Earth Day: New from old

More ESG for the sake of the environment

We know that our planet is not doing well. Increasing environmental pollution, growing mountains of garbage, deforestation, overfishing and extinct animal and plant species are throwing the ecosystem out of balance. And the resulting climate change is causing great problems for our planet – and for us as well. 

For this reason, the topic of sustainability has become increasingly important in all areas of our lives, including in the real estate industry. Both companies and large institutional investors are placing increasing emphasis on environmental protection, social commitment and fair corporate governance. So you can say: The less CO2 and waste a company produces and the more it cares about peoples’ wellbeing, the more interesting it is for employees, customers and investors. 

The sustainability of a company is evaluated by various ranking agencies in accordance with ESG (Environmental, Social and Governance) criteria. However, the rating models often differ, meaning there are currently no uniform global standards. The EU is therefore currently working to standardise ESG criteria within Europe. As part of the EU taxonomy, large companies are already obliged to publish their ESG measures, such as net-zero strategies. Many SMEs are joining in and regularly report on what they have done, are doing and will do in terms of ESG. And property plays a key role here.

Fit for the future: How do I know if my building is ESG compliant?

It is easy to decide whether a piece of clothing should remain in your wardrobe. If you like it, it still fits well and the quality is right, you continue to wear it. With a property, it’s much more complex. We asked our expert Ariane Husemann, Head of Sustainability DACH at Cushman & Wakefield, how to recognise whether a building is ESG-compliant and whether it could be further improved.

"Unfortunately, there is no simple, short answer to this short question due to the complexity of the topic," says Husemann. "Because every building has to be considered individually: For what purpose should it be used? What economic goals am I pursuing? And how can I make working as pleasant as possible for my employees, taking these goals into account?" 

"An IT office, for example, must provide rooms for concentrated work. At the same time, it should offer agile group workplaces and meeting rooms. Employees mainly work in a seated position, and remote and flexible working are increasingly important. Under these conditions, completely different ESG potentials may be identified than those for example od a warehouse, which must primarily provide storage capacity for various goods," Husemann describes. "For example, the walls could be re-insulated or building services could be automated to save energy. Optimisation regarding human aspects could be to replace the desks and chairs and offer employees regular back training to enable more back-friendly working."

With potential: When does it make sense from an environmental point of view to convert and reuse a property?

If I don't like a jumper anymore, it's best to give it to a second-hand shop or donate it to a good cause. Small holes can be easily patched. But what do I do with a dilapidated property? Is it worth modernising them and reusing them?

"Every existing building has a great advantage in terms of sustainability: even if it is dismantled to the shell, the concrete skeleton of the building is retained. And the cement element of concrete is one of the major 'energy guzzlers' in house construction, as a lot of CO2 is released during its production. For this reason, the CO2 balance of an existing building is already better per se than that of a new building," explains Lutz Schilbach, Teamlead Design + Build at Cushman & Wakefield. 

"The decisive question is whether the existing property has the potential for contemporary use. What are the load-bearing capacities, storey heights, basic structure, construction quality and the access core of a building? And does the building correspond to the value potential of the location? Because it is always difficult to maintain a portfolio if the value of the land has risen so much since its construction that densification would result in a significant profit for the owner," says Schilbach. "Getting a property whose existing substance matches the zeitgeist, such as a loft with brickwork and large windows, is easy. It becomes more difficult when it comes to supposedly 'ugly' buildings with poor construction quality. But I also see a trend here for such buildings also to be preserved and upgraded."

No prospects: When does it make sense to demolish a building?

Only when a T-shirt is completely worn out, should it be thrown out or cut up for dusters. It is similar with a building. The preservation and conversion of a property is usually more cost-effective and environmentally friendly. But in which situations is it more expedient to demolish a building?

"From an ESG point of view, demolition represents a possible solution if the building substance is not suitable for current and value-stable reuse and if growth in land prices points to significant densification," says Schilbach. 

Husemann adds: "If a building has been demolished, ESG aspects can already be taken into account when planning the new building. Local building materials reduce the CO2 footprint during transport and are created under fair working conditions. In addition, one should rely on recyclable materials from the outset and think about their later disposal right from the start. The use of composite materials should therefore be avoided as far as possible. Building technology is also of great importance. It enables both flexible usability of the areas, and efficient control of the systems. The usable life of the building is decisive – the best prerequisite for a sustainable, future-proof property."