All real estate market players have been working for years to reduce their emissions and shape a more sustainable sector. The growing sustainability requirements of investors and tenants turn the decarbonization of real estate into a strategic value creation opportunity.
The real estate sector has taken an important turn towards decarbonization in recent years, especially in the office, hotel and industrial market, a priority for both investors and large corporations. The majority of corporate tenants have ambitious plans to decarbonize their activity that contemplate the reduction of their emissions; also including those derived from the leasing of offices. Therefore, the demand for low-carbon real estate assets has increased in recent years.
However, the supply has not done so at the same pace. This imbalance creates a value creation opportunity for owners and investors to develop lower carbon assets. However, this window of opportunity can also become a risk: those who do not adapt their properties to the needs of tenants risk being left out of the market.
According to JLL estimates, 65% of office buildings risk becoming obsolete by 2030 if their owners do not take action to improve their sustainability performance. The success in reducing emissions from real estate assets is based on three pillars: the optimization of the operation of buildings thanks to the implementation of energy efficiency measures, the electrification of operations and the implementation of renewable energies. The advantages of decarbonizing buildings go beyond having greater power to attract tenants; but they also generate a more profitable cost structure.
Thus, the proliferation of renewable energy generation, storage and transportation infrastructure has made its price more accessible today than ever. Once again, the provision of clean energy has a positive impact on the cost structure of investors and owners: according to the European Consumer Organization (BEUC), producing one kilowatt-hour of solar energy is up to ten times cheaper than doing it with fossil energy.
Not only offices seek this energy efficiency, the Spanish hotel sector, which represents 13% of GDP and employs 3 million people, faces a significant transformation in sustainability and digitalization that will mark the future of establishments, especially in the 16,000 existing hotel facilities in the country.
“They are buildings with intense use. They are 24 hours a day, 365 days a year. The staff is the highest operating cost of the hotel (38%), the supply of items and drinks is the second and the third is the energy operating cost and maintenance of buildings,” says Manuel Castro Lafuente, director of Operations at Remica. According to Álvaro Carrillo de Albornoz, general director of the Hotel Technology Institute (ITH), “energy efficiency has become crucial after the increase in energy prices, offering a double advantage: Not only do we save money, but we can make it profitable because the customer is increasingly concerned.” Grato wants to revolutionize water consumption in hotels.
“We have just signed a collaboration agreement with ITH and we are going to present at the Fiturtechy event, which will take place in January, a revolutionary solution for the sector. A domestic hot water system that is heated at the point of use, eliminating the need of boiler rooms and reducing problems such as legionella. The system works with solar energy, making it highly efficient and sustainable,” declares Vicente García Barres, general director Grato.
Hotels seek sustainability and one of the chains where sustainability is a fundamental pillar in their business model is Vincci, Hotels that has received the CaixaBank Hotels & Tourism award for commitment to sustainability, thanks to the measures it has carried out. in relation to the reduction of CO2 emissions and the use of 100% green energy in all its hotels. “Efficiency and sustainability are essential in the face of the growing demands of legislation and climate change,” says César Pérez Araque, Director of Quality at Vincci Hotels.
Cost adjustment
On the other hand, The push for the electrification of buildings – especially air conditioning systems – also represents a sustainable lever that owners can take advantage of.. Using electricity, instead of fossil sources, to power buildings’ HVAC systems drastically reduces Scope 1 emissions from buildings, which, again, makes them more attractive to corporate tenants seeking to reduce their environmental footprint. .
Finally, regarding the optimization of the energy efficiency of buildings, light renovations – which focus on the optimization of equipment, installation of LED lights; improvement of management systems, etc. – of real estate can generate savings of up to 2.9 billion dollars. This figure rises to 11.4 billion dollars in deep rehabilitation scenarios that cover the mechanical, electrical, plumbing and air conditioning systems of the assets, according to the consulting firm JLL.
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