Sustainability is a major theme in the real estate industry
JLL is one of the world’s largest real estate companies and has published the report “JLL Nordic Outlook – Spring 2023” with a special focus on financing, which is the biggest challenge in the real estate industry. EDC Poul Erik Bech has contributed with figures and trends in the Danish real estate market, where sustainability seems to be playing an increasingly prominent role.
Helle Nielsen Ziersen, Partner and Head of EDC International Poul Erik Bech, said: “It is no secret that 2022 was a challenging year on several parameters, and this has also left its mark on the real estate market in the Nordics. The more difficult financing conditions with rising costs and less availability are causing investors to hold back a little more. In addition, investors have stricter requirements than before, such as requirements for energy optimization or other sustainable initiatives.”
Energy prices increase importance of sustainability
EDC Poul Erik Bech has contributed to the JLL report with insights on, among other things, sustainability in the real estate industry in the Danish market.Joseph Alberti, Head of Research EDC Poul Erik Bech, said: ”Sustainability is no longer just a trend, it has become a necessity. The rising cost of energy has meant that sustainability is taken much more seriously now than in the past. Investments in energy efficient buildings are being made like never before, shortening the payback period.”
”In addition the vast majority of investors indicate that they are willing to pay more for sustainable buildings. This is motivated by being able to meet the future requirements of the taxonomy and adapt to tenants’ current expectations and future requirements.”
Adaptation to a more sustainable future
Sustainability has become almost a requirement for most investors as more companies work towards a greener future.
”For both companies and investors, it’s all about adapting to the times. Sustainability has become a major theme in the real estate industry, so for all parties, it’s about adapting to a future where sustainability is at the top of the agenda,” says Joseph Alberti, and continues:
”There is more and more focus on ESG policies around companies, and of course this also affects real estate. It is mainly in new construction that there is a focus on a greener future, but there is also value to be gained by energy optimizing older properties and making them more sustainable. Sustainability has become a key factor for both investors and owners, while tenants are increasingly demanding a focus on ESG.
The Nordic financing market
The latest JLL report also focuses on the Nordic financing market. Joseph Alberti, Head of Research at EDC Poul Erik Bech, says:
”If you look solely at reported transactions, the Nordic real estate market appears to be in a reasonable position, but this is not entirely the case. The real estate market in Sweden is in a particularly difficult situation, as corporate bonds make up a significant share of the total financing for real estate investments. Corporate bond yields have skyrocketed over the past year and the market expects a significant increase in bankruptcies. This makes borrowing money expensive and difficult for companies that cannot raise capital from banks. This is not as widespread in Denmark, but not uncommon, as companies such as Gefion, Oskar Group and NPV raise money through bond issuance.”
The report shows that there has been 80% decrease in the issuance of real estate bonds in Q3 2022, compared to Q3 2021, across the Nordic countries.