Capping private equity

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Michael Wagner
Green Real Estate News

We see huge near- and medium-term opportunities for companies focused on green building technologies, systems and materials. In particular, clean tech software focused on managing energy and water usage in buildings is a high growth area. This is an emerging market with potentially huge benefits to building owners and managers that will provide the platform to develop, implement and monitor green upgrades.

There have been few dedicated green real estate private equity funds. Many private real estate funds, whether focused on development or acquisition, are devising  green strategies but are not using sustainability per se to facilitate their own fund raising. The fund managers in that camp view green as something they can invest in out of their existing and future funds. This is particulary true in the U.S. W e have seen some new funds over the past year launched in Europe that are specifically marketed as sustainability or green funds. They are both private and public funds.  We see most of them in the UK, Germany and Switzerland.

The biggest barriers to entry in making buildings sustainabile are lack of  real knowledge and lack of funding. Building owners and their contractors need more education about what works and what doesn’t in the context of the current market environment, budgetary restraints and a sensible cost to value perspective. The U.S. needs to develop more robust, scalable financial instruments to incent building owners to upgrade their properties with an eye towards sustainability. We find that there is a big gap in the market for financing, with ESCOs and ESCO-like companies providing valuable services, but not nearly enough and not in all markets. Given an economy likely to be depressed or scraping bottom for the forseable future, we don’t see large-scale green upgrade  investments in either commercial or multifamily markets. Funding options with sensible public policy allowing owners to upgrade with little or no capital investment would go a long way to positioning our building stock for accelerated conversion to sustainability when the market returns.

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