Sven Bienert

Green agenda and green performance: empirical evidence for real estate companies

Purpose – A green agenda has become a growing subject throughout an increasing number of European listed real estate companies over the last decade. The focus on sustainability is presumably not only goodwill or legislation driven but is rather a benefit driven action to achieve an economic surplus. The purpose of this paper is the development of an adequate sustainability definition, the investigation of the effect of a sustainability agenda on a company level, and the identification of possible financial benefits.Design/methodology/approach – This is an explorative qualitative and quantitative study. First, the authors developed a four‐bottom‐line real estate sustainability agenda in accordance with the guidelines of the European Public Real Estate Association and the Global Reporting Initiative. Second, the study examines 80 European listed real estate companies from 2006 until 2009, and third, the study applies a panel analysis with conditional and unconditional regression techniques.Findings – After ...

THE MORTGAGE LENDING VALUE: PROSPECTS FOR DEVELOPMENT WITHIN EUROPE

Purpose – The purpose of this paper is to critically review the German mortgage lending value (MLV) and to adapt it in order to find a new concept that could serve as the basis for an internationally accepted standard for valuations for lending purposes.Design/methodology/approach – The research is based on a critical review of existing practices and literature and applies developments in the area of risk management tools, modern valuation techniques as well as the results of the consultation for Basel II in order to find an improved method.Findings – It was found that a value‐at‐risk approach and the implementation of simulation helps to understand the concept of MLV. The results also indicate that the German system of calculating the MLV has to be improved.Practical implications – Banks are in need of tools, reliable instruments and a strong theoretical basis when evaluating their collateral. The valuation of real estate for long‐term loans has always been a problem. This paper indicates a strong basis ...

The asset allocation of sustainable real estate: a chance for a green contribution?

Purpose – Given the growing market awareness concerning responsible investments in recent years, the purpose of this paper is to bridge the gap between real estate companies which implemented a corporate social responsibility (CSR) agenda and the possible role within a multi‐asset portfolio optimisation framework. The behaviour of the asset class sustainable real estate (SRE) together with its diversification characteristics are the main focus.Design/methodology/approach – The study is an explorative empirical analysis applying a portfolio optimisation algorithm. First, the authors developed a sustainable real estate index comprehending listed real estate companies from 2004 until 2010 acting in line with a CSR agenda. Second, the authors introduced SRE into the opportunity set of an UK investor and finally, generated the theoretical optimal asset allocation of SRE within different risk‐return portfolios.Findings – The unique risk‐return pattern of SRE enables the asset class to be allocated across all po...

Assessment of climatic risks for real estate

Purpose – The purpose of this paper is to investigate the functionality and main results of the ImmoRisk tool. The aim of the project of the Federal Ministry for Transport, Building and Urban Development (BMVBS), in corporation with the Federal Institute for Research on Building, Urban Affairs and Spatial Development (BBSR), was to develop a user-friendly tool that provides a sound basis with respect to the risk situation caused by extreme weather events. Design/methodology/approach – The tool calculates the annual expected losses (AEL) for different types of extreme weather hazard and the damage rate as the proportion of AEL on building value, based on a trinomial approach: natural hazard, vulnerability and the value of the property. Findings – The paper provides property-specific risk profiles of both the present and future risk situation caused by various extreme weather events. Research limitations/implications – The approach described in the paper can serve as a model for the realization of subsequen...

How does energy efficiency influence the Market Value of office buildings in Germany and does this effect increase over time

Purpose – The paper aims to estimate the effect of energy efficiency on the Market Value of office buildings and consider whether this effect increases over time. Design/methodology/approach – The authors analyze a dataset of office building valuations from 2009 to 2011, provided by the German Investment Property Database. The authors use hedonic regression models to determine the effect of energy efficiency and energy consumption on Market Values. Using generalized additive models (GAM) for modeling nonlinear covariate effects, the authors control for further building characteristics and location. Due to the small sample size, the authors introduce an innovative econometric approach that mitigates this problem. Findings – Mainly due to the small sample size, and in spite of the newly developed econometric methodology, the authors do not find clear evidence of the relationship between energy efficiency and the Market Value. However, the study nonetheless provides interesting insights into the composition ...

Office properties through the interest cycle: Performance impact and economic sustainability in Germany

Purpose - – The purpose of this paper is to estimate the impact of changes in macro-economic conditions going forward, focusing on a change in interest policy, with regard to office letting and investment markets. Design/methodology/approach - – For this analysis, the authors constructed two vector-autoregressive models, measuring the response of office rents and capital values in Germany to economic impulses. The authors isolated effects of unique exogenous positive shocks (such as economic growth or interest leaps) on the basis of impulse-response functions in order to understand the complex dynamic interdependence between several economic factors and office performance changes. Findings - – The authors initially find a moderately positive development of both office performance components even although supposing an increase in interest level. In terms of capital values, the authors find that they do not drop before 1.5 years after the interest impulse and the negative effect peaks after approximately nine quarters. Furthermore, the reaction to a change in GDP is significantly lower than a reaction to the interest rate, but impulses in other macro-economic factors provoke stronger reactions. Finally, the authors find that a positive interest shock leads to a comparably robust development and economic sustainability in office rents throughout a consideration horizon of 24 quarters. Research limitations/implications - – Estimations are based on observations from a time period containing two rather extraordinary market phases. As they included bubble growth and the low-interest environment, the authors find that certain patterns in both phases neutralize each other when looking at the total time frame. The authors constructed sub-samples to compensate for this. However, the research does not provide to what extent the measured impulse-responses stay forecast-proof, if the market moves into a phase of short-term normalization. Practical implications - – This paper provides insights into estimated impulse-response patterns on a hypothetical sudden increase of several macro-economic determinants. On this basis, the probable reaction to an increase in, for example, the interest rate level can be approximated. Also, the paper provides a fundamental understanding of the economic sustainability of German office properties in terms of their value and rent performance in the case of exogenous shocks. Originality/value - – This paper contains the first vector-autoregressive, impulse-response analysis of office markets in Germany in the context of several macro-economic drivers, including the interest level. It delivers insights into market reaction patterns on the basis of simulated one standard deviation shocks in all included variables.

The energy efficiency of corporate real estate assets: The role of energy management for corporate environmental performance

Purpose On the basis of corporate wholesale and hypermarket stores, this study aims to investigate the relationship between energy consumption, physical building characteristics and operational sales performance and the impact of energy management on the corporate environmental performance. Design/methodology/approach A very unique dataset of METRO GROUP over 19 European countries is analyzed in a sophisticated econometric approach for the timeframe from January 2011 until December 2014. Multiple regression models are applied for the panel, to explain the electricity consumption of the corporate assets on a monthly basis and the total energy consumption on an annual basis. Using Generalized Additive Models, to model nonlinear covariate effects, the authors decompose the response variables into the implicit contribution of building characteristics, operational sales performance and energy management attributes, under control of the outdoor weather conditions and spatial–temporal effects. Findings METRO GROUP’s wholesale and hypermarket stores prove significant reductions in electricity and total energy consumption over the analyzed timeframe. Due to the implemented energy consumption and carbon emission reduction targets, the influence of the energy management measures, such as the identification of stores associated with the lowest energy performance, was found to contribute toward a more efficient corporate environmental performance. Originality/value In the context of corporate responsibility/sustainability of wholesale, hypermarket and retail corporations, the energy efficiency and reduction of carbon emissions from corporates’ real estate assets is of emerging interest. Besides the insights about the energy efficiency of corporate real estate assets, the role of the energy management, contributing to a more efficient corporate environmental performance, is not yet investigated for a large European wholesale and hypermarket portfolio.

Are Energy Efficiency Ratings Ignored in the German Housing Market?– Evidenece from a large-sample Hedonic Study

Improving the energy efficiency levels of housing is of particular concern in the private rental market where capital costs and subsequent utility cost savings are not shared in equal measure by landlords and tenants. This problem is particularly pronounced in Germany where rental properties make up the majority of the housing stock. The present study is the largest and most comprehensive study of the value of energy efficiency in the German housing market and investigates the effect of energy efficiency ratings on rental values across 412 markets in Germany. Using a semiparametric hedonic model and an empirical sample of nearly 300k observations with full hedonic characteristics, we find strong evidence that energy-efficient rental units are rented at a premium. A survival hazard model is then used to study the impact of the ratings on time-on-market. It is found that energy-efficient rental properties tend to lease up more quickly than their non-efficient peers. This study provides a robust framework for policy makers and property companies for understanding how energy efficiency and expected utility costs of a rental property affect asking and effective rents.

Determinants of lease terms in residential markets and their implications for economic sustainability

In contrast to its European neighbors, Germany’s rental housing market has a long tradition. 54.3 % of all Germans live in rental housing. According to surveys, property acquisitions for rental purposes are on the rise and high purchase prices boost European rental markets. Simultaneously, individuals increasingly value flexibility and tend to minimize terms of commitment, resulting in major changes for the real estate industry. As a consequence, property investors need to consider shortened lease terms and a higher probability of tenants moving out, resulting in longer amortization periods and increased capital expenditure. On the one hand, long leases create stable income flows and require less capital-intensive maintenance strategies, but are confronted with higher legal burdens to increase rents. This is especially relevant to properties where a high margin between market rent and contractual rent is observable. On the other hand, short lease terms enable instantaneous adjustment to equilibrium market rents once the tenant has moved out, but also lead to higher fluctuation and wear of the subject property and directly encompass substantial refurbishment, administration and reletting costs. Therefore, the ability of residential investment properties to generate adequate returns stands or falls with tenant behavior. This obviously creates the need for more and deeper research in this field of study. Thus, the paper at hand aims to contribute to the theory, practice and development trends of residential property leases. The authors analyze a steady panel dataset of 500 residential housing units throughout one of the most overheated metropolitan German areas, namely Munich, from 2007 to 2017. Consequently, the analysis covers periods of boom and bust, making findings extremely robust. Based on a desktop literature review and a Cox proportional hazard model, the authors provide a more in-depth explanation of influence factors for effectively observed lease terms in residential markets. The authors support the hypothesis that main drivers of lease duration are tenant and property attributes, effective rental price increases, geo-referenced location variables and macroeconomic indicators. Due to bounded availability of data, current research in this field is still limited, especially in Germany. Thus, the study at hand should provide deeper insights into the decision making process of tenants and its implications for investors in the German residential market

Does ‘clean’ pay off? Integrating heating technology in hedonic pricing models

Comprehensive research has dealt with the question whether property markets show price premiums for buildings that feature ‘green’ characteristics such as low energy consumption or a building certification. We expand existing research by raising and answering the question if housing properties that were explicitly advertised to feature ? ‘green’ ceating technology based on renewable energies or ‘brown’ heating technology based on fossil energies or even obsolescent technology come with significant price differences in association with these technological differences. For this purpose, we perform large-sample geoadditive regression analyses on the basis of a private dataset, which originally contains more than 3 million raw observations from German residential properties of 2015. We indeed find significant impact on housing prices, which is specifically visible in the form of a ‘brown’ discount for properties that are powered by fossil-fueled energy systems. From our findings, we suggest that low-energy consumption levels may still lead to price discounts c.p. if it is caused by mainly building-related quality and system-related measures stay unperformed.