INSTITUTIONAL INVESTORS PLACE STRONG EMPHASIS ON SUSTAINABLE REAL ESTATE
Over a third (39%) of institutional investors - pension funds, insurance companies, Sovereign Wealth Funds (SWFs) and banks - view sustainable asset selection as ‘critical’ or ‘one of the most important criteria’ when selecting properties to acquire, according to CBRE’s 2016 EMEA Investor Intentions Survey.
The Survey which spans institutional investors, REITs, private equity and venture capital firms posed the question ‘does sustainability matter when real estate investing’. In total, 89% stated that sustainability is either ‘critical’, ‘one of the most important criteria’, ‘definitely matters’, ‘a consideration’ or ‘used as a rejection barometer’ when selecting assets to fund.
In contrast to institutional investors, the shorter term investment strategy profile of venture capital or private equity firms are less favourable towards ‘green’ real estate investment. Just 14% of this category currently view sustainability features as one of the most important criteria when selecting assets to acquire.
As a whole, investors active in the EMEA region are placing greater emphasis on sustainability than their global counterparts. This mirrors an overriding theme from the Survey that real estate investors, across EMEA, intend to be very active in 2016. Almost half of those surveyed (48%) expect to increase their purchasing activity compared to last year.
Institutional investors’ increasing focus on sustainability is due to a myriad of interlinking factors:
- Regulation – investors are keen to reduce the risk of building obsolescence, while adhering to the EU Energy Efficiency Directive to create a more energy efficient environment by 2020.
- Financial Penalties – if regulation and legislation is not adhered to, investors will likely take a monetary hit.
- Occupier Appeal – sustainable buildings are more attractive to tenants and their employees.
- Better Buildings – modern and critically acclaimed buildings all have energy efficiency features built in.
- Reputation – as the carbon economy continues to gain momentum, investors don’t want their reputation tarnished by dismissing wider sustainability aims.
- Value Add – there is increasing evidence that buildings with energy efficient and wider sustainability characteristics hold, and add, financial value.
Institutional investors tend to take a long term view when selecting investments and to see more than a third placing emphasis on green real estate is hugely encouraging. What’s important is that sustainability is most definitely here to stay. Owners and developers need to improve, and adapt, their commercial property to avoid diminishing future investment appeal and transaction value as that’s increasingly what investors demand.
About CBRE’s 2016 EMEA Investor Intentions Survey
The survey was carried out between 8th January 2016 and 4th February 2016. The survey attracted 1,255 responses globally, but respondents were first asked the global region for which they were most responsible. This report covers the 423 who responded in EMEA.
These responses were spread across a range of types of real estate investors. The most numerous were fund/asset managers, who accounted for 42% of survey participants. A further 13% were pension funds, insurance companies or sovereign wealth funds. The other most numerous respondents were private equity/venture capital firms (11%), private property companies (10%) and listed property companies/REITs (10%).
The respondents were predominantly investors domiciled in Europe (87%). UK-domiciled investors were the most numerous, making up 26% of the total, followed by France (13%), Netherlands (12%) and Germany (12%). The respondents from outside Europe were mainly from North America (8%).