Impact The full potential of manage-to-green | Impact
13.02.2023 • 5 Reading Time
Manage-to-green: the forward-looking investment strategy
A “manage-to-core” strategy generally refers to the targeted repositioning or development of innovative usage and marketing concepts. The goal is to make real estate attractive for future rentals.
But modern challenges require modern solutions. With the transition to “manage-to-green”, the investment strategy is taking an important step forward.
No core without green
In the modern real estate industry, sustainability is no longer just an add-on, but a key element of any core strategy. The term “green” is about more than just environmental awareness. It also covers social and governance aspects, all of which are encapsulated in the concept of ESG (Environment, Social, Governance).
With “green”, the focus is not only on the future of our environment, but also on the future of our society and way of life. And this has now also penetrated (almost) all areas of the economy. Whereas “green” has long been linked to a lack of profitability, stakeholders now know that sustainability is indispensable when it comes to a future-proof economy.
That’s why “green” also plays a decisive role in the real estate market: if comprehensive sustainability is left out of the investment strategy, financially strong and prestigious tenants are also left out. This is because in order to attract renowned companies with high corporate responsibility standards as tenants, corresponding standards must also be met in the properties. That’s why ESG compliance has become a virtually indispensable criterion today when it comes to designing real estate for the long term.
With “green”, the focus is not only on the future of our environment, but also on the future of our society and way of life. And this has now also penetrated (almost) all areas of the economy. Whereas “green” has long been linked to a lack of profitability, stakeholders now know that sustainability is indispensable when it comes to a future-proof economy.
That’s why “green” also plays a decisive role in the real estate market: if comprehensive sustainability is left out of the investment strategy, financially strong and prestigious tenants are also left out. This is because in order to attract renowned companies with high corporate responsibility standards as tenants, corresponding standards must also be met in the properties. That’s why ESG compliance has become a virtually indispensable criterion today when it comes to designing real estate for the long term.
The many facets of “green”
As already described, true sustainability is about much more than just environmental aspects: individual factors such as well-being, aesthetics and quality of living, but also digitalisation, connectivity and protecting the health of employees are included.
Aspects such as these, which primarily contribute to the quality and location of a property, have become more important, especially during the coronavirus pandemic. The reason for this is that, during this phase, many things came to a literal standstill for a short time and current markets as well as modern working conditions were re-evaluated. This development has continued to this day – and, as a result, the broader significance of ESG as an essential part of the investment strategy is being given greater emphasis.
Aspects such as these, which primarily contribute to the quality and location of a property, have become more important, especially during the coronavirus pandemic. The reason for this is that, during this phase, many things came to a literal standstill for a short time and current markets as well as modern working conditions were re-evaluated. This development has continued to this day – and, as a result, the broader significance of ESG as an essential part of the investment strategy is being given greater emphasis.
A new perspective: manage-to-green
Jens Böhnlein, Global Head of Asset Management and Sustainability at Commerz Real, emphasises the growing importance of manage to green. In many cases, it could even replace the traditional manage to core strategy.
While typical core aspects such as the location or the basic quality of a property can only be optimised with difficulty or not at all, manage to green can provide new impetus in the design of the property as an investment strategy in itself. For example, the modernisation of heating and air conditioning systems, the use of sustainable materials or certain structural measures can help to optimise the energy and climate footprint of the property and thus improve the quality of living there.
A flexible redesign of the spaces can also increase the third-party usability of the property. The installation of electric charging stations or a modern bicycle storage room also help to promote the use of more sustainable means of transport.
While typical core aspects such as the location or the basic quality of a property can only be optimised with difficulty or not at all, manage to green can provide new impetus in the design of the property as an investment strategy in itself. For example, the modernisation of heating and air conditioning systems, the use of sustainable materials or certain structural measures can help to optimise the energy and climate footprint of the property and thus improve the quality of living there.
A flexible redesign of the spaces can also increase the third-party usability of the property. The installation of electric charging stations or a modern bicycle storage room also help to promote the use of more sustainable means of transport.
The future of partnership rentals
In addition to the changed handling of the property itself, the manage-to-green strategy also focuses on the relationship with the tenants and their behaviour: how can tenants be motivated to adopt ESG-compliant practices and adapt their own way of working or business accordingly, for example by working in a manner that conserves energy and resources or using green electricity?
The answer lies in transparency through data. On this basis, new green rental agreements can then also be drawn up in order to promote sustainable business in a joint partnership as landlord and tenant. Such models are quite complex and combine sustainability, freedom of contract, data protection and influence on business operations. The practice of green rental contracts is still in its infancy. But one thing is for sure: a good manage-to-core strategy can no longer do without green.
The answer lies in transparency through data. On this basis, new green rental agreements can then also be drawn up in order to promote sustainable business in a joint partnership as landlord and tenant. Such models are quite complex and combine sustainability, freedom of contract, data protection and influence on business operations. The practice of green rental contracts is still in its infancy. But one thing is for sure: a good manage-to-core strategy can no longer do without green.