Quantum study: 6 opportunities for the real estate sector in times of crisis

Is there a way out of the crisis? Interest rate reversal, record inflation, and the climate and energy crisis are challenging the entire real estate sector. Added to this are supply bottlenecks, rising construction costs, and the long-term effects of the coronavirus pandemic. Quantum dares to look ahead and offers a fresh perspective. “From the current multiple and profound crisis, several opportunities for a sustainable and resilient real estate industry can be derived,” says Dr. André Scharmanski, Head of Quantum Research. In total, Quantum is publishing six opportunities for the real estate sector in times of crisis:

1. Focus on energy-efficient properties in acquisitions

The energy crisis is increasingly becoming a catalyst for the energy transition in the building sector. Why? Growing differentiation based on energy performance (e.g., valuation discounts) and regulation (keyword: stranding assets) are forcing industry players to act. Particularly in acquisitions, the focus is therefore on the energy efficiency of properties, which, according to Quantum Research analysis, is already being used as an argument in price negotiations today.

2. Develop-to-green strategies for existing stock

At the same time, refurbishment of existing buildings is gaining importance. ESG expertise and holistic asset management capabilities are becoming increasingly central. No matter how sustainable new builds are, without significant progress in the existing stock, the real estate industry cannot make a decisive contribution to climate targets.

3. Modular and serial construction and refurbishment as an investment opportunity

The construction industry hopes to gain speed and cost savings through serial and modular methods. The federal government is also increasingly focusing on building and refurbishing with prefabricated components, as these approaches provide strong conditions for creating highly sustainable buildings with high energy efficiency standards and a positive life-cycle assessment.

4. Greater consideration of embodied carbon in investment decisions

The climate balance of a refurbished existing building can be equal to or even better than that of a new build. Calculations show that up to 80% of emissions occur during the construction phase or the production of building materials. These figures are based on whole-life carbon assessments of buildings. By comparison, operational emissions from heat generation and electricity consumption account for only a smaller share depending on the building’s age.

5. Stronger incentives to invest in subsidized housing

During the years of ultra-low interest rates, public development loans were less attractive than market-rate loans for many investors. As a result, the number of subsidized new builds declined. A projection by Quantum Research shows: In 2021, one subsidized apartment disappeared from the German market every eleven minutes, while only one new subsidized apartment was added every 24 minutes. With rising interest rates, the incentive to invest in subsidized housing increases, as regional development loans are now significantly cheaper than financing for market-rate residential construction.

6. Major cities and their surrounding areas remain sustainably attractive investment locations

Post-pandemic, urban housing demand has regained momentum. In the context of rising interest rates and the energy transition, a slowdown in urban sprawl and suburbanization is also expected. A key reason is the sharp increase in mortgage rates, which already led to a 25% decline in approvals for single-family homes last year. This primarily affects “threshold households” that were just barely able to finance ownership on the urban fringe during the low-interest phase. Another factor: Household CO2 footprints in dispersed suburbs are two to four times higher than in inner-city neighborhoods.

Crisis as opportunity: Continuous development

“In times of crisis, it is important not to lose sight of continuous development despite all the upheavals. The aim is to use the crisis as a good moment to initiate change. This also applies to the real estate industry and especially to sustainability. Now is the right time to act,” says Dr. André Scharmanski.

The full publication with further details, background, graphics, and statistics is available as a free PDF download: Focus No. 39 – Crisis as Opportunity.

We are happy to provide additional materials for your reporting. We also offer interview opportunities to explain the six opportunities in more detail.