Sustainability a central element of the development cycle

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Accreditation from an independent third-party sustainability organization such as UK-based Breeam and US-based Leed, and increasingly specializing in indoor and human health, has become so standard that it makes integral part of the entire life cycle of a development project.

This is evident in the office market and increasingly also for logistics and other sectors such as hospitality and residential. There is also now a perceived need for sustainability features in public buildings.

Sustainability requirements are now extended to include environmental, social and governmental (ESG) and European taxonomy issues in planning, design, permits, financing, leasing, property management and an exit strategy. All of this, in turn, requires systems of benchmarking, transparency and accountability. ESG-related advisory services have thus become a growing business and specialty: KPMG, for example, has an advisory service dedicated to real estate sustainability.

ESG and the EU taxonomy act as roadmaps or frameworks for more sustainable and green products.

“We can clearly see that sustainability has become one of the major criteria in the real estate sector. Non-compliance with sustainability frameworks can even be a deal breaker these days, which is a new trend,” comments Zsombor Barta, President of the Hungarian Green Building Council (HuGBC).

“The EU taxonomy plays a very important role when it comes to the sustainability of the real estate sector, and major international green building programs are also aware of this; therefore, all have announced pathways to compliance with taxonomy requirements that have similarities to certifications,” explains the president.

“This is going to evolve further in the future, that’s for sure. In addition, net zero targets are clearly influencing certification systems, and more options and possibilities will be developed to certify net zero buildings or other strategies also in the near future,” Barta said.

“It is still very important that sustainability frameworks and holistic guidelines are implemented for all built environment projects, because wherever materials, resources, energy or land are used […], the active integration of sustainability aspects and measures is essential. Overall, third-party accreditations are a very useful tool for the systematic reflection and active integration of holistic aspects of sustainability,” he adds.

More used

Breeam is the most widely used sustainability scheme in Central Europe by office developers, although Skanska, for example, prefers Leed across its international portfolio, including this region. The prolific developer was also one of the first to use the Well system in Hungary in his office projects. More recently, Skanska received Well “Core & Shell” pre-certification for the first phase of its H2Offices complex in the Váci corridor.

According to the developer, the project is well on its way to achieving the highest level of “Platinum” accreditation for Leed and Well and WELL Platinum accreditations.

A similar trend can be seen in the logistics sector, where seeking third-party sustainability accreditation is quickly becoming the norm at the high end of the market for major domestic and international industrial park developers and operators.

Prologis is developing according to at least Breeam “Very Good” accreditation for its entire regional portfolio. Tenants seek to save on utility costs, recognize the importance of staff well-being, provide green spaces, bicycle parking and changing rooms, and electric vehicle charging stations. Other factors include observing precautions regarding transmissible viruses and the need to reduce the carbon footprint of their projects, Prologis said.

The Maglód and Fót HelloParks industrial developments in the Greater Budapest area are the first industrial buildings in Hungary to achieve Breeam “Excellent” certification in the “New Construction” category, according to the developer. Read more on page five.

Lawmakers are also impacting the landscape, with the EU introducing a common taxonomy for the single market.

“We are very proud and happy that the HuGBC has collaborated with the Hungarian National Bank (MNB) on the adaptation of the EU taxonomy for the real estate sector in Hungary. In addition, the HuGBC can also verify compliance with the taxonomy in this sector, which is again an important step related to third party verification of compliance with EU taxonomy,” Barta comments.

Net zero progress

Hungary is ranked 13th in KPMG’s “Net Zero Readiness Index”. Poland, for example, ranks 19th.

“Hungary has a Net Zero target in place and its financial sector is working to stimulate the flow of capital towards decarbonization efforts. Much of its electricity is generated by nuclear power, and it is developing solar capacity, energy efficiency and the use of electric vehicles,” said István Szabó, senior executive at KPMG Hungary. Buildings account for 17% of emissions, industry 21%, transport 23% and electricity and heating 23%, according to KPMG.

As reported in the July 29 issue of the Budapest Business Journal, Pál Dános, Head of Real Estate Consulting at KPMG Hungary, explained that the Net Zero Readiness Index compares the progress of 32 countries in reducing greenhouse gas emissions. emissions that cause climate change, and assesses the readiness and ability to achieve net zero emissions of these gases by 2050. With regard to the construction market, professionals stress the need for a circular economy that eliminates or reduces waste in the materials used.

The view expressed at the recent meeting of the Polish Urban Land Institute (ULI) was that the real estate sector “must produce adaptive and regenerative designs that make sustainable use of natural resources. Every developer must first ask themselves if the project is really necessary, and if so, it must be built for long-term value, efficiently and with the right materials. There is progress, but more is needed.

“Currently, the real estate sector is not one of the greenest sectors; however, it is clear that the sector is doing more year after year,” recognizes Barta.

“As the negative environmental impact of this sector is enormous, there are still huge challenges to overcome; there is a lot of work to do in the future. The good news is that there are positive trends and directions; there is a lot of knowledge about how we could do much better in this area,” he says.

“As long as non-sustainable solutions (such as materials, products, services, etc.) are the most financially advantageous options, sustainability cannot be implemented on a large scale and for the whole sector. Sustainable options must become the new normal, the financially attractive solution and, therefore, the cheapest,” concludes Barta.

This article first appeared in the print issue of the Budapest Business Journal on September 23, 2022.

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