High demand for green buildings

Sustainability or green construction in general is gaining ground in the real estate industry, in the construction sector and among advisors, investors and lenders. This is according to Nanna Flintholm, a qualified architect and partner at AART, one of Scandinavia’s largest architectural firms following its acquisition last year of Mangor & Nagel.

“Sustainability is becoming more and more important in our own project portfolio. We can also see, for example, that the number of sustainability specialists is steadily increasing. Today, the vast majority of bigger project developers and large companies in the construction industry employ sustainability experts or sustainability managers. This was not the case just a few years ago,” Nanna Flintholm emphasizes.

A further sign of the above-mentioned development is a sharp increase, especially in 2021 and 2022, in the number of projects that have achieved DGNB-certification, the most widespread ‘green stamp’ in Denmark for sustainable properties.

According to Nanna Flintholm, there is a paradigm shift in the real estate sector. This is particularly due to the fact that both the Danish Parliament and the EU are currently adopting a large number of laws, rules and regulations on, for example, lower energy consumption in buildings, better insulation, lower CO2 emissions in the construction phase and requirements for life cycle assessments (LCA) for products. The goal is a climate-neutral Denmark and EU.

Among the many rules that have either been adopted or in the adopting process, she mentions the EU Buildings Directive. “It is being renegotiated in 2023, and the EU is proposing that buildings with energy labels F and G must be renovated to achieve energy label E - otherwise they will become illegal. At the same time, the requirements for obtaining energy label E will be tightened. So, if the directive is adopted, a large part of the Danish building stock from before 1980 will have to be energy renovated,” Nanna Flintholm points out.

The green wave, triggered by a steady stream of decisions in The Danish Parliament as well as in Brussels and Strasbourg, is further accelerated by the market economy - in the form of stronger green demands from investors, lenders and especially the largest companies.

“Larger companies across industries have started to include targets on e.g., energy consumption and climate impact in their business strategy. At the same time, listed companies and companies with more than 500 employees must already this year (2023) report on the EU Taxonomy - just as there is an annual requirement for financial accounts. In the year 2025, all companies with more than 250 employees must report CSRD. Among other thing the tenants demand that the property and their own premises must be more sustainable. Building owners are therefore currently looking at what they can do with, for example, additional insulation, ventilation, and lighting as they run the risk of not being able to rent premises that do not have a sustainable profile,” says Nanna Flintholm.

For office premises, the increased focus on sustainability has reinforced the trend with an increasing number of multi-use buildings, where companies share, for example, reception, canteen, meeting rooms, parking spaces, bathing and changing facilities, and more office hotels, where entrepreneurs and smaller companies can access common facilities.

“Multi-use houses are clearly gaining ground these years, and this is completely in line with the sustainability agenda. Studies show that companies can advantageously share up to 29% of their area with others,” Søren Stoustrup, architect and partner in Mangor & Nagel, who became part of AART last year, points out.

According to Ejendomstorvet.dk, the total office space in Denmark is 27 million sqm, and thus it is a huge amount of space that companies can save by sharing between a quarter and a third of the space with others. At the same time, it provides financial savings as well as CO2 emissions, e.g., for heating, lighting and from reduced production of building materials due to lower use of space.

However, the interest in green premises among companies/tenants and investors includes far from just offices, but also, for example, properties for storage, logistics and production, premises for retail trade and properties with rental housing.

“We feel the interest across categories of properties. It is to a greater extent the type of customer or company that makes the difference, more than the type of property itself. The interest in sustainable premises especially comes from the largest concerns, from listed companies as well as from foundations, pension companies and banks, all of whom have a special social responsibility,” says Nanna Flintholm.

She adds that studies have documented that, compared to conventional premises, sustainable properties bring in a higher rent, have lower vacancy rates and retain value to a greater extent. AART concludes that the tendency will be reinforced with the EU’s taxonomy or rules that listed and larger companies must report on sustainability. This means that they obtain information from sub-suppliers and other factors in the value chain, and thus the requirements to document sustainability create a ripple effect.

“We find that tenants and investors increasingly demand sustainability certifications and thus more climate-friendly premises and properties. In this way, climate-friendly properties are a much more future-secured investment, e.g. with better opportunities for later sale. In addition, climate-friendly leases contribute to improving the companies’ sustainable profile and are also more attractive in that way,” says Nanna Flintholm.

She adds that developments in green construction and more sustainable properties are moving very quickly. “Bigger players typically have a competitive advantage because it requires specialists and ongoing investment in upgrading skills. In general, things are going very fast at the moment, and sustainability is a ‘moving target’; it’s moving fast, and it’s not hard to imagine it will be going even faster with developments in just two or five years.”

Best to preserve Søren Stoustrup emphasizes that it often benefits the climate the most not to build new.

“Realdania has made a case study: Restoration of old buildings is good for the CO2 account, which shows that new construction emits 75% more than preserving and restoring an existing building. The reason is that it requires a lot of energy – and thus a climate footprint – to produce concrete, bricks, steel, and other building materials. In addition, energy is needed to transport the materials and for the installation and construction phase itself.”

Renovations or transformations of existing buildings are precisely one of the specialties of AART and Mangor & Nagel.

On Rovsinggade in Copenhagen, Mangor & Nagel, which is part of AART, has helped transform an abandoned and dilapidated warehouse from 1963 into inviting and modern offices. The roughly 7,000 sqm is used by the company Veo Technologies, which develops advanced sports cameras. The transformed Nørrebro property was in the final for Office Construction of the Year 2023.

“We emphasized that the property’s history as an old warehouse and industrial building should stand out. It happens i.e., with exposed concrete and brickwork, and we have even preserved some of the old graffiti,” says partner and architect Søren Stoustrup.

The completely renovated property in three floors is furnished with large, open office spaces and with café and lounge areas on the 1st and 2nd floor. There is a natural light both from the building’s large window sections and from an atrium equipped with skylights.

Veo develops sports cameras. In order to contribute to creating a corporate culture and interior design that supports their DNA, Mangor & Nagel – part of AART, for example, has established a multi ball field on the ground floor. In addition, the ground floor contains a canteen and production facilities.