Challenging times - but sustainability still works

"All good things come in threes", as the saying goes. The German real estate industry is also currently looking at three things - not necessarily good things, but mainly challenging ones: interest rate shock, loss of importance and actionism.

**Paralyzing interest rate effect
The persistently high interest rates are paralyzing developers in particular, but also many portfolio owners who are about to refinance. Inadequate sustainability is a clear obstacle to successful refinancing - banks are looking more and more closely at the sustainability risks associated with a property or portfolio. Exits to obtain liquidity are also becoming more difficult. A recent survey of family offices showed that real estate is a relevant topic for 92% of respondents. At the same time, two thirds confirmed how important ESG is for the risk management of assets (50 percent consider it to be very important, a further 14 percent even very important).

**Less important than demographic change?
According to the latest trend barometer from EY Real Estate, demographic change is currently more important than ESG and sustainability. It is understandable that demographic change is having a huge impact on the sector - it is affecting the staffing situation in companies on the one hand and the products on the other, such as age-appropriate and barrier-free properties. However, the fact that sustainability is given less weight in comparison can certainly be seen as a warning signal. Especially as this is not the first time this has been the case in the 2024 Trend Barometer, but the second year in a row.

Not many, but they do exist
Even if there is actually no money and other issues are considered more important, we still have to do something, of course, because we can't do without sustainability. This is not a general criticism of the industry: there are not many companies and owners who are more or less headlong into actionism. But they do exist, the type of owner who, for example, prioritizes photovoltaics as an immediate measure because it has a high marketing impact. Although from a strategic point of view, other measures would be much more sensible and efficient at the beginning of the sustainability commitment.

**Proposal for a way out
If we combine all of this, a possible way out emerges: let's take the financial restrictions and work with them by initially using only the most cost-efficient levers as sustainability measures. Simply switching electricity supply contracts to renewable sources improves the CO2 footprint enormously. The conversion costs are generally zero (even when using service providers). Let's take the aforementioned loss of importance and accept that sustainability is of course not the only field that needs to be cultivated in the daily business of real estate companies. In order to conserve their own resources, it is advisable to outsource or partially outsource the task to specialized service providers. And let's take actionism away from the realization that you have to show your stakeholders - including society - that you are active. But with the right actions, please.