The Grass is Greener on the Other Side | Expert Opinion Article

08 July 2021

by Andrei Botis, CEO NAI Romania & Moldova, and President ROGBC

 

There is no greater urgency in the real estate market than that with which companies and real estate buildings are becoming greener and more energy efficient.

The last decade was characterized by important climate changes and environmental disequilibria that obliged consumers to acknowledge the importance of environmental protection for the future well being of the human race. Buildings are one of the main environmental polluters and take up massive chunk of overall energy consumption – BUT – the building sector is also one of the easiest to transform so as to reduce the pollution volumes, raising the bar, and the expectations, for the adaptability of the real estate industry. 

Construction standards that include provisions related to minimizing the environmental impact came as a natural step forward. Presently, EU regulation includes specific requirements for the minimal standards to be respected for new builds (that need to be Near-Zero Energy Buildings), as well as for refurbishments meant to upgrade older ones to a superior environmental class by diminishing energy and water consumption, using less-polluting materials and offering features that allow users to limit their environmental impact – efficient waste management systems, plug-in stations etc.

Moreover, the EU put in place a complex policy that turned the green objective into its principal growth vector. It involves public financing for developing the adequate infrastructure for improving the environmental performance of the built areas, as well as favourable financing. One objective is to create the institutional mechanism that assigns an “adequate” financing cost to the green performance of the objectives to be financed, with banks playing a key role.

The Romanian Green Business Council (ROGBC) has a prodigious activity in this field, by creating an integrative framework for gathering and sustaining green building initiatives. It involves a long-term systematic dissemination activity meant to increase consumers and investors’ awareness of the benefits of a green building, creating a wide network of investors and suppliers of green materials, and becoming an important partner of the regulatory authorities in terms of implementing green building policies. Examples of initiatives include green home financing alongside main commercial banks, liaising with the authorities in the quest towards fiscal reductions for green buildings. It is also recognized as an expert body, acting as consultative partner or issuing recommendations regarding the implementation of green building policies in CEE.

The shift is palpable. Communities are becoming ever more aware and public authorities are developing policies for ensuring macroeconomic growth through green initiatives. If ten or five years ago, analysts began to emphasize the benefits of green buildings in terms of reduced exploitation costs, better brand image and bigger comfort in utilization, now the green standard is the norm. The changes in market preferences are rapid. The green advantage is gradually replaced in consumers’ culture by a brown discount for conventional buildings. In time, the conventional buildings will be associated with higher uncertainty related to quicker depreciation.

The non-residential segment is already strongly oriented towards building green, especially when talking about new projects. This trend is correlated to an increase in big companies’ demand for green facilities due to their brand management constraints.

The residential segment notes a steady increase in the percentage of green projects. However, an important part of the residential stock remains old and with a low green standard. Regulatory initiatives have been put in place, i.e. that any important refurbishment must also lead to an improvement of the efficiency class. Progress has been slow though, as the cost-benefit analysis does not always prompt a green revamp for older buildings. One potential solution could lie in offering financial incentives for green refurbishment of individual residential units on a perennial basis. 

The most profitable investment projects in the years to come, on the national, but also European real estate market are green complex big-scale integrated projects, including infrastructure developments and a wide range of facilities. They have the big advantage of an integrated green architecture starting with the design phase, that allows obtaining the biggest efficiency possible by including the finest optimizations right from the project phase. 

The EU included them in its development axes and dedicated financial products can be used to put them in place. The costs are not low, but the results certain and the stakes high. We are talking about securing the future of Europe’s real estate market and green is a competitive advantage vector, particularly across CEE countries that need it the most.

To conclude, I would say that future of buildings is green and it is only getting greener. The pandemic and EU’s public policies to mitigate its effects shaped irrevocably consumers’ preferences for green projects. And make to mistake, this is not an evolution restricted to the EU – the United States, Middle East, and the world at large are laying the foundations of better, more sustainable buildings of the future. 

 

This article was originally published in Real Estate in Romania & Poland 2021 report, available in full here

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