Rising interest rates but the introduction of environmental regulation in Europe have started putting pressure on investors of real estate in Europe. The new regulations will require property owners to invest into improving the energy efficiency of their buildings, in an attempt to improve real estate sustainability in Europe. This will be enforced with a hefty non-compliance cost to ensure property owners comply.
Impact of new environmental rules on property owners
The EU has reinforced its commitment to sustainability with the passing of the Energy Performance of Buildings Directive (EPBD). Ensuring property owners make required renovations in order to meet the aim of cutting carbon emissions. The stricter green building standards across the property industry mean that if a property owner doesn’t comply, they will face issues selling or leasing their buildings through legal restrictions.
Over the next decade, the directive will gradually raise the bar for energy efficiency, but those who fall behind could be left with unmarketable properties. Estimates by the EU have come to a figure of €275 billion on annual renovation costs just to meet its climate spending. This only adds to pre-existing financial strains for real estate investors already struggling with high interest rates.
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Sustainable properties are gaining value
On the other hand, sustainable property development is becoming more profitable. Energy-efficient buildings are in high demand, commanding rental premiums of up to 7%. The number of green-certified properties is growing, and as the market shifts, investing in sustainability can help protect asset value while improving marketability.
It is ideal for property owners to take action immediately. Meeting green building standards will ensure compliance with future regulations, letting property owners capitalise on the growing demand for sustainable spaces.
Challenges for non-compliant properties
Owners of energy-inefficient buildings are facing growing risks. In the UK, around 70% of commercial properties have energy performance certificates (EPC) rated C or lower, indicating the need for substantial upgrades. By 2030, properties that don’t meet minimum energy standards will be unable to operate legally, leading to significant financial losses.
Demand for solar-ready, emissions-free buildings continues to rise, and sustainable property development is now a critical factor for maintaining property value. Property owners who delay these improvements could face costly retrofits or penalties, while those who act now will be better positioned to meet market expectations.
A method that real estate businesses can use to stay ahead of regulation is using ESG software like Klimado, which can help with compliance and ESG performance tracking
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This article is referenced from Greener buildings gain in value, others face ‘huge problems’ as environmental rules loom over property market by Fortune.
Editor’s Note: The opinions expressed here by the authors are their own, not those of Impakter.com — Cover Photo Credit: Fer Troulik
