Rising costs fuel energy transition

Skyrocketing energy prices ignited by the war in Ukraine have reinforced the imperative of boosting efficiency and curbing the consumption of fossil fuels in real estate, and of converting to renewables. By Judi Seebus

Higher energy prices are hitting occupiers in all industries, but ­intensive consumers in the manufacturing sector are particularly badly affected. Heating, cooling and powering operations account on average for 140 percent of production companies’ total rental and accommodation costs, according to a recent study by Colliers. Energy bills are also taking a big bite out of ­operating income in the hospitality industry. In comparison, energy costs are ­relatively low as a proportion of turnover and operating income within the office and retail sectors.

The energy crisis is nonetheless spurring landlords across all property sectors to intensify their efforts to monitor and curb energy consumption, and the ESG results and economic benefits are now very visible. “The payback time of sustainability measures is also shortening due to the high energy prices,” Madeline Buijs, Chief Econo­mist and Head of Research at Colliers, says.

The payback time of sustainability measures is shortening due to the high energy prices.
Madeline Buijs Chief Economist and Head of Research at Colliers

Industrial and logistics sector leads on the climate pathway

The industrial and logistics real estate sector is arguably already the most advanced property segment in terms of the climate pathway to cutting CO2 emissions. The extensive roof areas and large site footprints of “big sheds” often readily lend themselves to renewable solar energy generation and the leading players in the sector are also eyeing the potentially lucrative income stream power sales could represent in the future, thereby diversi­fying their dependence on rental income. 

GARBE Industrial Real Estate is represen­tative of this trend. The Hamburg-based specialist recently formed a wholly-owned subsidiary, GARBE Renewable Energy – GREEN GmbH (GARBE Green), to make all its assets net zero carbon by 2040. 

The tide of energy efficiency innovation and renewable energy production is also rising across other property sectors. The Edge in Amsterdam, built in 2014, is still considered to be one of the most innovative and sustainable office buildings in the world and received an “Outstanding” BREEAM sustainability rating with the highest-ever score of 98.36 percent. The world’s first smart building is clad with solar panels and contains no fewer than 28,000 sensors that measure motion, light, temperature and humidity. 

Renewable energy makes sustainable living affordable

In the rental housing sector, the Catella Elithis Energy Positive Fund, launched in 2022, is the world’s first real estate investment vehicle to focus exclusively on European residential developments that produce more energy from renewable sources than the buildings and households con­sume. It also links sustainability to affordability and tenants pay very low or zero energy bills.    

Across all sectors, landlords are looking at new as well as existing technologies such as geothermal energy to heat and cool buildings; to use surplus heat from waste water or industry for heating; and to tap into district or neighbourhood power networks. Used electric car batteries can also be given a new lease of life for storing energy in a building connected to a renewable energy source such as solar panels.

“Sometimes the answer is not more innov­ation, but more networking and exchange of knowledge and a greater willingness to explore the possibilities and to change outdated regulations,” says Christoph Holzmann, Chief Operating Officer at Union Investment. “We also need to be more intelligent when we select materials and use recycled or recyclable products wherever possible to reduce the amount of embedded carbon in our buildings and the number of new builds.”

Data is the new gold. We’re only at the beginning of tapping this huge opportunity.
Joost Vooijs Partner/ Director Asset Services at Colliers

The EU is targeting real estate and fast-tracking the energy transition

The European Union plans to become the first major economic bloc to achieve a net zero carbon built environment, by 2050. But with around 80 percent of today’s stock expected to still be standing by then, the energy efficiency of existing buildings has to be substantially increased and carbon emissions slashed through massive sustainable refurbishments if the EU is to stand any chance of reaching its climate change target.

Innovative solutions and tech breakthroughs are pointing the way forward

Joost Vooijs, Partner/Director Asset ­Services at Colliers, says harnessing “Big Data” is key to implementing the energy transition: “Data is the new gold. The challenge is to obtain meaningful data that provides a good picture of current energy use and how it can be optimised. We’re only at the beginning of tapping this huge opportunity.” Smart data solutions are critical, he adds: “Sophisticated monitoring tools can show which rooms are unoccupied and when, and they can even track the intensity of individual desk use. This information can help us to optimise set points for heating or cooling systems in our commercial buildings, to review cleaning schedules per floor or room and, ultimately, to make better use of the space and resources such as cleaners while also cutting costs.”

Meeting requirements for overall building efficiency

Breakthroughs in new energy sources such as “green hydrogen” could offer scalable renewable energy in coming decades. Similarly, geothermal heat pumps are gaining wider traction in the industry, also in refurbishments, as a way of meeting the requirements of the EU’s Nearly Zero Energy Building (NZEB) directive on the sustainable energy performance of real estate. 

Possible use of buildings to store energy

The greatest challenge facing the real-estate industry in terms of renewable energy is generating it exactly where it is needed, Colliers’ Vooijs says: “The automotive and shipping industries are already working with battery storage of renewable energy. That’s where our industry needs to move to as well. By using buildings to store energy on location, we will help relieve energy supply networks, avoid the need for transportation and thus cut costs as well as CO2 emissions.”

By Judi Seebus

Title image: Ronald Tilleman

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