‘Triple win’ for green buildings on costs, rents and returns

There is an understandable focus on the difficulties of the transition to green, but things are definitely getting easier and better, delegates heard at Real Asset Media’s Investors & Tenants: Creating Effective Strategies for ESG & Impact briefing, which took place at Provada in Amsterdam recently.

Pieter Vandeginste.

“Now there is a pull from two directions, capital markets on one side and occupiers on the other,” said Ron van Bloois, founder/CEO, Multiple Impact. “Both tenants and investors are willing to pay more for green buildings, which is why we see a brown discount.”

If investors, landlords, occupiers and lenders all push in the same direction then change will happen more quickly and it will benefit everyone.

“Tenants pay higher rents for green buildings, but their energy costs are lower,” said Robbert van Dijk, managing director residential, ASR real estate. “Sustainable buildings generate good returns and higher rents but have lower costs, so it’s a triple-win situation.”

The change is also happening on a European and global level as awareness of environmental issues grows along with the willingness to act.

“ESG criteria are converging more and more and this makes it easier,” said Jan van den Hogen, head of tenant relationship management logistics, Deka Immobilien. “Everyone needs buildings with solar panels on the roof, renewable energy and geothermal heating. ESG goals are the same worldwide and we see the same trends everywhere, with the exception of Asia.”

Institutional investors are driving change and legal requirements are becoming more stringent, as can be seen in Germany and the Netherlands.

“Regulations are too complex and they need to be simplified,” said van Bloois. “Allowing for more flexibility would make them work better.”

Jan van den Hogen

Paperwork and formalities are time-consuming to the point that they can detract from real implementation, experts agreed. They can also create a polarisation in the market between companies focused on getting the legal requirements right and others that concentrate on making a real change on the ground.

“The focus is mainly on the environment, but we think the social part needs more attention,” said van den Hogen. “It’s essential to take your tenants with you and make sure they subscribe not just to the same environmental goals, but also to social goals which are more difficult to achieve. When it comes to ESG, the tenant is a business partner.”

Collaboration between partners is key to making things happen, and focusing on the social aspect is a way of fostering cooperation and mutual understanding.

“Small initiatives matter,” said van Dijk. “A practical real example of how things can get done is working with tenants to create a neighbourhood garden, which is also a way for local to work together and meet each other, which helps with the very real loneliness problem.”

Initiatives like this are emerging more frequently.

“You can start with a flower garden,” said Pieter Vandeginste, fund director, ASR real estate. “On a project in Utrecht a developer is giving one hectare of land and an area in the building available to tenants and residents to learn about gardening and looking after the green space. It’s not about making money but about having a social impact. It is a way of setting the right example and showing a sense of responsibility.”

The transition requires commitment, vision and perseverance, but also a systematic approach and a can-do attitude.

“We just have to keep investing in existing buildings to make them greener and it’s good to see our tenants are committed to this”, said van Dijk. “You need a step by step approach. What looks impossible now will be doable soon.”