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March 29, 2023

How the Decarbonization of Commercial Real Estate Contributes to Value Stability


Magdalena Sturm

The decarbonization of commercial real estate not only represents an important contribution to climate protection, but is also the key to sustainable investment. ESG criteria are increasingly having an impact on value stability and development. Sustainability in building operations has thus become a strategic decision. In addition to reducing CO2 emissions, decarbonization is usually accompanied by cost reductions and long-term safeguarding of value development in the sustainable real estate portfolio.

Climate neutrality, ESG criteria and DGNB framework

By signing the Paris Climate Agreement, the global community has committed itself to limiting global warming to below two degrees Celsius. The building sector plays an important role in this, as it is responsible for 38 percent of energy consumption and 29 percent of greenhouse gas emissions in Europe. In view of this, sustainability in building operations is becoming an important but also strategic decision for owners and asset managers to avoid stranding assets, i.e. unprofitable buildings, and to secure value development. If the 1.5-degree target is to be met, many commercial properties will be at risk of falling in value by around 2037. Large investors are already moving to align investments with ESG criteria. Existing buildings pose a greater challenge than new buildings, because each existing property has its own unique challenges.

ESG stands for "Environmental, Social, Governance". The ESG criteria are used in the evaluation of companies or investments and relate to the areas of environment, social affairs and responsible corporate governance.

Sustainable Decarbonization Strategies are Gaining Importance 

The investment costs for decarbonization can vary widely for existing buildings, but lead to long-term value stability, reduced dependence on fossil energy, and savings in operating and maintenance costs. A holistic strategy for decarbonization can be achieved by combining several key measures

1. operating the stock more efficiently e.g. through digital operational optimization

2. Building measures to reduce energy demand

3. Decarbonization of the remaining energy consumption

Concretely, investments in infrastructure to optimize energy efficiency and enable the switch to renewable energy, for example in the form of photovoltaic systems. Measures that increase comfort for tenants also contribute to improving ESG KPIs. Optimization of building operations and thus energy efficiency can be achieved, for example, through AI-based monitoring and control of energy and water consumption. Intelligent control systems are able to adapt energy consumption to the behavior of the occupants and thus have a positive impact on the lifecycle costs of the properties. Modernization measures in lighting and insulation are also potential aspects of decarbonization. Combined, these measures provide a significant reduction in CO2 emissions.

Framework for Climate-Neutral Buildings

To support real estate owners and operators in the challenging process of decarbonization, the German Sustainable Building Council (DGNB) has created a framework that includes the definition of climate neutrality for buildings and corresponding strategies for reducing CO2 emissions. This framework provides stakeholders in the real estate sector with effective optimization approaches and rules for accounting for CO2 emissions from buildings. The aim of the framework is to provide concrete and individual action plans for achieving climate neutrality. The basis for any recommendations for action is always an accurate assessment of current greenhouse gas emissions based on consumption data. The DGNB has also developed a certification system for this purpose, which is now internationally recognized as the Global Benchmark for Sustainability.

Simply Making Buildings Sustainable With aedifion

As a recognized service, aedifion supports asset managers on their way to DGNB certification. The Sustainability Bundle contains all the software modules needed to operate buildings sustainably and to prove that they are DGNB-compliant. This guarantees at least the bronze standard in the certification process. On the way to certification, building operators benefit in several ways and permanently from optimized digital building operation. The networking of building infrastructures makes it possible to predictively control building operation, maintenance and repairs and to detect operating errors more quickly. Depending on requirements, structural measures can be pointed out to improve the energy efficiency of the building.

The aedifion software solution enables uncomplicated decarbonization of commercial real estate by taking over the optimization of building services equipment. Thanks to the simple plug-and-play solution, all building data comes into the cloud platform in real time. AI-based tangible optimization proposals are created based on the data. With the cloud platform, ESG targets and energy savings of up to 40 percent can be achieved. All evidence and documentation can be accessed at any time.