Climate neutrality for real estate by 2045 in Germany - in 2025, that still sounds like a relatively distant future. But if you consider the usual investment cycles in the real estate sector, which for many professional investors span eight to twelve years, it becomes clear that we are already in the penultimate cycle towards climate neutrality. Or to put it another way: after the buyers, who will hopefully start buying in 2026 or 2027 at the latest when the transaction markets pick up, there will then only be investors who will bring with them an unimagined uncompromising attitude to climate neutrality that we can hardly imagine today, despite all the awareness that already exists.
Investment cycle as a trigger
According to our observations, ESG managers and explicitly also portfolio managers are currently being listened to by their management when they specifically trigger the aforementioned investment cycle approach. This is because it is more difficult to avoid this immediacy than to ignore the general but often vague background noise of sustainability in hectic daily business. Particularly in the case of medium-sized owners and managers with 20 to 80 properties in their portfolio, we have found that a backward view of the investment is helpful: there is often only one dedicated ESG manager without a departmental remit, who is challenged both strategically and operationally and then - with all due respect - is often simply unable to implement the appropriate ESG measures that would best target the exit when liquidity reserves are tight.
Protective shield and reporting plus small technical measures
According to our observations, the concrete effects of the cycle argument often concern three decisive levels of measures. Firstly, an ESG shield is installed more frequently than in the past. This means that external specialists permanently monitor the portfolio with a view to the constantly changing regulations and adjust the strategy and measures where necessary. Secondly, ESG reporting for banks, investors and other stakeholders will be launched or - if already in place - further professionalized. The keyword here is to digitize all consumption data from individual buildings or portfolios and store it in a single system; the keywords here are real-time retrievability and a single point of truth instead of data fragmentation across dozens of service providers. And thirdly: final energy consumption and the carbon footprint are less likely to be reduced "just like that". We are now living in a time when, for the last time, success can still be achieved with smaller technical measures in order to keep a portfolio or sub-portfolio fit for exit. Action is then taken accordingly.
Investment is more economical than sacrificing returns
"Provided the liquidity is available, investments in the portfolio are more economical from an exit perspective than the capex discount that would otherwise occur, i.e. having to reduce the sales price until buyers see their risk and their own expenses compensated beyond the already existing yield compression," says Christian Pfeiffer from agradblue°. "Our investment cycle approach can make portfolios of all types and sizes exit-ready from a sustainability perspective. It is not always necessary to tackle the building envelope at great expense."