A new report from CBRE Investment Management says bank credit will be insufficient to fund the refurbishment of commercial real estate properties in the UK and Europe needed to meet tightening energy efficiency standards. The investment manager estimates that 60-75% of non-residential real estate stock will need to be upgraded to comply with the new low-emissions standards, but warns that regulatory restrictions mean “non-bank lenders will be required to support the funding need”. “Non-bank lenders who have built capability to meet one of real estate’s most pressing challenges will be able to deliver strong returns and improved ESG performance to investors,” said Dominic Smith, Senior Director, Credit Research at CBRE Investment Management, adding that likely cherry-picking could result in retrofitting being concentrated in the most desirable areas. In the UK, it will be illegal to let a building with an EPC rating below E from 2023, rising to a minimum B rating by 2030.
