- Last year, environmental, social, and governance (ESG) investment exploded in real estate, as pandemic and climate-related upheaval compelled investors to take a more rigors approach to sustainability-related risks.
- According to CBRE’s 2021 Global Investor Intentions Survey, 60 per cent of respondents had included ESG criteria as part of their investment strategy
- One of the year’s first major offerings will be Brisbane’s Energex House, which will be Queensland’s first 6.0-star Green Star office building
- The Expressions of Interest campaign for the fully leased Newstead site is expected to fetch more than $360 million
Environmental, Social, and Governance (ESG) investing took off in real estate last year as pandemic and climate-related disruption drove investors to take a more rigorous approach to sustainability-related risks.
According to CBRE’s 2021 Global Investor Intentions Survey, 60 per cent of respondents had included ESG criteria as part of their investment strategy, with the Americas, EMEA, and Asia-Pacific all showing a higher focus on ESG problems than in prior years.
Several big commercial office deals last year have shown that major institutions prioritise investing in buildings with the greatest levels of green credentials.
These assets have already begun to differentiate themselves from the pack, and this trend is expected to accelerate as the world’s largest sovereign wealth and super funds have identified ESG as a significant driver in their decision making.
According to CBRE Senior Managing Director, Queensland Bruce Baker this trend has seen investors implement ESG concerns into every stage of the property lifecycle, from due diligence through purchases and leasing to asset management.
“With the energy used to heat, cool and light buildings accounting for 28 per cent of all global carbon emissions, pressure is growing on building owners, operators and occupants to reduce their carbon footprint,” Mr Baker said.
“While carbon reduction efforts may not generate higher rents to offset the yield premium today, it will play a prominent role in preserving asset value as occupiers increasingly shy away from properties with subpar environmental performance. And, as occupiers and investors are drawn to properties that are more sustainable, these assets will be worth more.”
One of the year’s first major offerings will be Brisbane’s Energex House, which will be Queensland’s first 6.0-star Green Star office building and the recipient of the maximum 5 Star GRESB Rating in 2021, putting it among the top core corporate office investments in Australia from an ESG perspective.
Cromwell Property Group, a real estate investor and fund manager, created the asset in 2010 and is currently selling it because unitholder opinion indicates a preference for a capital return.
Cromwell believes the timing is right as the fixed term syndicate nears the end of its life, given investor appetite for assets with ESG credentials, as well as the fact that investors in the fund, who have already enjoyed very strong performance since inception, are likely to be very satisfied with the sale result.
Mr Baker, Peter Chapple, and Tom Phipps of CBRE, as well as Paul Noonan and Seb Turnbull of JLL, have been recruited to lead the worldwide Expressions of Interest campaign for the fully leased Newstead site, which is expected to fetch more than $360 million.