The value of sustainability in real estate – addressing climate risks and creating value 

Sustainable real estate development in Africa has carved out its own niche in the last few years. Many that have adopted that trend are already reaping its rewards. In fact, those real estate developers keen on commencing sustainable development might place themselves in a position to gain in the next 10 years. Sustainable real estate is being proclaimed as the next move in investor evolution. It is something everybody in the housing market in Africa needs to consider if they wish to remain at the forefront of their sector.

While sustainable buildings and construction in East Africa is not a new issue contemplated by the real estate industry, what is new is the drive that has picked up around the subject of sustainability in the past couple of years. COVID-19 pandemic has made it clear that companies with high strategic resilience have a benefit over firms that have not given much thought to such crisis events before. Challenges that arise from a changing climate can cause new crises for the real estate sector. Countries that consider the potential effects and the best solutions for them today will be at an advantage tomorrow.

Therefore, it is clear that it is only through sustainable solutions its attainable to mitigate the tensions between climate change, urban growth, providing affordable housing, clean energy, and also environmental conditions in East Africa. For example, in Kenya, East Africa’s biggest economy, the country’s shift towards sustainable development has huge, positive, and far-reaching implications. According to the president, the country has adopted sustainable solutions as the answer to environmental, economic, and social challenges. In Kenya, it is already seeing gradual results as there is an increase in private investment in sustainable green real estate, infrastructure, as well as natural resources projects.

Why is sustainable real estate development important for Africa in particular?

Climate change is expected to disproportionately impact African countries, which will bring more unpredictable weather conditions in the years to come. Faced with the prospect of higher temperatures and more regular and intense droughts, it is imperative to adopt this new normal; starting with the buildings as well as critical infrastructure.

Some modeling implies that if the temperatures rise by 2°C, Sub-Saharan and East Africa can experience about a 20 % decline in rainfall and also an increase in the number of dry days consecutively. If real estate is designed with these climate situations in mind, countries in this region would be in a better position to handle growing concerns like scarcity of water. Similarly, real estate development that prioritizes energy efficiency would take the pressure off the electricity system and limit overall emissions.

Challenges

A huge number of the East African urban population live in slums. This increasingly challenges governments to meet the individuals’ needs for a sustainable settlement, which includes clean water and electricity. Implementing sustainable real estate is a way of achieving this goal, but it has encountered a lot of challenges. Property developers face many challenges in the process of implementing building projects incorporating green technologies.

• Shortage of finance
• Infrastructure
• Building Technology
• Low priority for sustainable housing in the construction industry

Shortage of Finance

The high cost of conducting business, perceived risks, and longer terms for returns in Est Africa create situations where the sustainable housing industry lands in competition with other kinds of real estate investments. For example, high-end housing, luxury segment, and commercial spaces which are always perceived to reap better and faster benefits from real estate investment.

Infrastructure

A lot of African cities see the reverse trend where sustainable housing development whereby construction will happen first followed by the provision of infrastructures such as clean water, reliable electricity, efficient transport system, and sanitation services. This puts a lot of pressure on real estate developers to put in more money, face higher lead times, and then face the risk of waiting long to dispose of the units.

Building Technology

The building equipment, alternate construction materials, and innovative techniques all provide for large-scale housing, highly cost-efficient, and expedited projects which then justifies the investment of the project. Unfortunately, many real estate developers in the industry encounter resource and capacity limitations and also insufficient incentives for capitalizing on these aspects, which result in weak competition in terms of the housing affordability of the units.

Low priority for sustainable housing in the construction industry

Many African countries highly rely on specific few, high return industries, to drive their economies. A sudden change in government priorities towards sustainable real estate would be highly unlikely because such a step could have a ripple effect on many aspects of a nation like social and economic development. This also mirrors the fact that serviced land provision for sustainable housing has declined in high-demand areas because of the perceived low return of investment.

Way to prepare for the future of sustainable real estate

The development of sustainable real estate is the future. More developers will look to green housing to limit their carbon footprints and also build more efficient houses. It is worth noting that the future starts now. The belief that sustainable real estate is years away is incorrect, it is being implemented in today’s building strategies. Anyone who is not implementing their own green practices is being left behind. But it is not too late for those who have not initiated their sustainable real estate. Here are a few things to do to get started.

• Factor in the High Upfront Costs
• Get LEED Certified
• Renovate and repurpose
• Tailoring sustainability with your specific location

Factoring in the higher up-front costs

Sustainable building materials have a reputation for having exorbitant prices. It always costs more to use better materials. However, it is important to note that while upfront costs will be higher when you use sustainable materials in real estate, their inclusion in the project will save the owner more money in the long run. When implemented correctly, they will reduce carbon footprint, save the environment, and cut energy costs. Investors should always account for initials cost, but that should not be a reason not to use them.

Prepare for Leadership in Energy and Environmental Design certification (LEED Certification)

For a property to be recognized as sustainable, it should be LEED certified. A LEED Certificate will acknowledge that a building meets the highest sustainability and eco-friendliness standards. But getting this certificate is not as easy as applying for it, investors have to follow very strict guidelines. Therefore, the sooner you prepare for LEED Certificate, the better.

Renovating and repurposing

When considering sustainable real estate development, it is not always necessary to begin from scratch. It is always possible to repurpose or renovate existing house features for them to be considered green or reduce a house’s carbon footprint. Renovating an existing building and fitting it with sustainable real estate features can save investors a good amount of expenses upfront and achieve the same purpose.

Tailoring sustainability with your specific location

Every location requires tailored improvements to optimize a house’s carbon footprint completely. The location of the house will determine the most essential sustainable materials to include. Dry locations, for instance, should focus on water conservation. It is also crucial to look into local geography for the property’s benefit. For example, sunny locations should consider solar panel installations. Sustainable housing should consider what the environment provides and doesn’t provide.

Bottomline

The next decade will be crucial if real estate is going to play its part in a more sustainable future. Sustainability in real estate is the future of the housing sector in Africa and something every home redeveloper should consider. Those who do will eventually recognize their potential to conduct more business and increase their bottom line. We maintain that sustainability in real estate development is the next important step in investor evolution. Those who adopt these trends will reap the rewards. The benefits of transitioning real estate to low or no carbon buildings are very significant, and they go well beyond the financial.