ESG performance is becoming an increasingly vital component for the financial performance of assets within the UK commercial real estate sector. More and more real estate investors and owners recognise that they will see the value of their assets decline if they do not make the transition to net zero.
According to one study, over three-quarters of respondents predicted the capital value and rental income of their real estate assets to depreciate by over 20 per cent if their ESG performance does not improve, bringing to light the importance of commercial real estate sustainability throughout the UK.
The research also called attention to the scale of the ESG challenge facing UK commercial real estate.
12% of those questioned stated that 5 – 10% of their real estate portfolio has poor energy efficiency or a high carbon footprint.
The participants were asked what actions they were likely to take to address poor ESG performance of their real estate portfolios; to which, 72% said that they would actively engage with the property management team to make improvements.
Meanwhile, 61% said they would invest in improving energy efficiency and 45% indicated they would work with a third party to develop an ESG strategy and measure performance against KPIs.
Around 28 per cent said they would demolish and rebuild failing assets and one in ten said they would simply sell their assets.