Can advisers benefit from new economy real estate?

“Things like old warehouses are now being converted into distribution logistics centres to support e-commerce, and online retail in the supply chain.

"In fact, they're even converting old shopping malls and big box retail stores to facilitate logistics as well. So that's truly a big opportunity.”

Green transformation

In parallel, real estate has been undergoing a green transformation.

From energy efficient offices and homes to green transportation, the switch to a greener way of life has necessitated an accelerated rollout of new real estate, such as charging stations and solar technology.

“The big picture”, says Gabriela Herculano, iClima CEO and manager of the Smart Energy ETF, “is that we are changing and solving with one goal big problems in our largest industries, which is energy, transportation and building. And at the bottom of all [this] are two technologies, the solar panels and the batteries.”

She adds: “Where we could be by 2030 is a materially different planet where these three industries converge.

"So that has profound consequences for real estate, not only because we're producing electricity at the point of consumption, but we're taking this to another level. And it's not concepts, it’s being done right here, right now.” 

Her fund is looking at companies such as vehicle-to-grid business Nuvve, which offers green charging station and grid services. 

For urban construction, it considers companies with solar window solutions, which develop glass facades that are capable to produce electricity.

According to Herculano, one of the big drivers behind the solar trend are new regulations banning fossil fuel boilers, such as the UK's ban on gas boilers in new builds from 2025.

But demand is there beyond what regulation is requiring, she adds. “Buyers of property want to have the solar rooftop, want to have that stationary battery and want to have the vehicle-to-grid already plugged in.

Where we could be by 2030 is a materially different planet.Gabriela Herculano

“Developers have a very key role here. They in a way react to regulation, in a way react to demand and market forces, but they also have an opportunity to be ahead and take that concept further.”

When it comes to buildings, studies have shown energy efficiency can yield a sizeable increase in both sales and rental values. 

A 2018 science-for-policy report from the European Commission, titled 'Energy efficiency, the value of buildings and the payment default risk', described a premium of 3-8 per cent in the price of residential assets.

It also cited an increase of 3-5 per cent in residential rents compared to similar properties which were not energy efficient. For commercial buildings the premium was 10 per cent on sales and 2-5 per cent on rents.