Has Energy Efficiency Emerged as a Driver of Real Estate Returns?

MSCI (2023) | Underwriting, Financing, Capital Stack

Full access to the post is available to subscribers only.

Energy-performance certificates (EPCs) are increasingly vital for property investors in the EU, offering a standardized way to assess building efficiency. In the Netherlands, data from the MSCI Annual Property Index shows a significant shift toward greener assets: from 2012 to 2022, properties rated A or better rose from 24.2% to 50.2%, while those rated D or worse fell from 19.6% to 6.1%. Investors not only upgraded existing buildings but also strategically acquired efficient assets and sold off less efficient ones.

In 2022, residential properties with top EPC ratings outperformed others, reflecting the impact of high energy costs. Although long-term capital growth was mixed, energy-efficient buildings required less capital expenditure and showed stronger net operating income (NOI) growth and yield premiums. These assets are now seen as lower-risk, with EPC segmentation offering deeper insight into performance. As energy costs …