Climate risk is increasingly shaping how commercial real estate assets perform, compete, and retain value. For property managers, this shift is not limited to the traditional fear of exposure to extreme weather. It also includes transition risk; the financial, operational, and reputational pressures that emerge as markets, regulations, technologies, and tenant expectations evolve in response to climate change.
In a real estate management context, transition risk often develops gradually. New building performance standards may introduce compliance obligations that expose inefficiencies. Utility costs may rise without corresponding strategies to manage consumption or secure competitive rates. Insurance premiums may increase while coverage narrows. Properties that do not adapt at pace with these changes will face declining demand, higher operating costs, and reduced asset value.
Over time, unmanaged transition risk can contribute to stranded, wavering assets. These are the properties that lose economic viability because they are misaligned with current or anticipated market conditions. Stranding is rarely caused by a single event. More often, it results from incremental decisions, deferred investments, or the absence of a structured approach to understanding risk. Simply put: a property becomes stranded when it can no longer meet performance expectations at a reasonable cost.
Property managers are at the heart of this challenge. They operate assets on behalf of ownership and other stakeholders while responding to resident needs, regulatory requirements, and long-term asset strategy. As a result, sustainability and climate risk assessments have already become an essential management function rather than a supplemental exercise.
One example of how this challenge is being addressed in practice is through structured sustainability and climate related risk assessments, such as those required under the IREM CSP (Certified Sustainable Property) program. These assessments prompt property managers to evaluate both physical and transition risks, alongside opportunities to improve efficiency, resilience, and long term performance. In this framework, transition risk is treated as a core consideration rather than a secondary concern.
This type of assessment encourages managers to examine how a property is positioned within its market. Questions related to utility rates, insurance trends, regulatory exposure, and technology adoption help identify where risks may be accumulating. Evaluating whether a property is keeping pace with competitors can also surface early indicators of potential obsolescence. Together, these insights support more informed decision-making and help prioritize investments that protect asset relevance.
Beyond risk identification, structured assessments support clearer conversations with ownership and other stakeholders. When risks are documented and contextualized, discussions about capital planning, resilience strategies, and operational changes can be grounded in evidence rather than assumptions. This clarity is particularly important as climate related expectations continue to evolve across jurisdictions and markets.
“Our IREM CSP certification work revealed that transition risk isn't waiting on the horizon; it's already in the operating budget,” says Christine Cho, LEED Green Associate, Fitwel Ambassador, BREEAM In-Use Assessor, TRUE Advisor, LFA . “Properties achieving certification gain measurable advantages when reporting to sustainability frameworks such as GRESB, tenant retention, and stakeholder confidence, while uncertified assets face growing exposure to regulatory costs and competitive disadvantage. The assessment process gives investors a roadmap to prioritize capital strategically rather than react to compliance deadlines.”
As climate-related policies, market expectations, and financial pressures continue to develop, the ability to recognize and mitigate transition risk will increasingly define effective property management. Stranded assets are not an inevitable outcome, but they are a foreseeable one when risks go unexamined and unaddressed.
By applying structured assessment frameworks, property managers can better understand where assets are vulnerable and where strategic action is warranted. This approach supports more resilient portfolios and reinforces the role of property management as a critical link between sustainability, risk management, and long-term asset value.