Global Efforts to Stimulate Investment in Sustainable Real Estate

Global Efforts to Stimulate Investment in Sustainable Real Estate

Translation: Muhammad Khalid

The real estate sector is one of the main causes of global warming. According to a report by the Intergovernmental Panel on Climate Change, around 38% of energy-related carbon dioxide emissions come from buildings, 28% from operational emissions, and 10% from building materials and construction activities. Therefore, the expansion of green urbanization, the sustainability of real estate, and the endeavor to reduce carbon emissions have become a global trend, as a major solution to confront the continuous environmental changes.

The United Nations Environment Program stated that the boom in the global construction sector has pushed carbon dioxide emissions in the sector to an all-time high of 10 gigatons, which means that it is off track to meet its decarbonization pledges of 2050.

In this feature, Invest-Gate discusses the importance of applying sustainability principles in the real estate sector globally, identifies the most prominent obstacles to this trend, and highlights the efforts made in all countries to invest in green buildings.

Global Transformation Towards Real Estate Sustainability

Green buildings have many advantages that make them preferred in the global markets. It is expected that the number of green buildings will reach more than 534,000 by 2028, compared to 76,000 in 2019, and their market value will reach $241 bn by 2026, according to the French company, ReportLinker. The International Finance Corporation (IFC) estimates that the investment opportunity represented by green buildings will reach $24.7 tn by 2030 in emerging market cities. However, Asia Pacific has led the growth in the global multifamily housing green buildings market for 2021.

Green buildings depend on the application of the principles of sustainable construction and green architecture, which aim to reduce carbon emissions by improving the efficiency of energy and water consumption and contribute to improving the quality of the internal environment, in all stages of building, starting from planning and site selection, to design, construction, operation, ending to maintenance of buildings.

There are some obstacles that impede the expansion of green building investments globally, including their high costs compared to traditional buildings, which affects both investors and buyers.

In this regard, Mohamed Taher, Chairman of Nile Developments, stated on the sidelines of the Invest-Gate’s roundtable held in October 2022 that the increase in the cost of establishing sustainable projects by 5-10% compared to traditional facilities would be offset by cost saving in the long term. Taher added that research had confirmed the displacement of about one bn citizens from their homes in 2050 due to carbon emissions and the rise in water levels, which prompts everyone to pay attention to establishing sustainable green cities.

Sustainable Buildings Around the Globe

The United Nations Environment Program (UNEP) has indicated that the construction sector accounts for 40% of total energy needs in Europe and that 80% of it comes from fossil fuels. To reduce these emissions, the UNEP reported that the construction sector can contribute to decarbonization by improving the energy performance of buildings, reducing the carbon footprint of building materials, and doubling measures and incentives for investment in energy efficiency.

Recently, the demand for sustainable homes in Portugal has skyrocketed. Therefore, Portugal has taken several measures to encourage investment in green buildings. About 83% of investors in Portugal expect an increase in tenant demand for green properties, according to the British newspaper, the Green Journal. Many Portuguese companies take the issue of sustainable buildings at the core of their business, and this is considered to be in line with current legislation in the country.

In another context, UK-based company, Insulation4less, listed the 10 most environmentally friendly buildings in the world to be the Bosco Verticale Towers in Milan, Italy; Shanghai Tower, Shanghai; Vancouver Convention Center, Vancouver; Museum of Tomorrow, Rio de Janeiro; Pricewaterhousecoopers (PwC) Building, London; CopenHill, Copenhagen; Cube Building, Berlin; Marco Polo Tower, Hamburg; One Angel Square, Manchester.

Investing in Sustainability

Real estate developers and investors must adopt sustainable real estate construction policies in the coming period, and prepare well for the future of sustainable real estate development globally, to implement the long-term sustainable construction strategy, as nearly two-thirds of the world’s existent buildings are expected to stand until 2040, and will continue to emit greenhouse gases.

A global survey conducted by JLL revealed that achieving net zero emissions is at the top of the priorities of decision-makers in the real estate sectors during 2023, and a significant annual increase has been recorded in the number of clients who consider sustainability a top priority.

Sustainable buildings have increased the value of commercial real estate assets in Europe, according to Deepki, the ESG data intelligence firm. Although the implementation of green real estate causes a rise in costs for the investor, buildings that have the “LEED” certificate, the world’s most widely used green building rating system, will have excellent prices.

Jay Grainger, Global Head of Sustainability and Environmental, Social and Governance Services (ESG) at JLL, confirmed that green buildings are now achieving record rents, as buyers are increasingly looking for spaces that reflect their sustainability commitments. Grainger pointed out that increasing legislation and regulations, such as carbon taxes on buildings in New York, contribute to raising awareness among investors and buyers of the importance of implementing sustainable standards in real estate. Grainger adds that there is a concern, especially among investors, about liquidity and financing.

With emissions from real estate rising to an all-time high recently, real estate sustainability becomes a necessary step. “Achieving decarbonization targets quickly and in a financially prudent manner are key objectives for companies in 2023 and in the years to come, and companies now need to move from simply making commitments to implementing them on the ground,” Grainger said.

About 63% of major investors strongly agree that green strategies can increase occupancy, rents, gross values, and the number of tenants, according to JLL’s Decarbonizing the Built Environment report. The World Economic Forum also confirmed that the cost of building green properties and achieving decarbonization will reach $5.2 tn over the next decade.

Green Buildings in Egypt

Within the framework of Egypt’s keenness to establish environmentally friendly cities and properties in order to preserve real estate wealth, Mai Abdel Hamid. CEO Social Housing and Mortgage Support Fund, stated that 7,998 units are being implemented under the green architecture model in the Capital Gardens city, as part of the Green Architecture initiative in cooperation with the World Bank and the Housing and Building National Research center (HBRC).

The Green Architecture initiative aims to build 25,000 housing units accredited by the Green Pyramid classification system for social housing, in four Egyptian cities: Capital Gardens, New Obour, New Aswan, and Hurghada. The country has accredited the Egyptian Council for Green Development, which recently implemented the Green Pyramid rating system, to assess the sustainability of buildings.

For his part, Walid Abbas, Assistant Minister of Housing for New Urban Communities Authority Affairs, said that the state seeks to implement smart and sustainable cities with the aim of reducing carbon emissions Abbas stressed that the volume of buildings in the new cities that are being implemented does not exceed 25% of the total size of the city, while the remaining areas are allocated to green spaces and parks to reduce greenhouse gas emissions.

In order to meet the current growing demand for environmentally friendly real estate, Egyptian real estate companies are adopting more environmentally friendly specifications in building their projects, including the use of double glazing, wall insulation, energy-saving lamps, smart meters, and solar panels.

In this regard, Nader Khozam, Chairman of IL Cazar Developments, confirmed during the aforementioned roundtable that the current period is witnessing an increasing demand by consumers for sustainable and energy-saving facilities, and this comes at the top of the priorities of real estate developers, in order to meet the needs of the market and reduce emissions and rationalize energy consumption.

Ayman Sami, Country Head of Egypt at JLL, indicated on the sidelines of mentioned Invest-Gate roundtable that Egypt plans to power 42% of homes with renewable energy to cut carbon emissions. Further, Mohamed Galal, Managing Director of Misr Real Estate Asset Management, noted that the company has entered into an agreement with a French company to analyze the air in Cairo Downtown, determine the amount of pollution and emissions therein, and measure its energy consumption, and based on the results of these analyses, devices will be installed in some buildings to purify the air.


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