CESAR

The real estate sector is responsible for around 40 per cent of the global energy and 50 per cent of the natural resources consumed. Consequently, a circular economy that focuses on the durability and recyclability of materials is in greater demand than ever before. The Federal Ministry for the Environment, Nature Conservation, Nuclear Safety and Consumer Protection’s Substitute Building Materials Ordinance (Ersatzbaustoffverordnung, EBV), which recently came into force, marked another major step towards ‘circular building’ with its regulations on the recycling of excavated soil, building rubble and slag. By replacing state-specific guidelines with uniform federal regulations, more legal certainty for those involved is being created. Circular building is also one of the German Sustainable Building Council (DGNB)’s central themes, which assesses the use of recycled materials positively in the assessment result with a view to improving the carbon footprint and lifecycle of a building.

We use CESAR to analyse green buildings in the Big 7 office property markets (Berlin, Düsseldorf, Frankfurt, Hamburg, Cologne, Munich and Stuttgart). In our analysis, we always use the terms ‘certification’ and ‘certified’ to refer to properties which are certified, pre-certified or registered for certification. We have investigated the stock of, and demand for office space in these markets, but not developments under construction or at the planning stage. We have taken account of all recognised certificates in Germany, i.e. DGNB, LEED, BREEAM. The Hafen-City-Siegel certificate, which is of specific regional importance to Hamburg, was added to the DGNB in June 2023 as a special environmental award with a focus on environmental aspects.

The construction industry is currently facing major challenges. The effects of the shortage of materials and inflation-fuelled increases in building and financing costs are evident in the current weak order situation. The resulting delays in the completion of development projects are clearly reflected in the completion pipeline figures for office buildings. In fact, the completion pipeline for the first half of the year in the Big 7 is lower than expected with just under 660,000 sqm of office space completed between January and June 2023, a decrease of 31 per cent compared to the same period last year.

Yet looking at the past 12 months, the office stock in the Big 7 has grown by 1.28 million sqm. Certified buildings accounted for 760,000 sqm of this figure, i.e. significantly more than half of the newly constructed office buildings have a Green Building certificate.

As expected, the ratio is lower in relation to the total stock of office space. Of the 97.5 million sqm of total office stock at the end of the second quarter of 2023, 11.4 per cent is certified. This means that the share has grown by 0.6 percentage points in the last 12 months. Of the Big 7 office markets, the largest increase of 1.3 percentage points was observed in Düsseldorf, partly due to the completions of the new Eclipse and Trigon projects in the Kennedydamm and Linksrheinisch submarkets, respectively.

Frankfurt assumed pole position among the Big 7 in the ranking of green buildings and by a considerable margin, with over 26 per cent of its total office stock of 11.8 million sqm now certified. Düsseldorf and Munich followed with shares of 12 per cent and 11 per cent of their respective stocks.

The proportion of the total letting take-up accounted for by certified office space is at an all-time high. Just five years ago it was 14 per cent, today it is 22 per cent. Almost 22 per cent of the 1.16 million sqm of the space leased in the Big 7 office markets in the first half of 2023 is now certified. Frankfurt recorded the strongest demand with 41 per cent, corresponding to 71,200 of 174,900 sqm, followed by Cologne with 25 per cent (21,300 of 84,400 sqm). In third place, with an almost identical share of just under 20 per cent, were Düsseldorf (20,700 of 104,200 sqm) and Berlin (50,000 of 254,200 sqm). The largest lettings in certified buildings were concluded in Berlin and Hamburg and comprised Boston Consulting's letting of 18,800 sqm in Berlin's Mediaspree, RTL Nord’s letting of 17,200 sqm in Hamburg's HafenCity and the letting by Bürgerschaft der Freien und Hansestadt Hamburg of 10,000 sqm in the city centre.

Although the banking and financial services sector have been relatively inactive in terms of lettings over the past three years, accounting for just 6 to 8 per cent of the total letting take-up in the Big 7, companies in this sector have shown a particularly strong interest in sustainable space over this period and currently account for 40 to 57 per cent of the take-up result (48,600 sqm). Companies from publishing, media and business-related services followed in second and third place with shares of 29 per cent and 28 per cent, respectively. These sectors have maintained a regular presence in the Top 5 since the survey began.

Analysing the origins of tenants leasing more than 1,000 sqm of space in the first six months of 2023, 55 per cent of the space taken up by foreign companies was in green buildings. The share of certified space let to German companies was significantly lower at 19 per cent, which clearly shows that international companies set particularly high standards in sustainability when choosing a location for their offices. High energy efficiency standards such as insulation, geothermal energy, photovoltaics and smart building controls are at the top of their wish lists.

Excursus

While a ‘green building’ refers to a building whose development has been sustainably developed from environmental, economic and social perspectives, there are many other real estate assessment systems / certifications. In the case of office furnishings, for example, ‘Level and Quality Office Siegel’ advertise sustainably produced furniture. ‘Grüner Strom’ and ‘Grünes Gas’ certify green electricity and biogas, and ‘GEFMA 160’ considers sustainability in facility management. Moreover, ‘WiredScore’ and ‘SmartScore’ have already certified approximately 400 buildings in Germany based on their connectivity and digital infrastructure.