Increasing need to incorporate sustainability into multifamily schemes

CBRE recently released an interesting piece of thought leadership looking at the topical issue of sustainability as it specifically relates to multifamily/Build-to-Rent schemes. Although the report has been written from the perspective of the Irish market, it offers learnings applicable across many other key urban locations in Europe. CBRE's Marie Hunt and Dragana Marina have summarized the report in this article. 

How does the priority list look like?

The report acknowledges that health and wellbeing along with environmental considerations have been moving up the priority list for developers, investors, funders, occupiers, Governments, and other stakeholders, all of whom are increasingly focussed on environmental impact, energy efficiency, and decarbonisation. This is an issue that the property consultants say has escalated since the onset of COVID-19. While the focus to date has been primarily on commercial properties, CBRE believe that this is now starting to change and that an increasing cohort of developers and investors are now turning their attention to the residential sector and more particularly to multifamily developments.

Opportunity to embrace ESG

Although this issue has particular resonance for countries such as Ireland where multifamily development is at such an embryonic stage, more mature markets like the Nordics have also seen the trend gaining in force. The property consultants believe that with lots of new purpose-built rental stock being developed, there is an opportunity to embrace ESG from the outset of the development process and in doing so future-proof these buildings.

Much of the multifamily stock that is being developed across the Nordics is purpose-built and therefore adheres to various regulatory requirements, demonstrating favourable sustainability characteristics. However, the focus is now moving away from regulation and design elements and focusing on other construction, operational aspects and social elements that also have a part to play in improving overall ESG credentials within a development. ESG in itself is very broad and no scheme can aspire to tick every box, not least because of the cost of providing every aspirational element, which is ideological and would invariably render development unviable. However, those developing multifamily schemes are increasingly looking at all of the options that come under the E, S and G banner and determining which elements they can realistically incorporate into schemes to make them more sustainable and efficient to operate.


Future demands

According to CBRE, in locations where supply and demand are in broad equilibrium, sustainable multifamily developments should generate higher rents and demonstrate higher occupancy than competing schemes that don’t have equivalent ESG credentials. They say that developers should be mindful of this and look to incorporate sustainable features into their developments to improve liquidity and future-proof their multifamily developments. Interestingly, the property consultants conclude that while the millennial generation, who generally make up the bulk of occupants within multifamily schemes, are very aware of the need to live sustainably and are likely to demand these features in their rental accommodation, occupants are unlikely to be willing, or indeed in a position to, pay more for sustainability credentials or features. CBRE say that in markets where rent affordability is already an issue, renters are not going to want to, or indeed be in a position to, pay extra for sustainable features despite expecting them to be in place. While all renters will opt for the most sustainable option if offered the choice, they will be less inclined to pay extra for the privilege of living in a sustainable scheme unless perhaps it can be demonstrated that significant cost savings can be generated from reduced utility bills as a direct result.

Increased value

Incorporating ESG elements will increasingly have value implications for property assets according to CBRE. Just as we are seeing in the commercial property sector, we expect to see a widening delta between core multifamily buildings that offer the highest standards in terms of ESG and older secondary buildings that will require considerable retrofitting in order to bring them up to minimum standards. It is no longer a case of considering if you can afford to integrate sustainability elements into a multifamily scheme but rather a question of considering if you can afford not to.

Incorporate EGS

The property consultants point out that incorporating ESG can add significant costs to a project. Multifamily developers therefore need to be mindful of developing sustainably but also sensibly so as not to impact negatively on viability and deliverability of the overall scheme. The CBRE report points to lots of actions that developers and those owning and managing multifamily schemes can consider from an Environmental, Social and Governance (ESG) perspective and state that while it will not be possible to incorporate all elements into every scheme, developers need to be mindful and incorporate as many as is feasible, and have a positive impact on the development. When considering what approach to take in respect of incorporating ESG within a multifamily residential development, CBRE say that a strategic approach should be taken to balance benefits for residents, community and investors, with the capital cost of incorporating sustainable design elements or retrofitting older stock.

If you have any questions, please contact:

Marie Hunt or Dragana Marina.


Would you like to read the full report
The Role of ESG in the Multifamily Property Market?
Please click here >>


Marie Hunt has also written an article for the Swedish Real Estate Blog, about the Evolution of Multifamily in Europe. You find it here >>

Marie Hunt I Dragana Marina

Marie Hunt I Dragana Marina

Marie is an Executive Director and Head of Research at CBRE Ireland. She is a highly respected property industry specialist & spokesperson, providing comprehensive analysis & strategic thought leadership on the Irish economy, real estate & business, enabling investors, developers, occupiers and legislators to make informed decisions.
Mobile phone: +353 1 6185543
Email: Dragana is an experienced professional with over 13 years of experience in the real estate sector. She leads the research operations for the Danish market. The Danish research department covers all market segments and works closely with other Business Lines by using research to drive client-based initiatives. Dragana also collaborates with the Danish marketing department and supports the achievement of marketing goals for various products and services. Besides being responsible for leading research functions in Denmark, Dragana also supports CBRE’s pan-Nordic research. Mobile phone: +45 (0)3135 7484

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