The importance of ESG standards for real estate in 2023
CBRE has published a 2023 forecast for Italy’s commercial real estate market. The report’s central thesis was the factor of uncertainty, which will play a vital role in all sector processes. In this case, experts note that the vector of attention of investors is shifting to projects that meet ESG standards.
2022 was extremely difficult for the Italian and global real estate market. As a result of rising prices for building materials and fuel, developers faced rising costs for projects. This, in turn, led to a slowdown in the market. According to analysts, the Italian commercial real estate sector is undergoing new approaches and principles of the market. More and more investors are interested in projects that support sustainable development.
Changing consumer behavior is a powerful signal for developers to optimize their construction processes following the environmental requirements of ESG. Soon commercial real estate projects that meet these standards will become more demanded on the market. The favorable credit terms make such objects easier to rent out. Besides, developers should be prepared that ESG criteria will become a mandatory condition for the project’s implementation.
Similar transformations are waiting for the residential real estate market. Investors will be interested in small projects, which will reduce the financing threshold. The ESG approach to the construction of houses is also relevant here, primarily because such objects are more in line with buyers’ needs. In addition, it’s easier to get financing for homes built with ESG requirements in mind.
ESG concept is a set of tools and approaches to solve problems at the ecology, society, and corporate governance level. From the real estate market’s perspective, this standard should consider the influence of the object and its construction on the environment, the orientation of the project on the social values, and comfort for the tenants. In addition, investors pay attention to the developer, their management methods, and their reputation in the market. ESG projects include green and energy-efficient buildings, affordable and social housing.
Compliance with the designated standards already affects the real estate valuation adopted in the EU. It contains a system of comprehensive project analysis based on the results of which the investor decides on further financing.
Another advantage of the ESG standard real estate is the support of the state. Governments of developed countries encourage companies seeking to reduce the negative impact on the environment in their activities, to switch to more environmentally friendly materials, and to optimize production processes to reduce emissions.