Imagining the German real estate industry without the topic of sustainability is no longer possible. Quite the opposite, in fact. Indeed, the real estate industry has a key role to play in achieving the EU's climate goals of being climate neutral by 2050. After all, buildings currently account for more than 30 percent of greenhouse gas emissions and 40 percent of energy consumption in the EU. This also results in a great responsibility for all market participants. Whether real estate developers, investors or users – all stakeholder groups now have their sights firmly set on ESG factors, i.e., environmental and social aspects as well as aspects of good corporate governance. There are still a number of challenges on the road to decarbonization, but these do not only offer great opportunities in the further development of the industry. Sustainability is also the biggest driver of innovation, as the results of the current "Innovation Barometer of the German Real Estate Industry" show. Highlighting innovation thrusts triggered by the green megatrend is therefore worthwhile.
One thing is clear: questions of sustainability preoccupy the real estate industry and especially real estate developers from the very first steps of a project. Consequently, the current Innovation Barometer was also focused on the "Creation - Real Estate" section of the real estate life cycle, thus taking the entire service spectrum of a project development into account - from planning through to implementation. We have been collating data for the Innovation Barometer together with the EBS Real Estate Management Institute of EBS University since 2016 and, since 2019, also in cooperation with CBRE. In these endeavors, we examine the respective current innovation pressure on the real estate industry, analyze the innovative power of various trends, and provide impetus and food for thought for decision makers in the real estate industry.
Pandemic, regulation, smart technology – what affects innovation and how?
What is surprising about the results of the current Innovation Barometer is that it is not individual aspects such as the customer or regulation, and not even the pandemic, that are decisive innovation drivers, but ESG requirements. Rather, customers or occupiers of the properties desirous of more sustainability in buildings are the driving force for breaking new ground in the area of sustainability and for ramping up innovation in the field of digitalization and technologies. The real estate industry would be well advised to focus even more strongly on customer requirements in the future so as to detect changes in preferences and needs at an early stage and to effectively develop innovative real estate products that also meet sustainable needs in the long term.
Another important conclusion for the entire industry is that sustainability as a megatrend is a prerequisite for implementing and developing further innovation drivers such as digitalization – as a means to an end, so to speak. That said, if the objective of digitalization or smart building technologies is to meet ESG requirements, occupiers and tenants will be all the keener on them.
In this context, the Innovation Barometer also revealed that technologies such as artificial intelligence (AI) are gaining traction. We at Real I.S. have already recognized this and are constantly developing ourselves and our real estate portfolio - with the aim of achieving greater sustainability in the company and also at product level. We are already using innovative technologies such as artificial intelligence in our properties to reduce carbon emissions.
Sustainability – more than just a trend
The Innovation Barometer confirms: Sustainability is not just a fad but a decisive trend that will continue to significantly drive change in the real estate industry going forward. This trend will spawn many innovations in the digital or technological field - always in the service of sustainability. As one of the leading providers of real estate investments for private and institutional investors in Germany, we at Real I.S. have long been aware of the importance of sustainability. We have anchored sustainability as the most important part of our mission statement and set ourselves clear climate targets. For example, we aim to achieve climate neutrality as a company by 2030 and for the entire portfolio by 2050. With Giulia Peretti as Real I.S.'s Sustainability Officer, all ESG issues are coordinated throughout the company and processes are adapted to our ESG goals.
We want to continue to develop ourselves and our products in this direction in the future, as well as support the transformation of the industry, including through our active contribution in associations and initiatives. For example, the topic of sustainability is also the subject of the recently published first edition of a newly initiated whitepaper series on current issues in the real estate industry from a scientific and practical perspective. We launched this series in cooperation with KPMG, pbb, and real estate master's students and doctoral students at EBS University. The conclusion so far is that the real estate industry is not on the cusp of a green transition but is rather more in the midst of it and must reconcile achieving environmental goals with economic feasibility. Product offerings and business activities will have to be aligned even more closely with ESG criteria, and the entire value chain needs to be rethought in terms of ESG compliance. Sustainable action must be firmly anchored within a company and must take place at all levels of the company. To achieve this, all stakeholders must be involved - from asset managers to tenants - and the focus must not be solely on the property as a mere building.
Our aim through these and other projects is to acknowledge the importance of the topic of sustainability and accompany the process of accelerating green change throughout the entire real estate industry.