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Sustainable retail property is also worth more

shopping center Westwijk Amstelveen
It is now known that the real estate sector has a large ecological footprint. The effect of real estate sustainability on homes and offices has been studied previously: better energy performance goes hand in hand with higher value. So far, only little is known about the effect with stores. This applies in particular to BREEAM, one of the best known sustainability labels for buildings.

It turns out that a higher BREEAM score can also increase the return on retail property. Based on data from real estate investor Altera, Peter-Jan Reinders found in his thesis a gross initial yield-decreasing relationship with a rising BREEAM score. This means that the value of the property increases. Apart from the usual building and location characteristics, there is a significant relationship. This relationship is strongest for stores with a daily supply ('convenience retail'), such as district shopping centers and supermarkets.

Altera is a pioneer in the field of sustainable real estate and made the study possible by making data from their retail portfolio available. I put five questions to Ellen Tak, Head of Research & Strategy at Altera, about the usefulness and necessity of increasing sustainability.

What was the most important reason for you to make data available?
In all our investment decisions, data and the right data applications play an important and ever-increasing role. From this conviction we create added value for our sustainable real estate portfolio. We see this reflected in higher customer satisfaction and therefore better lettability. In the long term, too, we believe that already meeting the highest sustainability requirements will translate into lower costs and fewer unforeseen real estate investments. A better sustainability certificate, for example in the form of BREEAM, should therefore also be related to a higher property valuation in a financial sense. For this reason, we provided data for the study.

What are the main lessons you draw from the results?
The most important lesson is that a better sustainability certificate does indeed contribute to a higher property valuation in a financial sense. Of course, in retail more factors are involved, so the outcome is not (yet) directly visible for all categories. Certainly when the variation in gross initial yields is greater for a particular type of shopping area. But for us it is certainly a confirmation that investing in sustainability pays off.

What else would you like to research?
We see laws and regulations being tightened continuously, especially in the area of sustainability. A high level of sustainability is still an ambition, but will increasingly become a condition in the future. We are therefore curious to what extent "mandatory real estate investments in the field of sustainability" must and will be included as costs by appraisers.

What has Altera already achieved with sustainability measures?

We are convinced that our investment strategy - with integrated ESG/SDG approach - delivers a sustainable return; a return with a positive impact for both our shareholders, our tenants and also society. The Altera residential fund is considered the most sustainable residential fund in the world according to GRESB. The retail fund received the GRESB/BREEAM 'Responsible Investment' award. Two wonderful awards that we received in one year for both our funds, which show that we are distinctive with our high sustainability requirements. 

What other ambitions do you have in terms of sustainability?
We are a leader in the field of sustainability and would like to maintain this position. We will continue to focus on the continuous improvement of our environmental performance and thus limit the impact on the environment. Based on our ambition, we are implementing the "Paris Proof" standard and have translated it into our portfolio. But also in the field of climate adaptation we are continuously adapting our real estate to the changing climate.

Would you like to know more about BREEAM and how it helps you to work in a structured way on sustainability? Please contact our expert on this topic Hil Bos: Hil.Bos@colliers.com, +31654336054.
 

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Paul Nelisse

Director Valuations

Amsterdam

Paul has both practical and academic expertise in the field of groundleasing. Furthermore he has extensive experience with the valuation of residential and commercial property in The Netherlands. As an associate director he is responsible for several managerial tasks, such as maintaining the in-house database with market evidence. 

Paul started his career in 1991 and worked at Syntrus Achmea, Aberdeen Property Investors, Bouwinvest and ROZ/IPD before joining Colliers in 2007. His experience includes research, investment analysis and portfolio management.

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