Sustainability is becoming increasingly important in the real estate market. Environmental certifications and other sustainability indicators, such as GRESB and GRI, have become an important part of the real estate investor strategy.
According to recent studies, better sustainability correlates with higher yields in real estate portfolios. Dirk Bourne and Maarten van der Spek (2017) analyzed the performance of almost 340 non-listed real estate investment funds in their research and examined the relationship between fund GRESB scoring and fund returns. According to Bourne and Spek, real estate investors who have been the early adopters in GRESB reporting have received higher returns on their investments. Portfolios with longer participation in GRESB reporting also received better returns than others. GRESB reporting was also reported to improve understanding of the performance of non-listed real estate funds.
Moving from the fund level to human, Ramboll’s Green Market Study (2017) interviewed 400 experts in the field of real estate and construction in the Nordic countries. According to the survey, more than 90% of the respondents considered sustainable development relevant to business development. Mikael Lindgren, Vice President, Property Management at Ramboll was quoted in the study as saying: "Compared with traditional buildings, the property and rental returns of buildings with sustainable development are on average 3-5% higher, operating costs are 5-10% lower and the vacancy rate is 3-5% lower." In this case it is clear that sustainable buildings equals financial upside.
This year's first real estate information survey (KTI) dealt with the measurement and verification of sustainability. The article stated that “at best, key performance indicators can be used to guide the company's strategy and support as well its corporate image and the image of the whole industry as a pioneer in responsible business. KPIs need to be based on their clarity and usefulness in practical management.” KPIs are important for tracking maintenance costs, energy consumption, emissions, and even HVAC processes. Portfolio level sustainability KPIs verify business performance and are essential for sustainability reporting.
More about sustainable development and its measurement and verification can be found from Nuuka’s interview with Genesta's CEO David Neal.