JLL Nordic Outlook: ESG and sustainability are changing the dynamics of the real estate industry
A new Nordic Outlook is out with the headline Carbon commitments shape market dynamics, delving into ESG and sustainability in the real estate industry. As always, the report also dives into the Nordic market conditions, trends in the different property segments and looks at the outlook for the property industry in the Nordic countries. EDC Poul Erik Bech has provided market figures and trends for the Danish part of the report.
Helle Nielsen Ziersen, Head of EDC International Poul Erik Bech, who works closely with JLL and has recently completed a mini-MBA in ESG, says: “ESG and sustainability are becoming more and more important. In our international department, we work daily with companies that are prioritizing and reporting on their ‘green’ efforts to a much greater extent than before. Sustainability has become an independent business area like so many other things. It’s here to stay, and the interest and awareness is constantly growing.”
She continues: “Companies are investing more and more in various sustainability initiatives because the consequences of not doing so, are getting bigger and bigger. The number of companies signed up to SBTI (Science Based Targets Initiative) has increased fivefold in the past year. It is a non-profit initiative focusing on collaboration between companies and experts to ensure, that company climate targets are aligned with climate science. Over 8,000 companies, including 800 in the Nordic countries, are involved in the initiative. This is just one of many examples of how this is an area of significant growth.”
Tenants are demanding more
The theme article in Nordic Outlook also focuses on the fact that the more companies that sign up to initiatives such as SBTI, the more influence it has on companies’ choice of property. At JLL in Sweden, they are experiencing a significant increase in Demand for sustainable office space, and this is also something Helle Nielsen Ziersen recognizes in her daily contact with both Danish and international companies:
“Companies have become more aware of ESG and sustainability in the last few years, and this has a direct impact on companies’ choice of premises when buying or renting. Among other things, this has meant that, tenants have started to place higher demands on the property’s energy efficiency, carbon emissions and sustainability profile. Tenants are increasingly looking for solutions to reduce their carbon footprint, both in terms of operational emissions and embodied carbon, which is the total amount of carbon sequestered in the structure and materials of the building itself.”
“Green lease clauses have become a key tool for tenants who want to make sure their lessors are committed to sustainability goals. It helps to create an ongoing dialogue and collaboration between tenants and landlords aimed at making improvements, sharing consumption data and increasing transparency on things like energy consumption, water consumption and waste management. This leads to a change in the dynamics of the market – because if the landlord and tenant don’t work together, it’s difficult to change things,” Helle Nielsen Ziersen states.
Reason for cautious optimism
As always, JLL takes the temperature of the Nordic property market in Nordic Outlook, and if you look at the figures, there is light at the end of the tunnel. Joseph Alberti, Head of Research at EDC Poul Erik Bech says:
“The Swedish real estate industry, which is the largest in the Nordics, experienced a recovery in the second quarter of 2024 and transaction volumes have increased by 10% year-on-year. In the first half of the year, 49 billion SEK was traded, and of this, 32 billion SEK was traded in the second half of the first half of the year. This indicates that the gap between buyer and seller has narrowed and that there is reason for optimism.”
“In Denmark, the transaction volume for the first six months of 2024 was very close to the level of the same period last year. At the beginning of the year, the transaction volume was at a very low level, but it increased slightly, and the last few months were better than the first months of the year. Therefore, our expectation is that the transaction volume will quietly continue its upward-going trend for the rest of the year, and the total volume for the year will exceed 2023. However, everyone agrees that there is a long way to go before the previous record years,” says Joseph Alberti.
JLL is one of the world’s largest real estate companies with an annual revenue of USD 20.9 billion, and more than 103,000 employees and operations in over 80 countries.