EUROPE - Real estate manager DTZ is predicting Europe will eventually develop into a two-tier property market which prices less energy-efficient real estate at a discount.
Kate Medlicott, senior research analyst at DTZ, told delegates at a conference in Amsterdam last week development of the sustainable real estate market will gather momentum and will become once of many factors in a company's brand management.
Speaking to IPE Real Estate after the ING Real Investment Managers Conference, Medlicott said while it could take time to surface, the gap between efficient buildings and lesser is likely to mean poor buildings in the sustainability space would eventually needed to be discounted to attract tenants.
"We think it will take time to see an impact on the market, not least due to the sale, rent and construction trigger for energy performance - with long leases already in place, it could take up to 10 years for the certification process to be complete.
"Overtime, we would expect to see the emergence of a two-tier market whereby energy efficiency is viewed as one of the characteristics of prime space stock - energy inefficient space (space with a poor rating) is likely to be discounted," added Medlicott.
DTZ has published research on the introduction of the EU Energy Performance of Buildings Directive and its impact on commercial property. The Directive was implemented on January 1 2006 and each member state has until January 2009 to fully implement it.
More specifically, DTZ has been analysing the likely impact of certification on European commercial real estate as every building will have to be rated from A to G - G being the least efficient.
She notes as energy performance certificates are mandatory and certification will be visible, it should providing a benchmark to the end users and provide a common standard by which investors can compare properties on a Europe-wide scale.
That said, she also acknowledges there was some scepticism among delegates at last week's conference, as some delegates told IPE Real Estate they were unsure whether the benefits of using applying sustainability policies to real estate management would be sufficient to warrant the potential cost implications.
"We always have sceptics and people who think it will make no difference and there are all kinds of situations where the issue has not been handled properly, such as in the UK where [Home Information Packs] are unpopular," said Medlicott.
"But we have quite a few clients where it is becoming an important issue, they view it as ‘future proofing'. If you are building a portfolio, you have to be aware of changing occupier demand over a long period of time. We believe it will be driven by occupiers who are developing a sustainable image, who perhaps have a zero carbon policy to meet by a certain date. In the long-term, these issues are really becoming quite important for the majority of corporates," continued Medlicott.
Indeed, DTZ has evidence to suggest real estate developments can now be built on sustainable investment terms without any additional building costs.
Medlicott quotes one example of a warehouse developer in Europe who said buildings can be improved at no extra cost to the tenant, but notes at this stage the inclusion of ECPs has yet to be recognised in real estate yield generation.
It all depends on the market but there has been little differential between whether it is matters or not. If you can't measure the performance, how can you price it? Once we have clear data, we would expect the market to start moving forward," added Medlicott.