Sustainability and ESG criteria are seen as signposts for the future of the real estate industry. However, implementing these standards is by no means easy and is caught between ambitious goals and economic feasibility. While there are many arguments in favor of environmentally friendly construction methods, in practice there are clear hurdles that cannot be ignored.

ESG standards and the reality of rents

A complete alignment of all properties with ESG criteria would mean that extensive investment in new construction and refurbishment would be necessary – from energy modernization to the integration of smart technologies. However, these measures incur considerable costs, which many landlords can only partially refinance through rent increases.

  • Limited potential for rent increases: Rent growth is capped in many regions, whether due to government regulations or the purchasing power of tenants. In an environment of rising living costs, rent increases are often unenforceable.
  • High investment costs: Energy-efficient renovations and sustainable technologies often require a high level of capital. Small and medium-sized owners in particular find it difficult to cover these costs without subsidies.

Tension between goal and feasibility

The discrepancy between ambitious ESG targets and reality is becoming increasingly clear. Examples:

  1. Technical and financial challenges: Not every building is suitable for a complete conversion to ESG-compliant standards. Historic properties, for example, can often only be modernized to a limited extent.
  2. Slow amortization: The energy savings from renovations often only materialize after many years. In the short term, this increases the financial pressure on owners.

A realistic approach for the future

The solution could lie in a differentiated approach:

  • Support programs: Government support and incentives such as tax relief could help to reduce the burden on owners.
  • Prioritization: Instead of comprehensive retrofitting, buildings should first be modernized where the greatest savings and benefits are realistic.
  • Adjustment of targets: The real estate industry needs realistic ESG criteria that bring desire and reality more in line.

Conclusion

ESG criteria are undoubtedly important for a sustainable future for the real estate industry. However, full implementation will only be possible if economic aspects and social compatibility are given greater consideration. The dialog between politics, business and society must be intensified in order to find solutions that are both ambitious and feasible. After all, long-term sustainability requires pragmatic steps that are acceptable not only for investors but also for tenants.