Sustainable real estate funds to grow to €3.2b by 2018

Sustainable real estate funds are on the rise, according to Catella’s latest market tracker ‘Sustainable funds in the real estate industry – a look at Europe’, published this month.

In particular, investors are focusing on sustainable funds in Germany, Austria and Switzerland, according to Catella, which expects them to grow to €3.2b by 2018.

‘Today, there are around €2.73b invested in so-called sustainable property funds in Europe,’ said Thomas Beyerle, head of group research at Catella. ‘At first glance, that looks like a lot, but overall in Europe the volume is around €11.04tr., so these products are carving out a niche existence.’

Catella has identified nine property funds that are managed as sustainable funds, according to Beyerle. In Germany, property funds account for 17% of the sustainable investment market, compared to 20% in Switzerland and just 1.7% in Austria, according to Catella.

Last month (June), Catella Real Estate launched an open-ended sustainable private real estate fund together in conjunction with the Bank im Bistum Essen (BIB) and the Bank für Kirche und Diakonie (KD-Bank).

The fund - known as KCD-Catella Nachhaltigkeit Immobilien Deutschland - is an investment vehicle designed for religious, charitable, welfare, and church-related institutions and foundations. It will have an investment volume of €260m, including 30% gearing and will mainly invest in ‘Top 7’ cities and in metropolitan regions, such as university cities, in Germany. In May, Catella acquired its first office building for the fund, a 3.920 sqm building in Frankfurt for just under €20m.

‘This is the first open-ended fund we have launched for two church banks,’ said Dr. Tim Schomberg, head of Business Development Institutionals at Catella Real Estate. ‘The banks approached us about launching the fund because they had already invested in earlier funds of ours. We created a sustainability monitor for them, tailored to meet their Christian, clerical, ethical code. We could also roll out the sustainability monitor to other funds in the future.’

Potential properties for the fund will be analyzed using the sustainability monitor designed by Catella in partnership with the Institut für Markt, Umwelt und Gesellschaft (IMUG), which considers factors such as energy efficiency, value retention, climate protection, water consumption and user well-being.

Up to 60% of the fund will invest in offices, with an additional 40% maximum invested in retail. The fund can also invest 10% to 20% in residential stock and up to 20% in properties with charitable, welfare, or social utilization.