Real Estate Asset Management What makes a sustainable property truly sustainable
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But sustainability has also become a two-edged sword: The term has been used so inflationarily in recent years that it is often no longer clear what is actually behind it. This greenwashing has also spread to the real estate market.
In this article, I will explain to you what truly sustainable real estate is and how we at Commerz Real are working to transform our real estate portfolio in the long term and make it fit for the future.
Contents
Real estate and sustainability: Why is this so important?
On the other hand, they offer space for people to come together and live, work, shop and shop together. However, we are currently at the point where many properties, as they currently exist on the market, are no longer really fit for the future or meet future requirements.
On the one hand, this is due to the impact that real estate has on our environment. Currently, around 30 percent of the CO2 emissions emitted in Germany can be attributed to the real estate and construction industry. This makes real estate one of the largest emitters of greenhouse gases in the world.
On the other hand, we are also seeing inner cities change, properties become vacant, housing becomes scarcer and more expensive. The interplay between real estate and sustainability is not just about making it more environmentally friendly. Its interior life and its significance for the urban environment and local residents are also incorporated here.
Therefore, it will become increasingly important in the future to view a property not as an individual project, but in the context of the respective district in which it is socially and culturally embedded.
What makes a property sustainable?
Sustainable Real Estate Funds
What about sustainable real estate as an investment? Are sustainable real estate funds simply “just” several sustainable properties in a portfolio?
It couldn't be easier. Sustainable real estate is of course one of them, but the investment strategy behind the real estate fund is much more important. After all, this is what guides the development or purchase of sustainable objects.
What makes the whole thing much more difficult is that there are hardly any uniform standards on the market. This is now improving slowly but steadily, especially with regard to EU regulatory directives. In this respect, too, genuine, long-term sustainability is more of a marathon than a fun trend.
First and foremost, the Sustainable Finance Disclosure Regulation was introduced in 2021 March. Since then, asset managers and investment advisers have been required to disclose the sustainability impact and any sustainability risks of their investment products in reports. Sustainable investment products are referred to as Article 8 or Article 9 funds.
The regulation provides investors with a good starting point for distinguishing sustainable from conventional real estate funds. Our hausInvest also aims, within the meaning of Article 8 of the Disclosure Regulation, to support environmental ESG characteristics and promote a more climate-friendly way of operating in the real estate industry.
In addition to the Disclosure Regulation, the newly introduced CSR Directive (Corporate Social Reporting Directive) now also provides information on the sustainability impacts of financial and non-financial companies. However, this is less about the sustainable investment product than the associated financial company.
However, this information is also becoming increasingly important for investors: Who is behind the sustainable real estate fund I want to invest in? And how sustainable is the company itself?
Sustainable real estate funds are therefore more than a portfolio of sustainable real estate. At the end of the day, it’s much more about the overarching investment strategy, which is long-term and future-oriented.
Sustainable real estate certificates
Ways to make real estate sustainable
Renovation and digitalisation for ecological sustainability
I explained exactly what this means in a recent article in Handelsblatt. Basically, certain sustainability requirements, especially with regard to resource use and energy consumption, are set out directly in the lease agreement.
However, what falls behind is that we, as real estate asset managers, do not use the property ourselves and thus ultimately transfer responsibility to tenants - and ultimately sanction them for misconduct.
In my view, working together with tenants on ecological efficiency brings much more. For example, digital measuring instruments can be used to transparently control and optimise energy consumption and use.
In our hausInvest Immobilie 2Amsterdam, it is clear what this can look like in practice: As a certified smart building, all important measured values such as operating costs and CO2 balance, but also air quality, temperature or lighting can be measured and controlled digitally here.
And by giving users insight into their own consumption values and also communicating feedback and wishes themselves, they are actively involved in the strategy. This is how we all work together with our tenants and partners to make our properties more environmentally sustainable.
Sustainability and digitalization
Especially in such an environment, it is of great value to be agile and dynamic, to set new standards. This also includes recognising the potential of digitalization and then using it for yourself. What does this mean in practice?
As an asset manager, it is our job to develop the best strategy for each project. In such a process, large amounts of data are collected and evaluated. But without combining this data, we will continue to work with elaborate individual solutions. In doing so, we could use the insights we have gathered much more effectively and thus develop more holistic concepts that can be applied not only to one project, but to several at once.
This concerns, for example, users’ energy consumption or efficient behaviour that saves resources. It is becoming increasingly possible to collect such values - and we can then also apply these findings to other properties. This means that sustainability and digitalisation are also firmly intertwined in the real estate industry.
With fragmentation towards infrastructural sustainability
In addition to ecological sustainability, the infrastructure of the property itself can also be designed sustainably. At hausInvest, in addition to a number of large tenants in the office or hotel segments, we are happy to focus on fragmentation, i.e. on letting out our space in smaller parts.
This has several benefits: On the one hand, the areas can be used by a larger number of different tenants. And this significantly contributes to the properties gaining more vitality and culture again by also promoting exchange between individual tenants.
On the other hand, this smaller-scale rental also ensures greater stability in our rental income. Then our income (and also the returns of our investors) are not only dependent on a large tenant, but on 10 or 20 tenants.
For us as asset managers, this increases the administrative burden, but the risk of default is significantly lower - and the quality of life in the property is significantly higher.
We are also breaking new ground with our real estate project Forum Medikum in Mülheim: The former shopping centre was completely renovated, rebuilt and redesigned. This is now a unique property with a wide range of services, from shopping areas to catering and healthcare services.
The new concept has proven its worth: Small-scale letting integrates the property better into its environment again and makes it significantly more attractive for residents. At Forum Medikum, newly designed shopping options are now available in doctor’s offices, therapy rooms and nursing homes.
In addition to the healthcare offering, the Healing Architecture also ensures that visitors’ well-being is enhanced - with lots of greenery, open spaces and a calming aesthetic.
Affordable housing for social sustainability
But not all people in this country live, work and live in core properties. Affordable living space is more scarce than ever, especially in major cities. And there is far too little happening at the federal level: Currently, it looks like less than half of the 400,000 planned apartments are actually being built.
For a sustainable real estate portfolio, we therefore also set other priorities, ensure diversity and strengthen our focus on other realities of life. For several years now, we have been expanding the share of social housing in our hausInvest portfolio. In doing so, we are looking for close cooperation with the cities and municipalities. In this way, we relieve the burden on the central cities and at the same time strengthen the specific districts and neighbourhoods.
We are also working towards this with our project in Frankfurter Schäfergasse, for example: In cooperation with Caritas, the former office building at Schäfergasse 33 will be converted into a residential building with 64 social and partially barrier-free residential units, which will offer a safe home to people at risk of poverty and social disadvantages in particular.
We are also acting in the same way as the “Social City” federal state programme: town districts not only from a structural perspective, but from a holistic perspective with regard to their social and cultural importance.
For real estate with a future
That’s why I am convinced that sustainability starts with ourselves: What standards we set, what sustainability goals we pursue, how we envision a future-proof society. And then the way in which we create sustainable real estate also depends on this.
This is about more than “just” ecological sustainability. It is only when we also include social and economic aspects in our thinking, i.e. how a property is actually used, managed and embedded in its urban environment, that a holistic picture of sustainability arises.
This is when sustainable real estate really gains value - for its users, its neighbourhood and also for our investors.