Investors are open to pay more for sustainable buildings according to CBRE report

Sustainability criteria (ESG), i.e. care for the environment, social responsibility and corporate governance, are increasingly important for investors in Europe. Already 8 out of 10 intend to take into account non-financial aspects in investment decisions, despite the unfavorable economic environment, according to the CBRE report “Europe Investor Intentions Survey”. A third of investors are ready to pay extra for a building that meets ESG criteria, half of which even more than 20 percent of the original price. In addition, those investing capital are increasingly taking action aimed at modernizing and certifying facilities in their portfolio. Some investors even declare that they are getting rid of buildings that do not comply with the ESG principles.

Sustainable development is a very broad concept that does not only cover the specificity of buildings. However, it is worth starting with them, because it is in them that we spend the vast majority of our lives. How we feel, in what relationships we stay with other people, how we use various resources, to a large extent determines, among others, the environment and the conditions in which we work. That is why real estate used by companies is such an important area of ESG. They are one of the basic factors helping organizations achieve their environmental and decarbonisation, social and corporate governance goals, they affect the image and help to attract the best employees. Investors are well aware of this, which is why they are able to pay higher amounts for facilities adapted to ESG criteria, more energy efficient and with modern solutions that reduce emissions and support the well-being of users. It’s an investment for years

Anna Jarzębowska, deputy director and head of the ESG advisory team, as part of the Strategic Consulting team at CBRE responsible for the study said that only 4 percent of respondents had no plans to implement ESG principles in its facilities and decisions. A folling 15 percent had not yet established and implemented the Sustainable Development Goals it would like to follow, but is actively working towards it. The vast majority, 81 percent, already have established principles and is guided by them in its decisions, despite the current geopolitical and economic turmoil.

Long-term investment

Concern for the environment, society and the principles prevailing in companies are important not only in terms of image or recruitment and retention of employees, but they increasingly affect issues related to obtaining financing, and its reporting will be required by law, including the one established by the European Union . Therefore, implementing the ESG strategy as soon as possible is a long-term investment that can facilitate the functioning of the company in the future and save it from additional costs.

Looking at the decisions and sentiment of investors regarding buildings that function in accordance with the ESG ideas, it is necessary to pay attention to the specificity of individual markets. Poland is quite unique in this context, we are a relatively young market compared to Germany, France or Great Britain, which is related to the fact that the real estate in our market, to a large extent already at the construction stage, was more in line with the ideas of sustainable development than those in Western countries. This, of course, translates into the willingness of investors to incur higher costs for these projects on the Vistula River. In Poland, these differences are not so spectacular, which is a good indicator of the quality of the projects that surround us. Developers and property owners in Poland strongly focus on environmental aspects when building commercial projects. In Warsaw alone, over 50 percent. office buildings have ecological certification in the BREAM or LEED standard, which places us among the European leaders. For investors, it is currently a key aspect that the projects that will be included in their portfolios have specific plans and reports proving that they meet ESG requirements today and in the future

Monika Kulawińska, deputy director in the Capital Markets Department at CBRE

Green actions

Investors take many actions to make their portfolios more and more balanced. Almost 80 percent of them develop their buildings in a way that will enable them to be certified, e.g. LEED or BREEAM, and more than half seek advice from certification institutions before making an investment decision. Slightly more than a third subsidizes sustainable facilities, and almost a quarter sells those that do not meet the ESG criteria.

Date of first publication: March 16, 2023.

Source: CBRE press office