CRE alumnus Paul Clayton SM ’02, MIT/CRE blends real-world experiences and questions with applied data and projects to create a “living lab” for MIT/CRE researchers to conduct climate research.

    At an inaugural symposium on climate and real estate held at MIT in December 2022, more than a dozen scholars presented papers on the intersection of real estate and sustainability, which will form the basis of a special issue on climate change and real estate in the Journal of Regional Science. A “fireside chat” connected scholars and industry leaders in practical conversations about how to use research to aid practitioners.

    “Dissemination of research is critical to the success of our efforts to address climate change in the real estate industry,” says David Geltner, post-tenure professor of real estate finance and former director of  MIT/CRE, whose research group is working on climate risks and commercial real estate. “If we produce excellent research but it is cloistered in academic journals, it does no one any good. Similarly, if we do not work with collaborators to focus our research, we run the risk of investigating levers to reduce emissions that are of no use to practitioners.”

    Juan Palacios, coordinator of MIT/CRE’s climate and real estate research team, emphasizes that industry collaboration creates a two-way sharing of information that refines how research is being conducted at the center and ensures that it has positive impact.

    “More and more real estate investors and market players are putting sustainability at the center of their investment approach,” says Zheng. “A broad range of stakeholders (investors, regulators, insurers, and the public) have started to understand that long-term profitability cannot be achieved without embracing multiple dimensions of sustainability such as climate, wealth inequality, public health, and social welfare. Because of its unique relationship with industry collaborators and its place in the MIT innovation ecosystem, MIT/CRE has a responsibility and the opportunity to champion multiple pathways toward greater sustainability in the real estate industry.” More

  • in

    MIT Center for Real Estate launches the Asia Real Estate Initiative

    To appreciate the explosive urbanization taking place in Asia, consider this analogy: Every 40 days, a city the equivalent size of Boston is built in Asia. Of the $24.7 trillion real estate investment opportunities predicted by 2030 in emerging cities, $17.8 trillion (72 percent) will be in Asia. While this growth is exciting to the real estate industry, it brings with it the attendant social and environmental issues.

    To promote a sustainable and innovative approach to this growth, leadership at the MIT Center for Real Estate (MIT CRE) recently established the Asia Real Estate Initiative (AREI), which aims to become a platform for industry leaders, entrepreneurs, and the academic community to find solutions to the practical concerns of real estate development across these countries.

    “Behind the creation of this initiative is the understanding that Asia is a living lab for the study of future global urban development,” says Hashim Sarkis, dean of the MIT School of Architecture and Planning.

    An investment in cities of the future

    One of the areas in AREI’s scope of focus is connecting sustainability and technology in real estate.

    “We believe the real estate sector should work cooperatively with the energy, science, and technology sectors to solve the climate challenges,” says Richard Lester, the Institute’s associate provost for international activities. “AREI will engage academics and industry leaders, nongovernment organizations, and civic leaders globally and in Asia, to advance sharing knowledge and research.”

    In its effort to understand how trends and new technologies will impact the future of real estate, AREI has received initial support from a prominent alumnus of MIT CRE who wishes to remain anonymous. The gift will support a cohort of researchers working on innovative technologies applicable to advancing real estate sustainability goals, with a special focus on the global and Asia markets. The call for applications is already under way, with AREI seeking to collaborate with scholars who have backgrounds in economics, finance, urban planning, technology, engineering, and other disciplines.

    “The research on real estate sustainability and technology could transform this industry and help invent global real estate of the future,” says Professor Siqi Zheng, faculty director of MIT CRE and AREI faculty chair. “The pairing of real estate and technology often leads to innovative and differential real estate development strategies such as buildings that are green, smart, and healthy.”

    The initiative arrives at a key time to make a significant impact and cement a leadership role in real estate development across Asia. MIT CRE is positioned to help the industry increase its efficiency and social responsibility, with nearly 40 years of pioneering research in the field. Zheng, an established scholar with expertise on urban growth in fast-urbanizing regions, is the former president of the Asia Real Estate Society and sits on the Board of American Real Estate and Urban Economics Association. Her research has been supported by international institutions including the World Bank, the Asian Development Bank, and the Lincoln Institute of Land Policy.

    “The researchers in AREI are now working on three interrelated themes: the future of real estate and live-work-play dynamics; connecting sustainability and technology in real estate; and innovations in real estate finance and business,” says Zheng.

    The first theme has already yielded a book — “Toward Urban Economic Vibrancy: Patterns and Practices in Asia’s New Cities” — recently published by SA+P Press.

    Engaging thought leaders and global stakeholders

    AREI also plans to collaborate with counterparts in Asia to contribute to research, education, and industry dialogue to meet the challenges of sustainable city-making across the continent and identify areas for innovation. Traditionally, real estate has been a very local business with a lengthy value chain, according to Zhengzhen Tan, director of AREI. Most developers focused their career on one particular product type in one particular regional market. AREI is working to change that dynamic.

    “We want to create a cross-border dialogue within Asia and among Asia, North America, and European leaders to exchange knowledge and practices,” says Tan. “The real estate industry’s learning costs are very high compared to other sectors. Collective learning will reduce the cost of failure and have a significant impact on these global issues.”

    The 2021 United Nations Climate Change Conference in Glasgow shed additional light on environmental commitments being made by governments in Asia. With real estate representing 40 percent of global greenhouse gas emissions, the Asian real estate market is undergoing an urgent transformation to deliver on this commitment.

    “One of the most pressing calls is to get to net-zero emissions for real estate development and operation,” says Tan. “Real estate investors and developers are making short- and long-term choices that are locking in environmental footprints for the ‘decisive decade.’ We hope to inspire developers and investors to think differently and get out of their comfort zone.” More