The Dutch office sector is in the firing line as sustainability requirements become more stringent, experts agreed at Real Asset Media’s Global Outlook 2022 – Focus on the Netherlands investment briefing, which was held online recently on the REALX.Global platform.
“There’s a requirement from investors for core assets”, said Dennis de Laat, deputy head, Real Estate Finance Benelux, Berlin Hyp. “Core now means not just in a good location but also an energy-efficient building in compliance with the regulations.”
All buildings are required to have an energy label in the Netherlands, but the issue is particularly pressing for the office sector because there is an end-of-year deadline. By law from 1 January 2023 office buildings must have at least a category C energy label and if they do not comply they can no longer be used as offices.
“The choice is between upgrading your buildings to ensure their sustainability credentials or having stranded assets,” said de Laat.
The challenge is complying with the regulations in time and it is a massive undertaking as, according to Colliers data, 43% of office buildings in the Netherlands are not at the required level and need work.
There is unlikely to be a relaxation of the rules, said Madeline Buijs, chief economist and head of research Netherlands, Colliers: “At most they might be lenient on fines for a little while and give people more time before imposing penalties, but the deadline will not be postponed. Sustainability is too crucial for the government.”
The gap between compliant and non-compliant buildings is likely to grow wider as investors will focus on the good assets and demand for the others will dry up, with just a few ending up in the hands of turnaround specialists.
“Compliant assets will have high valuations and good liquidity, while the others will find no financing,” said de Laat. “We as a bank take this very seriously. We issue green bonds that are linked to our environmental performance, so we’re tied in to this. If investors want to buy and improve assets, we try to contribute from our end.”
Companies are getting the message and gradually following in the footsteps of frontrunners like ASR Real Estate.
“We’ve made a major effort to get an energy label A for all our assets, but everyone has a responsibility to do something, not just institutional investors,” said Elise van Herwaarden, sustainability manager, ASR Real Estate. “What seemed brave at the time now is seen as a logical choice because investors, tenants, managers and authorities are all on board. Sustainability is a must.”
The office sector is in the spotlight, but all asset classes have to focus on sustainability, including the logistics sector.
“ESG compliance is a hot topic on the workfloor as well, not just in the annual reports,” said René Buck, CEO, Buck Consultants International. “The vast majority of new logistics buildings are certified and built to high standards. The rest need to be upgraded.”