WAKE UP CALL FOR PROPERTY OWNERS TO IMPROVE SUSTAINABLE STRATEGIES TO MEET INVESTOR DEMAND
London, 17 March 2015 – Owners and developers need to improve, and adapt, their commercial property to avoid diminishing future investment appeal and transaction value according to CBRE, the global real estate advisors.
70% of respondents in CBRE’s 2015 EMEA Investor Intentions Survey, spanning fund & asset managers, pension funds, insurance companies, sovereign wealth funds, REITs and private equity or venture capital firms, stated that sustainability is either ‘critical’, ‘one of the most important criteria’, or ‘definitely matters’ in the asset selection process. This figure rises to 85% when counting those that reported sustainability as a ‘consideration’ when selecting assets to acquire.
These statistics demonstrate the importance of sustainability for property investors which is due to a number of interlinking factors.
Rebecca Pearce, EMEA Head of Sustainability, at CBRE explained:
“It’s a perfect green storm in many ways. Regulation driven by the EU Energy Efficiency Directive, including Minimum Energy Performance Standards, is now front of mind for owners. Occupiers want to be located in buildings with sustainable features to attract and retain talent, and investors don’t want to fall foul of regulation and take a financial hit if buildings are obsolete. In essence, properties which are not meeting such criteria are losing out, as both the marketability and value of the property is tapered.”
Which of the following statements most closely describes your approach to Sustainability in asset selection?
The results are even more definitive for institutional investors - pension funds, insurance companies and sovereign wealth funds. A third, or 30%, of this group noted sustainability as either ‘critical’ or ‘one of the most important criteria’ when selecting property to acquire. This jumps to 83% when including the ‘definitely matters’ respondents. Furthermore, just 3% regarded sustainability factors as insignificant when selecting assets.
Driving this is the increased importance of sustainability for institutional investors with greater emphasis placed on long term investment horizons and environmental, social and corporate governance (ESG) considerations. In addition the pre-acquisition due diligence process, including the analysis of detailed sustainability criteria, is now mainstream and the risk of assets becoming stranded weighs more heavily when investment decisions are being made. Combine this with increased regulation, e.g. ESG performance indexes such as the GRESB1 survey, and increasing occupier sentiment towards ‘green’ workplaces and the result is fund managers are continuing to invest in sustainable properties.
Rebecca Pearce, EMEA Head of Sustainability, at CBRE added:
“The evidence is loud and clear - owners and developers need to improve and adapt their commercial property.
“For some time, the real estate industry has been seeking verification that investing in sustainable property will provide financial reward. To date this has been difficult to define given the complex factors that influence transaction prices such as building age, location, tenant agreements and the overall macro-economic climate. These findings demonstrate that investors care about, and are acting upon, sustainable property measures as they understand there will be a material impact on their assets and financial performance. Given that this comes at a time when market activity is set to increase this is a hugely positive trend towards a more sustainable built environment.”