ESG performance is increasingly fundamental for the financial performance of assets within the UK commercial real estate sector, particularly in the near future, according to a leading industry figure.
Katie Whipp, who heads financial advisory Deepki UK, which specialises in implementing ESG strategies in the commercial property sector, said that 66 per cent of UK institutional commercial real estate investors and property professionals have seen a decrease in both the capital and rental value of their portfolios due to poor sustainability performance.
“Real estate investors and owners recognise that they will see the value of their assets decline if they do not make the transition to net zero,” Whipp told City A.M.
“ESG affects both capital value and rental income.Katie Whipp
However, “this path is often complex and requires data intelligence, analysis and the expertise to take the appropriate action,” Whipp continued.
Singling out a recent study that was conducted by Deepki, which claims to be the only company in the world offering a fully populated ESG data intelligence platform to help commercial real estate investors, owners and managers improve the ESG performance of their real estate assets and enhance their value.
Over three-quarters of the respondents predict the capital value and rental income of their real estate assets to depreciate by over 20 per cent if their ESG performance does not improve, highlighting the importance of commercial real estate sustainability in the UK.
High carbon footprint
The research also called attention to the scale of the ESG challenge facing UK commercial real estate, with 12 per cent of those questioned saying that 5 per cent to 10 per cent of their real estate portfolio has poor energy efficiency or a high carbon footprint.
A further 21 per cent and 42 per cent said that this was the case for 10-15 per cent and 15-20 per cent of their assets respectively.
The research also asked what actions respondents were likely to take to address the poor ESG performance of their real estate portfolios with 72 per cent saying that they would actively engage with the property management team to make improvements.
Meanwhile, 61 per cent said they would invest in improving energy efficiency and 45 per cent indicated they would work with a third party to develop an ESG strategy and measure performance against KPIs.
Around 28 per cent said they would demolish and rebuild failing assets and one in ten said they would simply sell their assets.