Saturday, March 30, 2024

European "Real estate investors turn to lawyers after ‘huge’ CO2 shock"

A deep dive from Bloomberg via Brussels Signal, March 25:

Real estate investors already battered by high-interest rates now face the prospect of significant writedowns triggered by new European regulations.

Property owners across the region will need to invest vast sums in renovations to ensure their buildings aren’t emitting illegal levels of carbon dioxide or consuming excessive amounts of energy, according to lawyers advising the sector.

The situation “is causing huge problems,” said Rory Bennett, a managing associate at the real estate practice of Linklaters in London. Portfolios containing energy-inefficient buildings face “the task of expending a huge amount of capital to bring that up to scratch, together with refinancing or redeveloping at the highest interest rates we’ve seen in decades.”

Bennett said he’s regularly called into meetings at which “we spend hours talking about what to do.”

This month, lawmakers in the European Union passed the Energy Performance of Buildings Directive. The rollout will be gradual — lasting more than a decade — but property owners that fall too far behind risk being saddled with assets that can no longer be sold or rented.

The directive is intended to force property owners to embark on large-scale renovations to improve the environmental credentials of buildings across Europe and ensure the bloc meets its commitment to the Paris Agreement. For now, refurbishments in the region only reduce annual energy consumption by 1 per cent, according to the European Commission. To meet its climate requirements, the EU says property owners need to raise spending on renovations by €275 billion a year....


So GDP will go up even though net wealth production is a bit sketchier.

Bastiat's ghost smiles.