2023-07-31-莱坊-Quantifying_ESG_in_real_estate_-_EN_2023_13页_2mb

Summary of "Quantifying ESG in real estate: Six lessons from the journey so far"

Core Content

The document explores the integration of Environmental, Social and Governance (ESG) factors into real estate investment and development decisions, emphasizing the importance of data-driven analysis and the challenges of translating ESG principles into tangible value for the industry.

Main Points

1. ESG as a Collective Responsibility

• ESG considerations are now central to major real estate decisions.
• The industry is embracing a shared responsibility to address ESG challenges.
• ESG research has often been based on opinion rather than data, making it hard to make informed decisions.

2. Quantifying the Value of Green Buildings

• Green-rated buildings offer measurable rental and sales value uplift compared to non-rated buildings.
• BREEAM ratings in London can lead to a 10–12.3% sales/rental price premium.
• NABERS rated buildings in Australia show a 18% sales price premium.
• The research uses rigorous methodologies and proprietary data to isolate the impact of green certifications.

3. ESG and Private Investment

• 80% of private investors consider ESG important in commercial real estate decisions.
• ESG is viewed as a way to future-proof portfolios, preserve wealth, and achieve greater returns.
• 40% of respondents are primarily concerned with protecting long-term returns.
• ESG is also seen as a branding opportunity, especially in regions like Asia where less than 10% of respondents think it is unimportant.

4. Occupier Interest in ESG

• Real estate is a major contributor to corporate carbon emissions, with 40% of global carbon emissions from the sector.
• While 40% of surveyed corporates have net-zero targets, only 16% believe these targets influence real estate decisions.
• 77% of those with net-zero goals have set a target date of 2030, which is less than one real estate cycle away.
• There is a disconnect between corporate ESG ambitions and real estate strategies.

5. Regulatory Impact on Office Markets

• Tightening regulations, such as the Minimum Energy Efficiency Standards (MEES), are pushing for higher EPC ratings.
• By 2030, a minimum EPC rating of 'B' will be required for all commercial premises.
• 82% of office stock in UK regional cities would fail to meet the proposed 'B' EPC rating if enforced today.
• This is expected to drive refurbishment activity and corporate office moves as demand for top-rated buildings rises.

6. Walkability and the 15-Minute City

• The concept of the 15-minute city is gaining traction, focusing on walkable, mixed-use urban environments.
• Walkability has a measurable impact on property value and rental growth.
• South Bank and Kings Cross/Euston in London have shown twice the average rental growth due to their walkability and mixed-use nature.
• Walkable neighborhoods support healthier lifestyles, community building, and ESG compliance.

Key Information

• Green buildings add value through measurable premiums in both rental and sales prices.
• Private investors globally are increasingly focused on ESG, with 80% viewing it as important.
• Occupiers are not fully aligned with ESG goals, often lacking the necessary action to meet their stated ambitions.
• Regulatory changes are accelerating the need for energy-efficient buildings, with MEES setting a clear path toward higher EPC ratings.
• Walkability is a growing factor in real estate value, particularly in urban centers like London.
• Retail properties have limited green credentials, with only less than 1% currently rated or pursuing sustainability ratings.
• The UK's retail sector is dominated by new developments, making retrofitting more challenging and costly.

Practical Applications

• The CRREM Stranding Risk Tool helps assess the risk of properties becoming stranded due to carbon emissions.
• The Urban Walkability Tool allows for benchmarking and scoring of different markets or buildings based on walkability.
• EPC Plus Reports are offered to support compliance with energy efficiency regulations.
• Knight Frank provides ESG consultancy and a network of 100+ ESG Ambassadors to support clients across the real estate lifecycle.

Conclusion

The document underscores the need for data-driven ESG strategies in real estate, highlighting the growing importance of sustainability in investment decisions, regulatory compliance, and occupier expectations. It also stresses the importance of education and awareness among occupiers and the value of green certifications in creating competitive and future-proof assets.