Real Asset Insight #6 June 2020

Crisis could lead to
a green recovery
A
green recovery is needed to lead us
out of a crisis that has changed the
way we look at assets and cities.
‘There has been a strong government
response to the crisis, now we must
drive a green recovery and change the
way investors, occupiers and citizens
make their choices,’ says Clemens
Brenninkmejer, head of sustainable
business operations at Redevco.
‘The virus has taught us to pay more
attention to the social element and to
the importance of data gathering from
a social point of view,’ adds Douglas
Edwards, managing director, head of
equity raising & client service, at
Corestate Capital Group.
THE END OF URBANISATION?
The last few years have been all about
urbanisation, but Covid-19 is likely to
change cities and possibly determine
how and where we live. ‘Will high-density,
busy cities stay on top or will greener,
smaller towns be more in demand?’ asks
Thomas Veith, partner, real estate, at
PwC. ‘The same applies to buildings: are
tall skyscrapers viable if only one person
at a time can use the elevator?’
The epidemic is also likely to change the
investment landscape. As supply chains
change and near-shoring intensifies,
some places and economies will become
stronger and investments will follow.
Owners can do a lot at asset level but
they cannot change the big picture, says
Brenninkmejer: ‘We can incorporate
social distancing and bring in technical
changes like better ventilation and so on;
the problem is the interaction between
private assets and the public domain.’
However green, compliant and resilient
a building might be, its location in the
right environment remains key.
‘Investments in renewables are still
limited, yet air quality and how cities are
powered matters, because it can negate
or contradict all the good things you
might do at asset level,’ says Damian
Harrington, director, head of EMEA
research, at Colliers International.
Social aspects of ESG set
to move up the agenda
Benchmarking seen as critical to move focus away
from solely environmental aspects of behaviour
The Environment part of ESG has
received more attention than the
Social part, but that is set to change.
The direction of travel is clear. Around
$32trn of capital has been raised for
impact investing, around 20% of the total
global market of $158trn AUM.
More than 1,000 property companies,
REITs, funds and developers representing
over 100,000 assets and more than €4.5trn
AUM took part in the 2019 GRESB (Global
Real Estate Sustainability Benchmark) –
the ESG benchmark for real assets.
‘Benchmarking is definitely an issue,’
says Damian Harrington, director, head of
EMEA research at Colliers International.
‘Some progress has been made on the
Environment part of ESG, but there is still
a big gap in hitting targets and no clear
robust benchmarking of which ESG factors
really matter to a company’s performance.’
LACK OF SOCIAL PROGRESS
In Europe, ‘around 25% of real estate
assets now have strong ESG credentials’,
he adds. However, there has been even
less progress on the Social component,
how the company treats its employees
and whether it does good via its products,
services and interaction with wider society.
‘We have focused more on environmental
topics in the last few years but now
undoubtedly the social aspects will
move up the agenda,’ says Clemens
Brenninkmejer, head of sustainable
business operations at Redevco. ‘There
will be more of a focus on health and
wellness.’
‘Some progress has been made on the
Environment part of ESG, but there is
still a big gap in hitting targets.’
Damian Harrington, Colliers International
Looking at the impact of the epidemic
on real estate, it will be felt differently in
different sectors. Covid-19 has highlighted
the importance of healthcare, as the
countries that have a stronger capacity
have dealt with the crisis better and have
come out of it sooner.
The office sector is likely to see some
permanent changes, after what Harrington
called ‘the biggest working from home
experiment ever’. In a Colliers survey 21%
of respondents thought their productivity
had increased since working from home,
while 60% thought it had not changed and
19% believed it had decreased.
The survey also found that the majority
believe their work/life balance had
improved since working from home: a
62% share in the first week of lockdown,
increasing to 76% after four weeks, a sign
that new habits are being formed.
‘People will go back to the office, because
they miss the social aspect of meeting
colleagues and clients, but they will want
to continue working from home one or
two days a week,’ Harrington predicts.
The workplace will become a different
environment, with new office density
strategies, smart lockers and visitor checkin
codes, an emphasis on cleaning and
disinfection, more cycling and shower
facilities. ‘EPC ratings will be a must-have
and good air quality will be demanded
more and more,’ adds Harrington.
‘Occupiers will insist on what employees
need, so developers, landlords and
property managers will have to provide it.’
50 Real Asset Insight | Issue 2 July 2020