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Impact of energy crisis on real estate industry

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An aluminum plant shutting down production, a bakery closing its doors, a patio without heaters - it's the new reality. While many employees enjoy working from home regularly, offices may become a lot busier this winter to be able to turn off the heat at home.

In many ways, high energy prices are affecting the real estate industry. Tenants are seeing their energy bills skyrocket, especially from industrial properties, hotels and restaurants. Their energy costs are high compared to their result and housing costs. In some cases, even higher than their rental costs. This analysis discusses the impact on the real estate industry and provides solutions to keep energy consumption as low as possible.

Seven times higher for industry
Only for offices and stores do energy costs remain lower on average than housing costs. Housing includes leasing, repairs, maintenance, cleaning and insurance in addition to rent. In the other real estate sectors, energy costs are higher than housing costs. For industrial companies as much as seven times higher, for restaurants and cafes about 25%, and for logistics companies and hotels 5 to 10%.

Also, for some sectors, the entire operating profit will be absorbed by energy costs. This is true for industry and hotels. Shopkeepers, logistics companies, restaurants and cafes will see part of their profits absorbed by increased energy costs. Only office tenants remain far out of harm's way; their operating profit is many times higher than energy costs.

Energy ceiling for companies
Possibly there will be an energy ceiling for companies, just like for consumers. The details are still unclear and complicated by the fact that companies need different regulations, unlike consumers. "An energy ceiling can help companies reduce energy bills, but the costs will still be higher than before July 2021," Buijs says. "Together with the coronasteun and taxes now having to be repaid, this could cause more businesses to close. That could increase vacancy rates."

Sustainability as a solution
Now more than ever, the benefits of energy conservation and sustainability are visible, according to Buijs. "Due to the high energy costs, the payback time of sustainability measures is shorter. This makes it attractive, for example, to purchase LED lighting, put solar panels on the roof and install intermediate meters to make one's own energy consumption transparent."


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Impact of energy crisis on real estate industry

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Related Experts

Madeline Buijs

Head of Research & Economy

Amsterdam

Madeline has been Chief Economist and Head of Research at Colliers since January 2022. Madeline heads the research team that researches the various asset types and trends in the real estate sector.  Important topics are the social relevance of the real estate market, sustainability and the use of data. Developments in the housing market have her special attention.

Before that, Madeline worked as a senior sector economist for the construction and real estate sector at ABN AMRO, where she formulated ABN AMRO's vision for the economic developments in these two sectors over the past 9 years. She did this by writing publications, giving presentations and media appearances. Before ABN AMRO, Madeline worked as an economist and project leader at the Netherlands Authority for Consumers and Markets (ACM).

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Arjan van Eijk

Head of Sustainability

Rotterdam

With over 10 years of industry experience across different sectors, Arjan leads the ongoing development and implementation of the Colliers sustainability strategy in the Netherlands, which focusses on improving ESG performance and managing associated risk for a range of occupier and investor clients. He is passionate about driving sustainability in all aspects of the business to preferably exceed stakeholder expectations. Arjan is also part of the ESG Subject Matter Experts Group for the Colliers property management teams across EMEA providing strategic advice on technology deployment, net zero strategies, EU carbon compliance, workplace wellbeing, and the impact that these trends have on service delivery.

Arjan is a regular presenter on sustainability topics and represents Colliers on various industry groups.

Contact Arjan if you'd like to discuss:

  • Development and implementation of ESG & Net Zero strategies
  • SFDR, CSRD and EU-Taxonomy consultancy
  • ESG data management & reporting
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