The German government tightened its climate targets in early summer 2021. The new targets are to reduce carbon dioxide emissions by at least 65 percent by 2030 and by 88 percent by 2040 compared with 1990 levels. Greenhouse gas neutrality is now to be achieved five years earlier in 2045, instead of in 2050 as before. Similarly ambitious targets are also being formulated in other countries. This increases the pressure on the real estate industry and its investors, as the building sector in particular is responsible for a large proportion of emissions.
One of the German government's approaches to making the real estate sector more climate-friendly is the Building Energy Act (GEG). This is currently on the minds of most property owners and investors and is also widely discussed in the media. We therefore want to take a look at what the Building Energy Act actually entails, which energy-related renovations must be carried out exactly and what other options there are for real estate owners and managers to make their building stock more sustainable.
The Building Energy Act (Gebäudeenergiegesetz, GEG), colloquially also known as the Heating Act, states that from 2024 onwards there will be a fundamental increase in the use of renewable energies when installing new heating systems. This means that from next year, every newly installed heating system must be powered by 65 percent renewable energy. Initially, this was to apply to existing properties and new buildings, but now the draft law has been adapted so that only owners of new buildings are obliged to implement this regulation.
In general, the GEG is intended to raise the standard for new buildings in terms of energy efficiency. For example, the permissible primary energy requirement forheating, hot water preparation, ventilation and cooling of a building has been reduced from the previous 75 % per year (EH 75) to 55 % per year (EH 55). These values can be achieved either through energy-related renovations, such as insulation of the building envelope, or by crediting electricity fed into the grid from renewable sources.
For existing properties, the GEG also provides regulations according to which oil and gas heating systems older than 30 years must be replaced under certain conditions.
Due to the legal requirements of the GEG and also the EU Taxonomy Regulation, property owners are obliged to a certain extent to meet energy standards, especially in the case of new buildings. In addition to the legal requirements, however, there are also other incentives why it can be worthwhile for owners to make their own property fit for the future. After all, energy-efficient refurbishment also means an increase in the value of the property as well as more favorable operation, which can be very attractive, especially in times of high energy costs.
To make real estate fit for the future, comprehensive renovations can be carried out, but large effects can also be achieved with smaller, inexpensive measures that can be implemented quickly.
One approach to making the building stock sustainable in the long term is the Manage-to-Green concept. This involves improving the energy efficiency of buildings and reducing CO2 emissions by carrying out and implementing various measures step by step. For example, one can start by optimizing the heating and ventilation system, then improve building insulation, and finally push ahead with the use of renewable energies. In addition, energy-saving potential can be exploited very well through the use of intelligent technologies such as smart home systems, as these can be installed quickly and easily.
Of course, it becomes easier if you are responsible for a project development in which high energy efficiency or even the use of sustainable materials is already aimed for in the planning phase.
However, making a property fit for the future does not have to be limited to the environmental aspect. Today, we often speak of the so-called ESG factors, i.e. Environmental, Social, Governance. However, the social aspect of this trio in particular is still too often neglected.
After all, it is also about creating socially compatible living space and promoting healthy coexistence. Accordingly, the integration of art and culture into living and working spaces can also be part of a sustainable concept. Rental agreements can also be designed to be ESG-compliant, for example by offering more flexibility so that rooms are always used optimally and do not remain empty for long periods.
Real estate investors, in particular, are looking for more and more ways to either retrofit properties in their portfolio or assess their potential and needs before they buy.