Next generation property investing: The urbanisation mega trend

8 minute read

Matthew Norris

Director, Real Estate Securities

Mega Trend 4: Urbanisation – green is the new prime

What is the urbanisation mega trend

With the urbanisation mega trend, we're talking about offices, and how both investors and occupiers are demanding greener premises. Whether it's Microsoft or Barclays, most companies now have their own net zero agenda, and that includes the office space they reside in. Green has become the new Prime.

The biggest threat facing humankind is clearly climate change and buildings have a large carbon footprint. With net zero targets on the horizon, new offices can no longer be the energy-guzzling behemoths of the past and are increasingly striving to be environmentally friendly. In the UK, the government has set the Minimum Energy Efficiency Standard, measured by an Energy Performance Certificate which sets out the energy efficiency of a property with a rating from A to E. The regulation requires all commercial buildings to be rated a minimum of B or higher by 2030.

If regulation dictates buildings need to be more energy efficient, tenants want to be in buildings that are environmentally friendly, and workers want to be in buildings that have a high level of amenities - places to store their bikes, places to have a shower, etc – that's good news for the landlords who produce, develop, and manage the next generation of green offices, with high EPC ratings. Those buildings that are lowly rated run the risk of becoming stranded assets - they become too expensive to upgrade to make them future proof and then become unacceptable to tenants or unlawful to let.

Gravis Advisory Ltd analysis, based on current portfolio holdings with EPC ratings. 2023 uses latest available data for the portfolio holdings. 2 Energy Performance Certificates for non-domestic properties in England and Wales - Department for Levelling Up, Housing & Communities, data to 31.12.23.

Why 'green' is the new prime

Go back to Mega Trend 3: Generation Rent.

Find out more about the VT Gravis UK Listed Property Fund, here.

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