Property owners must improve the sustainability of their buildings if they want to attract investors and maintain value, a new survey reveals.
A poll of fund and asset managers, pension funds, insurance companies, sovereign wealth funds, real estate investment trusts (REITs) and private equity or venture capital firms by real estate advisors CBRE has found 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.
About 70% of the 280 respondents considered sustainability to be ‘critical', ‘one of the most important criteria' or ‘definitely matters' in their asset selection process.
CBRE said the interest in sustainability growing among institutional investors is driven by their greater emphasis on long-term investments and environmental, social and corporate governance (ESG) considerations. In addition, the pre-acquisition due diligence process, which includes analysis of detailed sustainability criteria, is now mainstream and the threat of assets becoming stranded weighs more heavily when investment decisions are being made.
Rebecca Pearce, EMEA head of sustainability at CBRE, said all types of investors are facing a growing body of regulation, such as EU Energy Efficiency Directive, and the Minimum Energy Performance Standards, as well as other pressures.
"It's a perfect green storm in many ways," she added. "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."
Property owners therefore need to make changes to ensure their buildings remain attractive, Pearce said."In essence, properties which are not meeting such criteria are losing out, as both the marketability and value of the property is tapered," she added. The evidence is loud and clear - owners and developers need to improve and adapt their commercial property."
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This article has been adapted from an article published in Business Green.