Winter Issue 2022 - 57

OUTLOOK2022
real estate investment trust (REIT) index fund. " When
you start talking about sustainability and you explain
how a company is more sustainable, using real
estate as an example, people can grasp that quickly
because they've changed the light bulb, they've paid
a utility bill, they've had materials in their building
that they like and some that they don't like, " he says.
" And so it's very tangible, very real for investors. "
Once he tells people, for example, that the Empire
State Building recently had an energy retrofit and its
energy bills are now 40 percent lower, they can see
the opportunity very clearly. " I think real estate has
a huge role to play in getting investors excited about
sustainability because it's so tangible and the solutions
are so readily available and understandable, "
he says.
Investors have taken note, and many asset managers
have reshaped their portfolios to meet the
demand. Major developers such as Hines are luring
investors into property funds that earn high marks for
environmental, sustainability, and governance (ESG)
factors, and a large number of REITs are also going
green. Retail investors, too, are being given access to
exchange-traded property funds with a green tilt, such
as the offerings of Vert and BNP Paribas.
And bond buyers are not being left out: demand is
strong enough that some green property bonds now
trade at a lower cap rate than ordinary bonds. One
property manager says that right now this field offers
easy money. " To be honest, they just fill out a form
that says it's 'green,' and that's it. "
" Investors like the green touch, " says Claus
Hecher, head of business development exchangetraded
funds and index solutions for BNP Paribas in
Munich.
But are green investors right to be bullish?
Often, the value of green improvements outruns
cost. Simple measures such as installing insulation
can reduce energy needs and cut power bills
at the same time. Hans Vrensen, head of research
and strategy for investment manager AEW Europe,
estimates in the firm's 2022 global outlook that it
will cost just below 50 basis point in annual returns
over the next five years for investors across 100-plus
global markets to align themselves with the carbon
emission reduction pathways agreed to in the Paris
Accord by applying the Carbon Risk Real Estate
Monitor, a global carbon benchmarking tool.
Advances in technology are also expanding the
boundaries of what is economically feasible for asset
managers. Artificial intelligence-controlled heating,
lighting, and cooling of the kind featured in Nuveen's
Cube, a 175,000-square-foot (16,300 sq m) office
building is making it easier to be efficient.
Solar panels, too, are over 80 percent cheaper
than they were in 2010, facilitating new business
models. One California startup, ZNE Capital, takes
master-metered class B and C apartments in the Sun
Belt, improves their energy efficiency, then installs
solar panels-moves that shrink the building's
carbon footprint while increasing operating income
and therefore the building's value. " Clean technology
doesn't make bad real estate deals good, but it
always makes good real estate deals better, " says
Owen Barrett, founder and president of ZNE Capital.
Not only can solar installations reduce electricity
costs, but also some buildings can even produce
more power than they consume. For energy-efficient,
low-rise buildings with large roofs or surrounding land
that can be given over to solar panels, " it absolutely
should be feasible to have them generating more
energy than they're using, " says Dean.
Challenges Exist
But it is not all easy. Though the first stages of
reducing energy use and a building's emissions-
such as installing insulation and double-glazed
WINTER 2022
URBAN LAND
55
At the Dalton Park
Outlet Centre in
Durham, England,
the deals are not
only in the shops.
The rooftop solar
panels on this
Nuveen building
generate over
100,000 kWh of
electricity each year,
enough to power
79 homes and save
93 tons of carbon
dioxide.
PHOTO COURTESY OF NUVEEN
Winter Issue 2022

Table of Contents for the Digital Edition of Winter Issue 2022
