At a glance
- Changing legislation and increased energy prices have made investors seeing the potential in green properties
- Property investors do not want to be left with energy inefficient properties when the music stops
- Zurich's Sustainability and What This Means to Investors in Real Estate report outlines what improvements can benefit you and your customers
Our new Risk Insight, Sustainability and What This Means to Investors in Real Estate, has found that impending legislation, increasing energy prices and environmental taxes – like the Carbon Reduction Commitment – are prompting smart property investors to realise that going green can mean greater profits.
For tenants in commercial property, the sustainability agenda has been seen as a way to cut costs inside their businesses, particularly in combating volatile energy costs.
Investment funds are also likely to view green stock favourably, given the trusted duties to their investors when making long-term, sustainable investment decisions. Common sense would dictate that, for a variety of reasons, green buildings should prove to be the good investments.
The future is green
Meanwhile, in its recent winter report, property consultants GVA stated: “Some of our clients are already unwilling to purchase properties with poor Energy Performance Certificate (EPC) scores and we expect capital values to be impacted by energy efficiency before 2018.”
Brokers have an opportunity to get in on this rapidly growing sector by advising Real Estate customers to keep up with green demand. That means making improvements to their property portfolios from an energy efficiency perspective.
Provisions of the Energy Act 2011 mean that it could become illegal for owners and occupiers to let commercial buildings that score EPC ratings below a set rating, currently indicated to be an E rating (i.e. ratings F or G).
This is now being referred to as the ‘F&G effect’, which is like a game of musical chairs. Property investors do not want to be left with energy inefficient properties when the music stops. That time is April 2015 in Scotland and April 2018 in England and Wales.
Property investors do not want to be left with energy inefficient properties when the music stops.
Stick or twist – improve or sell?
Property investors should start by deciding whether they should improve or sell their properties, and they need to make these tactical decisions from a position of strength.
Either way, taking action is becoming more and more pressing, but how can you help your customers make such important decisions?
If they want to improve properties within their portfolios, you could just give the same advice to property investors that they are hearing from utilities suppliers, i.e. “Use energy efficient light bulbs, install solar panels and water butts,” or you could encourage something with a bit more sophistication.
Environmental risk management for property investors should also include identification of properties that will improve within their natural maintenance cycle, for example, and those that are incapable of improvement at an affordable cost, due to matters of structural integrity.
Real Estate expertise where you need it
Zurich Real Estate policies feature environmental adaptation clauses that improve aspects like a building’s energy performance at the time of a claim. Zurich also works closely with the environment consultancy 4See Environmental to draw on its expertise for your Real Estate customers.
Working with 4See, Zurich can supplement your property investor customers’ risk programmes with environmental- and energy-performance advice. 4See employs technical specialists who can systematically identify any weaknesses in commercial property portfolios.