The last day of COP26 focused on the built environment as a major contributor to – and thus a vital player in solving – the climate crisis.

Paul Danks

Paul Danks

There is an urgent need for action to decarbonise the sector, from design and construction to operations. Members of the Society of Industrial and Office Realtors (SIOR) across Europe have shared how they are responding.

Carter Jonas research shows that in the UK, there is high demand for offices with a low- or neutral-carbon footprint. Investors are realising that older, energy-inefficient stock leads to longer vacancy periods, higher investment risk and lower rental growth. As regulations raise the energy performance threshold, and UK standards make it unlawful to grant a commercial tenancy for property with an EPC rating of ‘F’ or ‘G’, investors are turning to new and refitted grade-A buildings.

The industrial and logistics sector’s approach to carbon emissions has also moved on, with developers prioritising energy efficiency, constructing BREEAM ‘Excellent’ and EPC A++ rated buildings, and SIOR members working to cut embodied carbon throughout the construction process.

Sustainability is rising up the agenda, stemming from growing pressure from occupiers. Across central and western Europe, AXI IMMO Group highlights that climate change factors are increasingly integrated into transactions as recognition of the higher value of ESG-compliant portfolios becomes increasingly widespread.

Ratings such as BREEAM and LEED will form a critical part of developer and investor decision-making criteria.

In the Baltics, NEXTRE Global Group notes a growing appetite for ESG compliance and loans linked to sustainability, as several cities specify that buildings with 100-plus occupiers must adhere to a major sustainable certification system.

They are not only looking to boost energy efficiency but wellbeing, too. The sentiment that ESG criteria and employee wellbeing go hand in hand is echoed in western Europe, where there is a drive by tenants to become WELL certified to retain talent. Employers also realise that to encourage back staff used to working from home, they must have sustainable, appealing environments.

Breaking down barriers

It is important to break down barriers to implementing changes, especially for smaller companies. In Germany, the government has committed to cultivating a climate-neutral construction industry and is set to introduce incentives such as 30% subsidies for hybrid heating systems to accelerate adoption.

NAI Apollo and Blackbird Real Estate report that many investors are refocusing from buying properties to making existing ones more eco-friendly. In Belgium, CEUSTERS is seeing an emphasis on prolonging the lifespan of buildings, partly driven by developments such as the Energy Performance of Buildings regulations, which render offices built before 2006 outdated, requiring more investment in energy efficiency and sustainability.

In Italy, occupiers are insisting on minimum standards – for instance that new Milan office schemes must meet class-A, zero environmental impact and LEED certification requirements. NAI Target Real Estate is seeing higher rents for these buildings.

Across Europe, technology and digitalisation are playing an integral role in making buildings more energy efficient.

We see clear solutions emerging towards offsetting climate change risk. We should look to the continent to learn and adopt successful schemes while also pursuing our own initiatives in the UK.

The consensus is that environmentally friendly buildings are not only beneficial to the planet but also offer far greater value.

Paul Danks is president of the European regional chapter of SIOR