Real Estate & Real Estate Services

Real Estate

The Real Estate industry is composed of companies that own, develop, and generally operate income-producing real estate assets. Companies in this industry are commonly structured as real estate investment trusts (REITs) and operate in a wide range of segments within the real estate industry, including residential, retail, office, health care, industrial, and hotel properties. REITs typically focus on the direct ownership of real estate assets, thereby providing investors with the opportunity to obtain real estate exposure without direct asset ownership and management. Although REITs are often concentrated in one segment of the Real Estate industry, many REITs are diversified through investment in multiple property types.

Real Estate Services

The Real Estate Services industry is composed of companies that provide a range of services to real estate owners, tenants, investors, and developers. Primary services include property management, brokerage, appraisal, and information services for real estate owners. Property management services may include leasing, tenant relations, building maintenance, and building security. Many companies also provide brokerage services, facilitating sales and leasing transactions. Appraisals and other advisory or information services are other specialized services that are commonly provided to clients. Companies in the industry play important roles in the real estate value chain, which is a substantial part of the global economy.

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Source: SASB

The real estate industry is responsible for a significant amount of global GHG emissions, and investors, regulators, governments, employees, and tenants are demanding more sustainable buildings. Transition and physical risks associated with climate change must be taken into account to achieve net-zero goals by 2050. There are opportunities for revenue streams in the industry, including generating and storing energy locally, building green properties, using green materials, and providing services for reducing and tracking emissions.

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Industry Characteristics

• The real estate industry currently contributes to almost 40% of global greenhouse gas emissions: 28% from operational emissions (i.e. energy needed to heat, cool, and power buildings) and 11% are generated from materials and construction. From the construction of new properties to the upkeep and performance of existing ones, there are high levels of energy consumption and a strong reliance on fossil fuels in the real estate industry. Source: Sustainlab
• The real estate sector consumes annually over 40% of global energy p.a., that buildings originate 20% of global greenhouse gas emission, and use c. 40% of raw materials respectively. Source: WEF
• Real estate is central to global climate change mitigation efforts. Real estate drives approximately 39 percent of total global emissions. Approximately 11 percent of these emissions are generated by manufacturing materials used in buildings (including steel and cement), while the rest is emitted from buildings themselves and by generating the energy that powers buildings. Source: McKinsey
• The contribution from raw materials comes primarily from energy-intensive cement production and through metals (about 50 percent of global steel production is used for construction), which contributes almost 7 percent of global GHG emissions. The contribution from commercial and residential building operations is mainly driven by space and water heating within buildings, heat leakage due to poor insulation, and other energy usage such as lighting, air conditioning, and appliances. Source: McKinsey
• Taking a closer look at emissions from the operation of existing buildings, we see that within the European Union, 70 percent of energy consumption relates to heating. Source: McKinsey

Sustainability Impact

• It will take $5.2 trillion over the next decade alone to decarbonize the built environment and green real estate. Source: WEF
• Switching to renewable technologies in heating accounts for 72 percent of emissions reductions, supporting the pathway to net-zero both for the building sector and for the European Union more broadly. Source: McKinsey

Sustainability Investments to watch

• McKinsey research estimates approximately $9.2 trillion in annual investment will be required globally to support the net-zero transition. If the world successfully decarbonizes, the 2050 economy will look fundamentally different from the current economy. Source: McKinsey
• A $265 billion annual profit pool awaits disrupters. A value chain delivering approximately $11 trillion of global value added and $1.5 trillion of global profit pools looks set for overhaul. Source: McKinsey

• Acquisition and ownership of buildings
• Professional services related to energy performance of buildings