Minimum Energy Efficiency Standards
Publication date: 18 February 2016
In recent years sustainability risks and drivers have had a transformational impact on the way in which equity investors approach direct real estate investment and management. One of the greatest drivers we’re now seeing in the UK is the introduction of regulatory Minimum Energy Efficiency Standards.
Major REITs and fund managers are starting to get to grips with the impacts these regulations will have on the property portfolios they own. However, with many institutional and private equity investors increasingly focused on lending as an additional form of real estate exposure, such sustainability considerations have to be considered from a new angle.
This is particularly important because of the way the real estate lending market has been evolving since the 2008 financial crisis. To begin with, lending activity has recovered strongly in the last year or two in the UK and much of Europe, and now represents approximately one third of the total commercial real estate investment market. While levels remain well below previous cycle peaks (CBRE estimate 2014 absolute levels are still less than half of their 2007 peak) 2014 saw a 55% increase in lending origination across Europe and 45% of that secured on properties in the UK.
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