How ESG will impact the property market in 2024

How ESG will impact the property market in 2024

According to the latest Trends Radar report by Cushman & Wakefield, the Polish commercial property market will be significantly impacted by increasing ESG regulatory pressure in 2024. Investors will be required to implement practical sustainable solutions for their property portfolios due to the EU reporting standards and the revised EPBD coming into effect. The rising importance of social and environmental aspects poses a major challenge for commercial property investors and firms.


Regulations are undoubtedly the main driver behind sustainable growth and the implementation of ESG policies. They are forcing organizations to adopt an informed approach to managing their environmental and social impact and to focus on climate risk and the transition towards a low-carbon economy. The need to adapt to new standards - most of which have not been fully defined at the regulatory and market levels: is creating financial and organizational pressure,” said Ilona Otoka, Senior ESG Consultant, Cushman & Wakefield.


In 2023, the European Union established a separate self-standing emissions trading system (ETS II) for the building and road transport sectors. This will introduce new penalties and charges on greenhouse gas emissions from 2027. As a result of this, companies will need to implement risk management tools such as Internal Carbon Pricing and Shadow Pricing.


Updates on certifications and the looming possibility of a "carbon bubble"


Multi-criteria green certification systems are also being revised to reflect regulatory changes and will most probably continue to be updated in the near future. This is evidenced by the latest BREEAM V7, currently under consultation, whose added value will include metrics for greater compatibility with the EU Taxonomy and the SFDR,” added Ilona Otoka.


New regulations require buildings to be evaluated for their carbon impact throughout their entire lifecycle. Investors are taking steps to prevent overvaluing properties that don't account for the risks of transitioning to a low-carbon economy. Despite this, there's still a lack of market data to accurately gauge transition risks in valuations, increasing the risk of a "carbon bubble". ESG due diligence is becoming more common in investment transactions, with tenants considering ESG aspects when choosing a location.


“Organisations taking a strategic approach to sustainability and ESG are likely to gain a competitive market advantage by building trust and long-term value,” said Katarzyna Lipka, Head of Strategic Consulting and ESG, Cushman & Wakefield Poland.


Investing in improving energy efficiency is a step towards achieving the goal of net-zero emissions


Increasing the share of renewable energy sources and improving energy efficiency are among the key priorities in transforming the energy sector. Market leaders are already developing strategies for achieving net zero emissions, relying on Net Zero Carbon Analyses for their assets.


In reducing the carbon footprint of properties, circular economy principles are particularly important. Cushman & Wakefield expects that designing buildings with a focus on zero emissions and circularity will become the market standard in the long term.


Sustainable growth requires cooperation. Sharing economy models and energy cooperatives will increase in importance in the coming years. Energy cooperatives are a good solution whenever renewable energy systems cannot be installed on-site.


In addition, the development of AI-powered building management systems will be crucial. These systems will enable a more efficient and sustainable use of energy consumption, generating savings in the long run.


Prioritizing social responsibility and community collaboration 


Cushman & Wakefield emphasizes that the real estate industry should prioritize its social responsibility alongside environmental measures. Factors affecting the appeal of the work environment, such as diversity, equity, and inclusion, are becoming more significant. Additionally, collaborating with local communities can benefit both developers and residents.


Space designing and planning is impacted not only by the trend towards the circular economy. Other important priorities in modern architecture and urban planning include adding missing functions, social integration and giving green and open spaces back to city inhabitants,” concluded Katarzyna Lipka.


For more information on real estate market trends and ESG priorities in each market segment, please see the full Trends Radar 2024 by Cushman & Wakefield.


Europe Real Estate — an overview of real estate developments in European countries.


Image source - Pexels.




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