Is Investing in Sustainable Real Estate Assets Profitable?

Sustainable projects are increasingly gaining value and interest as investment products among professionals in the construction and real estate sectors

Investing in sustainable real estate assets has emerged as an increasingly attractive strategy for investors seeking financial returns while contributing to the planet’s sustainable development. This approach involves moving away from conventional real estate investments and focusing on innovative projects designed from the outset to minimize their ecological footprint. ⁣⁣

This investment alternative guarantees results through key actions such as selecting sustainable materials and renewable energy sources, adapting designs to the surrounding environment, landscape, and local architecture, implementing energy-saving mechanisms for efficient building management, and adopting environmentally friendly operational practices.

What Is a Sustainable Real Estate Investment? ⁣⁣

Sustainable real estate investment involves acquiring properties or projects that align with sustainable development principles and construction standards aimed at reducing environmental impact, improving quality of life, and promoting social inclusion. These investments achieve this by using resources efficiently, reducing carbon emissions, generating renewable energy, adapting to climate change, and fostering technological innovation. ⁣⁣

This sector has experienced notable growth in response to increasing environmental awareness and responsible business practices. In this context, sustainable real estate assets, a relatively new and developing category within sustainable assets, are part of the broader investment philosophy known as Sustainable and Responsible Investment (SRI). This investment strategy integrates Environmental, Social, and Governance (ESG) criteria. ⁣⁣

There is a subtle difference between ESG and ASG (the Spanish equivalent: Ambiental, Social y de Gobernanza). ESG criteria are the most widely used in finance, as they allow investors to measure the sustainability and ethical impact of an investment in a business or company. Meanwhile, ASG criteria place greater emphasis on a company’s purpose, its reason for existence, and the value it provides to society. ⁣⁣

According to the study ‘Sustainable and Responsible Investment in Spain 2024’ by Spainsif, assets managed under ASG criteria by national entities amount to €236.89 billion, representing 49% of the total domestic market. This marks a decrease compared to the 62% recorded in 2022. Meanwhile, the share of ASG assets managed by international entities stands at 42%, remaining stable compared to the previous year.

Benefits of Investing in Sustainable Real Estate Assets

⁣⁣In Spain, investment trends are being led by private equity funds, both in terms of activity and transaction volume. When deciding where to allocate funds, it is advisable to evaluate the main investment strategies, comparing them based on risk, duration, taxation, and profitability.

⁣⁣However, different economic cycles demonstrate that there is no perfect formula for investing across financial markets. Success is closely linked to diversification. One of the keys to this success is conducting a thorough analysis when selecting a product or service, considering the risk of the investment and the prevailing economic conditions.

⁣⁣For this reason, there is a growing preference for sustainable assets as a new investment vehicle, with sustainable real estate standing out as an attractive alternative. This type of investment offers significant benefits and profitability opportunities while helping to reduce negative environmental impacts. ⁣⁣

These properties are experiencing higher demand and rental rates. The June 2023 study ‘Sustainability in Spain’s Housing Demand’ reveals that 87% of Spaniards looking to rent a home consider sustainability important—whether through the use of renewable energy sources, energy-efficient appliances, or cross-ventilation systems, for example.

⁣⁣The success of Kora Green City demonstrates that investing in sustainable buildings can lead to lower operational and maintenance costs over time, resulting in higher profit margins for investors. Additionally, the operational management of this complex in Vitoria-Gasteiz is not limited to short-term vacation rentals but also includes long-term leases for studios and apartments, providing a residential housing option.

⁣⁣Furthermore, investing in sustainable properties can enhance a company’s reputation and its ability to attract and retain environmentally conscious tenants.

Conclusions and Outcomes: Environmental, Economic, and Social Impact ⁣⁣

Investing in sustainable real estate assets is not only financially profitable but also significantly contributes to environmental and social well-being.

⁣⁣Although still a relatively new niche in the financial market, sustainable real estate is attracting increasing interest from both private investors and funds due to its potential as an alternative investment. It is also appealing to companies looking to improve their environmental reputation by integrating ESG criteria into their projects. ⁣⁣

Investing in sustainable real estate assets, as a viable vehicle for short- and long-term profitability, has an impact in three key areas: ⁣⁣

Environmental Impact

• ⁣⁣Impact investing in real estate promotes the development of properties that reduce carbon emissions, conserve natural resources, and adhere to environmentally responsible construction practices.
• ⁣⁣It also supports the protection of terrestrial ecosystems. Through thoughtful architectural and urban design, sustainable development aims to promote responsible land use, enhance ecological value, and improve biodiversity over the long term—while respecting the surrounding landscape. ⁣⁣

Economic Impact

• ⁣⁣Investments in real estate assets such as those developed by Kategora Real Estate offer net returns exceeding 6%. ⁣⁣

Social Impact ⁣⁣

• These projects contribute to improving local communities and quality of life. Real estate projects with a positive social impact help enhance residents’ living conditions, support local businesses, and boost tourism. ⁣⁣

If you are interested in exploring sustainable investment opportunities, we invite you to contact Kategora Real Estate and discover how you can be part of this movement toward a more sustainable future.