• Real Estate Best Practices: Construction Efficiency

    October, 2023

Nowadays, investors are demanding efficient construction practices due to new regulations introduced in the European Union. As a result, new developments are generally focusing on certain areas that were not prioritized in the past.

Carbon Emissions: Amidst the production of building materials, emissions contribute an additional 11% during the construction lifecycle. Imposing pressure on developers to reduce their carbon footprint, there is a prevailing impact to promote sustainability, propelled by heightened demand from both tenants and investors who demonstrate an escalating tendency towards ecologically conscious properties. This rising tendency is safeguarding the appraisal of sustainable-oriented assets by increase their value.

The rise of Eco-conscious Buildings: The rise of green buildings is indubitable. Buildings that drive robust environmental performance invariably command more substantial rental premiums than their non-green counterparts. While the meticulous quantification of the sustainability premium may require time, the prospective emergence of a ‘brown discount’ for properties with suboptimal environmental performance accentuates the investment requirement towards sustainability endeavors.

Virtuous Building Components: An approximate 40% of the annual global carbon emissions are attributed within the building and construction layer, with concrete and steel production constituting around 5% of this share. Timber surfaces as an eco-friendly alternative, distinguished by its carbon abduction capabilities. Notably, timber buildings have the capacity between 2,000 and 4,000 metric tons of carbon dioxide during their construction phase, in stark contrast to the 1,000 to 2,000 metric tons of carbon dioxide emissions inherent in an average steel and concrete structure.

The Rigorous of Regulation: The regulatory fabric is about to intensify, woven with threads of environmental, social, and governance (ESG) mandates that have a defining influence upon property ownership. Governments and industry professionals alike are championing the implementation of green reporting standards. Noteworthy is the example of Australia, where the NABERS building rating system has evolved into a legal requirement for buildings surpassing 1,000 sq. m. This promising undertaking has spaced energy reductions averaging 35% and carbon emission reductions nearing 50%. In some remarkable instances, energy consumption has undergone a reduction by an impressive 80%.

Navigating Resilience through Prudent Risk Management: Within the area of ESG and real estate development, resilience encompasses the capacity of buildings to sustain operations during tumultuous events such as pandemics and climatic extremities. Predominantly, the risks confronting the built environment are inevitably with the arc of climate change, where harsh weather often leads property detriment. In recent times, regions across the world have been threatened with wildfires and widespread destruction. In alignment with escalating climate risks, there are also double-digit increments in global property insurance premiums over the last seven quarters.

To conclude, the evolving landscape of construction and real estate is being shaped by a confluence of factors. Regulations within the European Union have spurred a demand for efficient and sustainable construction practices, leading to a shift in development focus. The recognition of carbon emissions as a significant contributor to environmental impact during construction has pushed developers to prioritize sustainability. This drive towards eco-consciousness has not only elevated the value of assets but also spread greater interest from both tenants and investors seeking environmentally responsible properties.