EU plans to boost growth and slash energy use should prioritize property

The EU’s key twin objectives of boosting economic growth against the background of the eurozone crisis and cutting the bloc’s energy consumption by 20% by 2020, may achieve the biggest payoffs if financing is directed towards the real estate sector, attendees at a PropertyEU forum in Brussels heard on Tuesday.

'Economic growth in Europe is not going to come from exports, when the prospects for our major trading partners in the US and China look distinctly murky. It’s also not going to come from internal consumption in the EU with its recession-hit economies and high unemployment. The usual solutions aren’t working and it’s time to look for new sources of growth like the mass refurbishment of buildings to make them energy efficient,' Carsten Brzeski, Senior Economist at ING Bank said.

He was speaking at the European Real Estate Policy & Investment Forum, held at the annual Realty real estate trade fair in Brussels.

Jeff Rupp, Director of Public Affairs at INREV (the European Association for Investors in Non-listed Real Estate Vehicles) argued that policy makers are actually heading in the opposite direction and reducing the flow of capital invested in Europe’s cities -- and so also job creation and economic activity -- through a wave of new regulations on the industry such as Solvency II, AIFMD and EMIR.

'The economic impact of these regulations should be understood before they are implemented, not afterwards. Policy makers need to engage in a careful cost-benefit analysis of the proposed regulations to ensure that the costs don’t outweigh the benefits,' he said.

Steffen Milner, EU Affairs and Regulation Manager at EPRA (the European Public Real Estate Association) said Brussels is not on track towards achieving its target of achieving a 20% cut in the EU’s energy consumption by 2020, but it could improve its chances of achieving that goal significantly by focusing its efforts and financing on Europe’s property industry. Some 40% of Europe’s final energy consumption is generated by houses, offices, shops and other buildings, and 38% of total greenhouse gas emissions come from the built environment.

On May 15, EPRA responded to a European Commission consultation paper on: 'Financial Support for Energy Efficiency in Buildings' in which it said the listed property sector could act as a 'one-stop shop' for implementing the EU’s energy efficiency targets as they are active operational businesses that effectively combine the services of financing, developing, and managing buildings for the long-term.

The EU’s listed property sector is, however, fragmented and evidently small and underdeveloped relative to other regions and this severely handicaps efforts to achieve pan-European goals in one of the underlying fundamental drivers of the bloc’s economy. EPRA urged policy makers to encourage national governments to adopt 'best in class' REIT (the most efficient form of listed property company) legislation across the EU to act as common vehicle for transforming the industry.

In its letter, EPRA said that while the EC’s consultation paper identified an investment requirement of around EUR 60 bn a year in the building sector to realise its required energy savings potential, this figure is significantly less than the capital that could be taken out of the real estate industry by the application of legislation on OTC derivatives alone.