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    12 Nov 2021

    COP26: The Future of Real Estate & Green Investing

    COP26: The Future of Real Estate & Green Investing

    This week world leaders joined forces at a milestone conference to compose a plan tackling the climate crisis before it is much too late. The 26th UN Climate Change Conference, more commonly known as COP26, united almost all countries to discuss the strategies to save our planet. To avoid world temperatures rising by 1.5 degrees, achieving net-zero by 2050 is crucial. Hence, each industry across the UK and the world must adapt quickly to tackle the crisis. The question is, how is the world of real estate going to proceed and will the market modify its practices?

    Each party in real estate is now more involved than ever as the world shifts its focus to sustainable living and healthier wellbeing. The criteria around the factors of Environmental, Social and Governance (ESG) now holds more importance to all as the climate clock is ticking. Moreover, this is true whether you are a property developer, investor, or homeowner.

     

    The Clock is Ticking. What Does the Future Hold for Real Estate?

    We cannot escape science and the truth is, we cannot stop the clock.

    To illustrate the percentage of global carbon emissions released, the World Economic Forum conducted some research. Study shows that commercial and residential real estate is responsible for around 40% of global carbon emissions.

    As we begin to build back from the pandemic, we must look ahead and break out of normality and comfort zones. The real estate market will need to pivot to combat the climate issues because we have only 30 years to save the planet. Unsurprisingly, many global business giants already have net-zero carbon targets in place and a substantial proportion of these businesses hope to attain this by the year 2030.

    Real Estate & ESG | The Growing Desire for Green Investing

    As COP26 brings forth environmental concerns in the media, we anticipate this will be on the minds of many. Perhaps you are wondering which stage of the real estate cycle affects the factors of ESG. The truth is that environmental and social factors impact the entire supply chain. Including sourcing materials and manufacturing, right through to delivering the goods.

    In addition, the desire for green investing continues to grow. The Wealth Report 2021 reveals investors with a higher net worth have a greater interest in ESG-focused developments. But how can the property industry make this appeal to the mass market and not just the wealthy?

    We believe property investors are slowly but surely seeing more of the importance of ESG in real estate. There are over 12,000 green-rated buildings across the UK, and many more are under construction. Therefore, a wide range of green investible real estate assets are on offer.

     

    Energy-Efficient Properties Continue to Move up the Agenda

    According to the Climate Change Committee (CCC), homes in the UK account for 15% of the greenhouse gases. Significant changes will need to be made to current properties to meet the net-zero goal by 2050. Plans are in the pipeline to raise EPC ratings to a minimum of C for private rented properties. The government aim to achieve this by the year 2030 or even 2025.

    As a result, tenants could save money on their bills because the energy efficiency of homes will be higher on average. For property investors, this will also prove to be an attractive selling point for potential tenants. Landlords may also be eligible for the Green Deal scheme on offer by the government. Therefore, allowing them to apply for a loan to make the properties more environmentally friendly.

    It is evident, eco-friendly homes continue to hold more importance for home buyers. According to research compiled in Knight Frank’s Global Buyer Survey, 84% of respondents said the energy efficiency of a future home is a crucial factor.

     

    Developers & Investors | Looking to Invest in a Greener Future?

    Property investors and landlords can secure the greenest credentials for buy-to-let properties by investing in new-build developments. Tenants and investors are becoming more environmentally conscious, so seeking out the most sustainable properties.

    New-build properties generate smaller carbon footprints in comparison to older properties. A smaller footprint is released because the design of new builds consists of sustainable and innovative materials. What can property developers employ to ensure they attract the largest pool of property investors who are looking to invest in a greener future?

    • Double or triple glazing windows  

    Double glazed windows will trap in the warmth meaning the central heating will not need to be switched on as often. Alongside dropping the price of bills, it will also reduce emissions.

    • LED bulbs

    Research suggests the move from halogen bulbs to LED bulbs could reduce CO2 emissions by 1.26m tonnes. As a result, this will lower the footprint of homes.

    • Charging points for electric cars 

    Currently, there are over 345,000 pure-electric cars on the road in the UK, or 675,000 in total, if you include the plug-in hybrid models. The number of electric vehicles on the road will only grow. So, adding an electric charging point to your development could attract a growing market of potential tenants.

    • Solar energy 

    Solar power is a low carbon, renewable energy alternative. Implementing this into new build properties will significantly drop the bills, making it an attractive leasing opportunity for tenants.

    • New boilers, effective insulation and smart meters will also improve the energy efficiency of properties.

     

    The Green Industrial Revolution: Green Building

    The UK is striving to become a global leader in green technologies. Exactly one year ago, a 10-point plan was created for the Green Industrial Revolution. The 10-point plan will receive £12bn of government investment and possibly three times as much from the private sector. Subsequently, this will create up to 250,000 jobs, boosting employment across the country. The plan includes driving the growth of low carbon hydrogen; shifting to zero-emission vehicles; green public transport and ships; green finance and investing in carbon capture and storage. But most importantly for the property sector, the plan outlines the focus on greener buildings.

    This green economic recovery will ensure new buildings are operating at the optimum levels of energy efficiency and low carbon heating. The government hopes to achieve this by implementing the Future Homes Standard in the shortest time possible.

    In addition to investing in a more sustainable future, the Green Homes Grant is receiving an extension from the government. The investment of £1bn will be available for another year to replace fossil fuel heating and improve the energy efficiency of homes. According to the government developing greener buildings could support around 50,000 jobs in 2030. By 2032, the government aims to reduce direct emissions by 50% in comparison to 2017 in the public sector.

     

    CityRise Verdict | Real Estate & COP26

    The climate crisis has driven the momentum for a sustainable change in the real estate sector. COP26 will no doubt speed up this force. With the hopes of adopting carbon-neutral practices immediately and implementing them as the industry aligns the real estate strategy to corporate targets around the globe.

    Energy-efficient homes have proved to secure higher rents than buildings with lower EPC ratings. For property investors, this results in letting out properties for a higher price per month. In turn, this will increase the ROI for investors in the coming years.

    A sustainable way to deal with carbon emissions is through new build properties. Historic England suggests ‘thoughtfully adapting’ old buildings could reduce emissions by more than 60%. At CityRise, we work closely with trustworthy developers. Including property developers that specialise in conversions and new builds. Many of the developments we sell are designed to the highest specifications and built using sustainable materials. We believe now is the right time to invest in greener properties. Whether you are looking for a character conversion or a new build, our team of experts are here to guide you through your property journey.

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