Plan for net zero or suffer huge depreciation, says report

Commercial property without plans to slash carbon emissions will soon plummet in value, warns a report on net-zero initiatives for UK commercial property market valuations.

The joint report, produced by new real estate stock exchange IPSX and sustainability data and consulting firm Carbon Intelligence, factor in UK government commitments to a 78% reduction in greenhouse gas emissions by 2035, coupled to increasingly stringent energy-efficiency standards.

“By not investing capital expenditure now into a long-term net-zero strategy, building owners miss out on the short-term advantages associated with a building that drives high tenant demand, due to minimal energy costs, prestige, and ESG credentials,” said Oliver Light, Carbon Intelligence’s real estate commercial director.

“They will also have to invest the same or more to deal with obsolescence as a result of non-compliance, voids, and capital depreciation of the building.”

Independent research from asset management services provider Fidelity International found that 97% of commercial real estate in Europe is currently unable to support a net-zero transition.

“Today’s liquidity conditions mean valuations do not yet reflect the stark difference between buildings that are ready to support the low-carbon transition and those that are not,” said the Fidelity report.

“That won’t last forever, and owners who delay investment in retrofitting could come to regret it.”