Copenhagen and Aarhus fall behind other European cities when looking at the share of office buildings with sustainability certifications

A new study from commercial real estate adviser CBRE shows that Denmark falls behind other European cities regarding the share of buildings with sustainability certifications.

December 27, 2022

By Dragana Marina

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CBRE's new report "Is Sustainability Certification in Real Estate Worth It" investigates how sustainability certifications affect the value of office buildings. The analysis is more comprehensive than ever and covers 18 European countries and 38 cities, giving a much better understanding and analytical insight into the real estate sector than what has previously been available.

Sustainability is a major focus in real estate across Europe, and there is a widespread belief that although the development of sustainable office buildings generally entails additional costs, there are several advantages. However, the study also shows that attention alone is not enough. The two Danish cities in the study, Copenhagen and Aarhus, both have ambitious climate goals, but fall far behind many of the cities they usually compare themselves with, such as Stockholm and Amsterdam.

"I think we are on the threshold of a wave of changes in the industry in terms of sustainable investments, and the study confirms the importance of being ahead of this development to attract investors' interest in the future," says Stefani Erika Papadaki, Head of ESG at CBRE.

Certified office stock continues to make up a larger part of the market. On the markets CBRE has surveyed, the certified share is 20% in mid-2022 compared to 14% in 2019. But there is a big difference from top to bottom. Aarhus and Copenhagen both have less than 10% certified office stock, while Amsterdam and Stockholm have more than 40%.

"Our European analysis shows that certified office stock has a rent that is 6% higher than non-certified buildings. In Copenhagen, the premium is 12%, so there is a financial incentive. Nevertheless, we can also see that the share of certified office stock in Aarhus and Copenhagen has hardly moved from 2019 to the first half of 2022, and this is worrying – both in terms of achieving the climate goals and attracting investors," says Dragana Marina, Head of Research & Data Intelligence, Denmark, Sustainability Research Lead, Continental Europe.

Everything comes with a price – including the future of the real estate sector

Green office buildings benefit all parties involved: tenants achieve energy savings and increased productivity, owners can charge higher rent, and society benefits from lower CO2 emissions. "There is no longer an excuse to deprioritize or completely opt out of having an ESG strategy because if you don't have one, you will struggle to retain your customers, attract green investments, and possibly end up with stranded assets," Stefani Erika Papadaki says.

Although certified buildings are in demand in most markets, it is still only an option and not a legal requirement. Reasons why new buildings are not certified include high construction costs, lack of documentation that a certification makes economic sense, lack of legislative incentives, and lack of understanding of occupier demand and preferences.

"The conclusions of our report show a significant correlation between sustainability certificates and the market value of buildings. Also, our analysis reveals a rent premium for certified office stock, regardless of the year of construction. Therefore, certifying new and existing building stock results in higher office rent than non-certified stock, and this supports the 'retrofitting challenge' outlined in the European Green Deal," says Dragana Marina.

When looking specifically at the two Danish cities in the study, there is no doubt that the development is going too slow and that we need to increase the pace dramatically. On the other hand, when looking at markets with a high share of certified office stock like Amsterdam and Stockholm, we see high demand from occupiers and investors and legislation contributing to helping development in the right direction.