Institutional Investors Tick Green for Building Selection
by Rebecca Pearce
Moreover, the most active investment group are institutional investors – pension funds, insurance companies, Sovereign Wealth Funds (SWFs) and banks. 39% of this set, view sustainable asset selection as ‘critical’ or ‘one of the most important criteria’ when selecting properties to acquire, according to our latest research – CBRE EMEA Investor Intentions Survey 2016*.
This news is hugely encouraging. After all, institutional investors tend to take a long term view when selecting investments and to see more than a third place emphasis on green real estate mirrors the long term objectives of creating a more energy efficient environment for all. To understand this sentiment, we need to look under the bonnet of our industry and assess the reasons for the increasing institutional investment focus. There are plenty:
- Regulation – investors are keen to reduce the risk of building obsolescence, while adhering to the EU Energy Efficiency Directive to create a more energy efficient environment by 2020.
- Financial Penalties – if regulation and legislation is not adhered to, investors will likely take a monetary hit.
- Occupier Appeal – sustainable buildings are more attractive to tenants and their employees.
- Better Buildings – modern and critically acclaimed buildings all have energy efficiency features built in.
- Reputation – as the carbon economy continues to gain momentum, investors don’t want their reputation tarnished by dismissing wider sustainability aims.
- Value Add – there is increasing evidence that buildings with energy efficient and wider sustainability characteristics hold, and add, financial value.
In addition to institutional investors, the 2016 Survey also spans REITs, private equity and venture capital firms. 89% of all respondents stated that sustainability is either ‘critical’, ‘one of the most important criteria’, ‘definitely matters’, ‘a consideration’ or ‘used as a rejection barometer’ when selecting real estate assets to fund. Again this is a huge step in the right direction, as it means just 11% view sustainability as an insignificant factor during due diligence.
Furthermore, as a whole, investors active in the EMEA region are placing greater emphasis on sustainability compared to their global counterparts. This is in keeping with a core them from the Survey, that real estate investors – across EMEA – intend to be very active in 2016. Almost half of those surveyed (48%) expect to increase their purchasing activity compared to last year. This infers that more money will continue to pour into green buildings which sends out the crucial message that sustainable real estate is here to stay. Put simply, owners and developers need to improve, and adapt, their commercial property to meet investor demand for more energy efficient and sustainable buildings.
*The CBRE EMEA Investor Intentions Survey 2016 was carried out between 8th January 2016 and 4th February 2016. The survey attracted 1,255 responses globally, but respondents were first asked the global region for which they were most responsible. This report covers the 423 who responded in EMEA.
These responses were spread across a range of types of real estate investors. The most numerous were fund/asset managers, who accounted for 42% of survey participants. A further 13% were pension funds, insurance companies or sovereign wealth funds. The other most numerous respondents were private equity/venture capital firms (11%), private property companies (10%) and listed property companies/REITs (10%).
The respondents were predominantly investors domiciled in Europe (87%). UK-domiciled investors were the most numerous, making up 26% of the total, followed by France (13%), Netherlands (12%) and Germany (12%). The respondents from outside Europe were mainly from North America (8%).
