Cooperation is the key to sustainability in real estate
Experts who gathered at a Mipim Investment Track session felt competition was an obstacle to progress on making assets ESG compliant. Nicol Dynes reports.
Cooperation rather than competition is the way forward on sustainability in real estate. That was the consensus experts reached during a session of the Mipim Investment Track in March.
“Climate change and social fairness are two of the biggest challenges we face. We should all lie awake at night worrying about them, because we only have a few years to get it right,” said Brigit Gerritse, head of research and strategy at Redevco. “We believe we need to do it together, lead by example, but make it open source; open the door and let everyone step through.”
Attendees linked the focus on sustainability and liveability to economic performance, because assets that were not up to scratch would soon struggle to find tenants and buyers, they said.
“We need to share ideas about the cities of the future, working with local communities to create better places for people to live in,” said Gerritse. “Real estate is a social industry, because it’s about people and where they live. An asset or neighbourhood that is not sustainable does not have a future, so has no economic or financial value either.”
It was felt that change had been a long time coming, but was now accelerating as more people in the sector came on board.
“We started late, so now it’s really about damage control,” said Ron van Bloois, founder and chief executive of Multiple Impact. “But it only works if it is not a competition, but a collaboration.”
Holistic approach
Cooperation was singled out as essential to finding solutions.
“We need to take a more holistic approach and look not just at the asset, but the neighbourhood and the whole city,” said Gerritse.
“Redevco has changed its focus from retail assets in the heart of cities to thinking about making these buildings more mixed-use as well as more sustainable, so that that part of the city becomes more liveable.”
The office sector was highlighted as an area where huge strides had been made thanks to technology and a new mindset.
“Now we can measure light, air and space and see how they affect people in the workplace, because sick buildings lead to sick people,” said Adrian Karczewicz, head of divestments in Central and Eastern Europe at Skanska Commercial Development Europe.
The pandemic was a catastrophe that led a higher value being put on health and wellbeing, Karczewicz said, and long-term planning was key.
“We plan the energy performance of our buildings 50 years ahead, and we also plan how the assets will be dismantled and demolished in a few decades’ time. Recycling needs energy and creates pollution, so we prefer to reuse materials.”
He cited Skanska’s Warsaw One as a practical example of this strategy. This taxonomy-aligned office development in the Polish capital replaced the Ilmet tower. Not only were 90% of materials recycled or reused, but some, such as partition walls and windows, were sent to Ukraine to help with its reconstruction efforts.
‘Data provides transparency, which is the key to moving forward in a positive way. There will be ever more transparency in the market.’
Alexandre Grellier, Drooms
The development had a social impact side as well. Two floors of the building were refurbished and converted into a refugee centre to host around 500 Ukrainian mothers and their children.
Technology was providing the means to achieve change in office buildings, Karczewicz said. “Sensors are learning how people behave [in spaces] and data-gathering allows us to improve assets.”
This type of data-gathering informed the changes needed to improve health, safety and well-being, he said.
“Change usually happens under pressure, and the social aspect has come to the fore recently,” said Alexandre Grellier, chief executive and co-founder of Drooms.
“We now have the capacity to gather data, and data provides transparency, which is the key to moving forward in a positive way. There is no turning back, so there will be ever more transparency in the market.”
A question of interpretation
What mattered was that the mindset had changed, said Sebastian Kreutel, a director and head of real assets financial services consulting at PwC Germany.
“There is definitely more willingness to participate, and institutional capital will only invest in ESG-compliant assets, because they are more resilient,” he said.
Some attendees were still worried about the cost of going green, although others pointed out that more companies were realising that the long-term cost of a lack of action would be for their assets to become stranded.
‘Real estate is a social industry. An asset or neighbourhood that is not sustainable does not have a future, so has no economic or financial value either.’
Brigit Gerritse, Redevco
The EU Taxonomy was becoming ever more important in Germany, Kreutel said, both from the banking and asset management point of view. “It is a topic for our clients, who want to know what the taxonomy means and what they need to do to become aligned with it.”
There were questions about the interpretation of sections 7.1 and 7.7 of the taxonomy, which cover the construction and acquisition of buildings.
What mattered was continuing the discussion about interpretation, said Kreutel, noting that it was positive that market participants were keen to develop a strategy to achieve standardisation and make sure their assets could be showcased as taxonomy-aligned and compatible.
An awareness of the magnitude of the challenge should go alongside a determination to overcome the challenges, Gerritse cautioned.
Aiming high was not a bad thing if ambition led to action, she said. “If Martin Luther King had made an ‘I have a nightmare’ speech, no one would have listened. It is good to have a dream.”