Institutional investors increasingly are demanding sustainably designed and managed real estate funds, according to Catella, the Stockholm-based financial advisory and asset management firm.
Catella expects that by mid-2016 some €850 million will be allocated to dedicated ‘green’ real estate funds in Europe.
“Pressure is increasing significantly from institutional investors for sustainably designed and managed real estate funds, and the process of transformation from conventional buildings towards a reorganized energy-efficient portfolio is a billion-dollar business in Europe alone,” commented Thomas Beyerle, head of group research at Catella.
However, despite the growing popularity among institutional investors for sustainable real estate funds, so far it has been a slow-growing sector.
“The sustainable-investments segment is booming worldwide, and European volume in 2014 was €5.2 trillion. In the same period, sustainably designed and managed real estate funds achieved just €495 million,” Beyerle added.
Beyerle puts this slow growth down to a couple of factors: firstly, the lack of new builds in Europe; secondly, the difficulty in refurbishing existing assets to a uniform standard.
“There is neither a universal seal of approval for sustainable real estate funds nor a benchmark for peer-group comparisons, which are absolute prerequisites to kindle the competition,” said Beyerle.
Yet, in spite of these problems, fund managers are introducing sustainable review criteria into due diligence processes and transaction standards, which Catella expects will yield positive results.