Asian real estate investment trusts led their North American and European equivalents on environmental performance, according to a report from research and analytics firm MSCI ESG Research, Real Estate News reported Dec. 13.
The report measured 70 REITs and calculated portfolio-wide performance against certain sustainable criteria, including the degree of environmental certification.
Asia-Pacific REITs led with 24.2 percent compared to 17.5 percent for European REITs and 5.6 percent for North American REITs, Real Estate News reported.
Mario López-Alcalá, senior analyst at MSCI, attributed the performance variation to a combination of regulatory programs and electricity prices.
López-Alcalá acknowledged that Asia-Pacific’s regional performance had been driven to a certain extent by outperformance in Australia, which mandated that REITs disclose energy ratings for buildings above a minimum size.
“Government commitment is instrumental in making managers and tenants aware,” López-Alcalá told Real Estate News. “Regulatory and market incentives are both important. Regulation will propel the market, but then the market will take over and make new practices the new normal.”
Unlike the European Union and Australia, the U.S. has yet to institute federal regulation tied to climate change.
Also, the U.S. lacks the other major incentive to focus on environmental performance — a decade-long increase in energy prices, Real Estate News reported.
Small energy price increases in North American (42 percent compared to 134 percent in Europe and 199 percent in Asia-Pacific) led to “stagnant” energy and water-efficiency enhancements.
The office sector leads in REITs, while the retail and residential sectors lag behind. However, the report noted that retail is comparable to office REITs relative to its potential as a resource-intensive sub-sector to balance out energy-price volatility risks, Real Estate News reported.
Related opportunities can be found in diversified REITs, which typically encompass 31 percent office and 18 percent retail assets, and specialist North American REITs, which are largely underdeveloped.