Re:sustain: Poor real estate energy performance affects European pension funds
New research by re:sustain highlights the challenges for European pension fund managers due to investment in buildings with poor energy efficiency. Re:sustain surveyed 80 European pension fund managers that invest in commercial real estate in the UK, Germany, France, Netherlands, Spain and Italy.
Over half (57%) of respondents said that between 10% and 30% of their commercial real estate portfolio has poor energy consumption i.e. that which is materially above expected energy benchmarks for that asset type and location. Around a third (31%) said between 30-50% of their portfolio was performing above expected benchmarks and 8% said that more than 50% of assets in their portfolio are poor performers.
As a result, all respondents have stranded assets in their portfolios - properties experiencing reduced capital value, leasing or future liquidity due to energy performance. More than half (54%) have seen their stranded assets decrease in value by 20-30% over the past three years and a further 25% said they had seen values decline by 30-40%. Furthermore, over the next five years, 25% expect to see the number of stranded assets to increase by 5-10% and 43% predict an increase of between 10% and 25%.
However, the majority (92%) of those surveyed have plans in place to improve the energy efficiency of their real estate portfolio, with 84% targeting energy consumption reductions of between 10% and 30% across their portfolios over the next three years.
The complexities of managing and coordinating landlords and tenants is cited as the most pressing challenge facing pension funds investing in real estate when it comes to improving the energy efficiency of their real estate assets.