High quality data an essential component for all ESG needs

Data is crucial in real estate now, particularly in relation to ESG, whether looking at it from the tenant’s or the investor’s point of view.

“I’m looking at it from both perspectives: the investors’ and the tenant’s,” said Adrian Karczewicz, Head of Divestments, CEE, Skanska.

“The majority of ESG values are acceptable and, of course, investors and tenants are very much encouraged by them,” he said while talking to Real Asset Insight’s Richard Betts.

However, there are small differences and tenants concentrate on net carbon, on emission-free operations and the well-being of people in the building.

“So you have to look at the location of the building, access and, of course, the quality of air, water and biodiversity, the presence of terraces, additional amenities like kindergartens,” he said. “Everything that is very important for the ‘S’ value.”

Investors still tend to focus on the bottom line though.

“How much money they make on ESG, or the energy efficency of the building. Definitely, I would say this is still the most important factor,” he said.

“On top of that you have to have proper data, for investors about savings and data. They’re looking at the cash flow, the IRR and their return on equity so they have to see what kind of data they have to hand so they can analyse that and look at the trend and then apply that in the asset management of the property.”

“This is very important because you have a lot of data on energy, on the social aspects” he said. “The quality of data is critical.”

Karczewicz had started by saying that the economic outlook for Central Europe is currently more promising than that of western Europe and this has been underlined by recent publications such as PWC’s Emerging Trends Europe 2023.

“You can see that the economies of Central Europe will be growing much faster,” he told Real Asset Insight’s Richard Betts.

Over the next four years Germany, Italy and France will grow at 1.5 to 2% while growth in Central Europe will be 3 to 4%. “This is fuelled by manufacturing, exports and consumer spending so the economies are still trading very well and we haven’t had a recession in Poland or in Czech Republic in the last 20 years”

However, as five- and 10-year bonds are still trading at high levels Karczewicz said it is hard to expect any decent increase in pricing or decrease in yields.

“What will happen, in my opinion, will be the change of the dynamic of the real estate market so you won’t be looking so much at the yield you buy or the exit yield, but at the rents.”

The economy, consumer spending, manufacturing and exports will fuel companies’ expansion. “Recent investors will be definitely put more focus on rental level predictions for the next years.”

Central Europe has less to fear concerning office obsolescence according to Karczewicz.

“The average age of buildings in Central Europe is 16 years, versus 33 to 35 years in Western Europe,” he said. Levels of physical occupancy are better. Furthermore, the distance from home to the office tends to be shorter in Central Europe. “Many real estate investors and developers have this idea of 15-minute cities. We don’t have to build 15-minute cities because our distance from home to the office is much shorter than in London or Paris.” He said this will definitely be a game changer for Central Europe.