Real estate funds are becoming a whole new investment.
Sustainable energy solutions are fundamentally transforming the real estate market. In the future, buildings will no longer just use energy efficiently, but will increasingly produce it themselves and become increasingly self-sufficient. Energy production is no longer centralized, but decentralized. This change is not only necessary from an ecological point of view, it also offers investors solid economic opportunities and new return potential.
Real estate and real estate funds have always been welcome diversification factors and stable return guarantees in an investment portfolio. Based on this asset class, new investment products can be created by adopting new approaches to energy management. Whereas in the past the focus was mainly on the energy consumption of buildings, today there is more focus on active production and on-site energy storage. Solar installations, heat pumps, electricity storage devices and other innovative technologies not only make buildings energy self-sufficient and resilient, but also transform them into power plants. However, despite these promising developments, the potential of renewable energies often remains untapped.
Switzerland offers ideal framework conditions
Switzerland offers ideal framework conditions for the use of renewable energies: cutting-edge technologies, available financial resources and federal support programs greatly extended by the new energy law. However, real estate owners and portfolio managers are often held back by technical complexity, regulatory uncertainties and operational challenges. The integration of new technologies such as battery storage or decentralized energy systems into existing infrastructure requires the interaction of several service providers, such as engineers, planners, installers and many others, who are often not not coordinated between them today.
The transition to sustainable real estate is not a short-term trend, but a long-term paradigm shift.
Decarbonization is profitable in the investment portfolio
The real estate sector plays a central role in the energy transition, with buildings accounting for a significant portion of global CO2 emissions. Often a clear overview of the financial benefits is lacking. Decarbonization and sustainable energy production are no longer only a concern for the sustainable development of real estate, but also represent a profitable investment case. Investment opportunities arise where domestically produced energy is cheaper than long-term price forecasts for energy purchased externally.
For installations carried out in 2023, the average Swiss price of electricity from rooftop solar installations is between 5 and 20 cents per kWh. With unchanged network charges and fees of 11 cents per kWh and long-term energy price forecasts of 6.8 cents per kWh, the majority of installations are therefore profitable compared to total costs of 17.8 cents per kWh. The challenge, however, is to reach the lower end of the cost range. Caution is also required when injecting electricity produced on site, because this is less and less remunerated. Over the past two years, the prices of electricity fed into the grid have repeatedly plunged into the negative during certain periods during the summer. It is therefore a question of marketing the surplus well and finding permanent buyers.
Lower energy costs
For property owners, this means being able to evaluate these opportunities before construction and limiting the risk of unpleasant price surprises. If implemented correctly, net returns on real estate can not only improve, but also increase their attractiveness. On the one hand, owners benefit from stable and attractive returns. On the other hand, energy costs for tenants are reduced, which increases the attractiveness of real estate. Finally, such investments contribute to achieving the climate objectives pursued by the European Union and Switzerland.
The transition to sustainable real estate is not a short-term trend, but a long-term paradigm shift. Funds that actively participate in this transformation not only meet the growing demands of investors, but also contribute significantly to the energy transition.
