In Germany, the level of interest in sustainable real estate is encouraging, but implementation and product supply lag far behind, as Thomas Beyerle reports
Let us be honest - who doesn't like investing in a convincing investment story - especially when it not only provides a strong economic but also a strong ecological and thus moral argument? ‘Green' is now quite clearly a major trend.
Scarcely a day goes by without the consumer being confronted with this subject. Yet hard data is still limited. During the period between 23 July 2009 and 14 August 2009, we carried out a representative survey among German managers of open-ended and closed-ended real-estate funds to obtain a comprehensive picture of the current situation.
The questions were addressed to members of BVI (the German Association of Fund Managers), VGF (the Association of Closed-ended Funds) and INREV (European Association for Investors in Non-listed Real Estate Vehicles). The core of the survey comprised questions covering sustainability, green buildings/green building funds, environment certificates and investor behaviour. The level of interest shown in this general subject can be seen from the 53.3% of responses from 75 managers polled.
Most of the people who took part in the survey had already dealt with the subject of sustainability in the course of their professional work. Sustainability already receives quite a bit of attention; nevertheless, daily implementation in most companies has still not progressed very far.
On the survey questions relating to green buildings/green building funds we see some interesting results. When asked how important sustainability issues are in the acquisition of new buildings, almost 60% of respondents consider sustainability aspects during an acquisition process as "important" to "very important", although only 27% of the funds managed take sustainability into account. Nearly 25% consider sustainability aspects during acquisition processes unimportant.
Interesting answers were also received from the client viewpoint. About 70% of the respondents indicated that they or their company had been contacted on the subject of sustainability. And 35% of our respondents believe that sustainability factors in real estate funds are "important" to "very important" for customers.
On the question of whether the supply and demand of green buildings was sufficient, the majority of respondents believe that the supply is currently nowhere near enough to launch a green building fund. On the other hand, more than 45% of the respondents believe that the demand is not sufficient to launch a similar fund. Nearly one in five could not give an assessment of the current market situation in the area of supply and demand relating to green building funds. From the demand perspective, interested investor groups with a clear focus on a sustainable fund are churches (32.2%), foundations, retail customers, retirement provision institutions (25.8%) and insurance companies with 22.6%.
In the final part of the survey we asked respondents to assess the future prospects of sustainable buildings and green building funds. About 70% of the fund managers expect that the proportion of green buildings in their existing funds will increase in the next five years, while only 3.2% of the fund managers do not expect that the proportion of green buildings in their existing funds will increase. Nearly 23% of the fund managers expect to be offering a pure green building fund in the coming five years. The larger group, 38%, do not expect to offer a pure green building fund in future.
The survey of German real estate funds managers showed that the aspect of sustainability certainly does arouse keen interest but most companies still do not have any possibility of concrete implementation. The trend towards green has, nevertheless, been recognised; in the opinion of most fund managers, the portion of sustainable buildings in their real estate funds is set to rise over the coming five years. For just under 60% of the managers surveyed, sustainability has already become an integral element in their investment strategy.
The findings from our survey reflect high expectations accompanied by a dearth of evidence. The research showed that there is certainly quite a lot of interest in the commercial significance of sustainability, although most companies still have not managed concrete implementation. The success of the certification of sustainable buildings is significant; it has quickly attained a high level of acceptance in Germany, the UK and the US. Green buildings are still something of an exception - but in the not too distant future sustainable construction is set to become an international standard. Green is now very much in vogue. The question of ‘green' real-estate funds is no longer one of whether it will happen, but merely when.
Thomas Beyerleis head of global research,Aberdeen Property Investors