Will the crisis stop sustainable development in the real estate market?
High loan installments resulting mainly from rising interest rates and a weak zloty, but also the prolonged waiting time for building permits and disturbed supply chains are the most frequently mentioned problems on the real estate market. Problems that translate into dynamic price increases, where the price is set day by day.
What does this mean for ambitious climate goals?
"The pressure of investors is obvious, but net-zero on the real estate market is not that simple and obvious to achieve," says investment expert Radosław Jodko.
ESG reporting, introduced and forced by the European Union, certainly introduced a fundamental change that was felt most quickly - and to which it adapted most efficiently - large development companies operating primarily in the industrial market. Today, investors also consider sustainability reports when assessing investment risk. ESG in the real estate industry is much more than just a marketing procedure to be eco.
The real estate market is also crucial for achieving the climate goals. It is enough to look at the latest report (from March 2022) of the consulting company ThinkCo, which clearly indicates that only in 2020 buildings were responsible for the consumption of 36% of global energy demand, CO2 emissions at 37%, production of 1/3 of the world's waste and consumption of 3 billion tons of raw materials. 2/3 of the energy used comes from fossil fuels.
Construction is one of the most material-consuming sectors of the economy and consumes over 50% of the world's steel production. Its absence on the global market certainly does not help any of the real estate companies today.
The real estate sector is responsible for 30% of global greenhouse gas emissions and consumes around 40% of total energy. Almost 75% of buildings in Europe show low energy efficiency.
Real estate innovations are certainly one of those that can help achieve carbon neutrality. The reduction of CO2 emissions is increasingly taking place not only during the use phase, but also during construction. And the last one is sometimes the most difficult to achieve. Just like the fact that developers have to play green with excel - that is, take into account trends, but also the cost of maintaining or building.
Not every landlord will pay for a building with a reinforced roof just so that you can put photovoltaic panels on it. Especially when not only construction costs are rising, but also material costs. It is the price pressure and disrupted supply chain that are the biggest problems today that significantly affect the real estate market.
In addition, there is no regulation at the national level - in order for one industry to adapt, it must be followed by pressure in each of the cooperating industries.
The most interesting, however, and relatively little-talked about trend is brownfield, i.e. the revitalization of facilities and land. We are thinking more and more often about how to re-adapt industrial land, for example. Is it possible to adapt buildings to meet the standards?
Here, the answer depends more often on what building it is about.
But more and more often, in areas where there is an old factory or an old brickyard, investment opportunities are sought that take into account the development of these old facilities, treating them as an additional attraction. I have been observing several such projects for some time and I can see enormous investment potential - attractiveness resulting from well-thought-out land development with its historic elements.
Decarbonising the economy will not happen by itself. It is not without significance to what extent local law - and hence the sector - keeps pace with the needs of sustainable development. It will be interesting to observe the case of Great Britain, in which in 2023 the regulations on the energy performance of buildings will be tightened, and, according to the analyzes of local companies, only one in 10 London offices meets the standards that are to be in force in 2030. This will certainly also have an impact on property prices and rents for those rented.
Source: Radosław Jodko, investment expert