Health, wellbeing and environmental considerations may be moving up the property sector’s priority list since the onset of Covid but so far the focus has been mainly commercial property.
However, a growing cohort of developers and investors is now turning its attention to the residential sector, particularly multifamily developments, says CBRE.
The firm said that in countries such as Ireland, where multifamily development is at an early stage, this has particular resonance. With such a large amount of purpose-built development planned, there is an opportunity to embrace ESG from the outset of the process, the firm said, adding that to do so would establish Ireland as an exemplar of sustainable multifamily development.
“Much of the multifamily stock that is being developed in Ireland is purpose-built and therefore adheres to current regulatory requirements such as Near Zero Energy Buildings (NZEB) and Building Energy Rating (BER) certifications, so is already well on its way to demonstrating favourable sustainability characteristics,” said CBRE Ireland head of sustainability Rachael McGinley.
She added that the focus is moving away from regulation and design elements to construction, operational and social elements that also have a part to play in improving a development’s ESG credentials.
No scheme can aspire to ticking all ESG boxes
McGinley said that ESG is broad and no scheme can aspire to tick every box, not least because the cost of providing every aspirational element would render development unviable.
“However, those developing multifamily schemes are increasingly looking at all of the options that come under the E, S and G banner and determining which elements they can realistically incorporate into schemes to make them more sustainable and efficient to operate,” she added.
In locations where supply and demand are in broad equilibrium, CBRE said sustainable multifamily developments should generate higher rents and achieve higher occupancy than competing schemes that do not have equivalent ESG credentials.
Developers should be mindful of this and look to incorporate sustainable features into their developments to improve liquidity and to future-proof multifamily schemes, the firm said.
CBRE said that while the millennial generation, which generally makes up the bulk of occupants within multifamily schemes, is very aware of the need to live sustainably, occupants are unlikely to be willing or in a position to pay more for sustainability credentials or features unless it can be demonstrated that significant cost savings will result.
CBRE Ireland head of research Marie Hunt said that ESG features increasingly have value implications for property assets. “We expect to see a widening delta between core multifamily buildings that offer the highest standards in terms of ESG and older secondary buildings that will require considerable retrofitting in order to bring them up to minimum standards.”
“It is no longer a case of considering if you can afford to integrate sustainability elements into a multifamily scheme but rather a question of considering if you can afford not to” she added.