Energy efficiency as a return driver for residential real estate

For institutional investors in the residential segment, the factors of location, rental dynamics and financing conditions have long been decisive for transactions. For some years now, another parameter has been moving into the strategic focus with an increasing tendency: the energy efficiency of buildings. It is evolving from a "nice-to-have" to a crucial determinant of cash flow stability, exit capability and regulatory resilience.

Real estate values fall significantly with each worse efficiency class

Basically, the performance of residential real estate investments is based on two pillars: current rental income and performance. Both are increasingly influenced by the energetic quality. For example, a study by Wüest Partner¹ shows a clear, linear and statistically reliable correlation between energy efficiency classes and market values. The basis is around 1.38 million German residential and commercial advertisements from the period between the third quarter of 2023 and the second quarter of 2025. According to the study, both prices and rents measurably fall with every worse efficiency class. In the residential segment, the basic rent is reduced by an average of 0.22 euros per square metre per efficiency class. The average purchase prices for condominiums and single-family houses will fall by 107 euros per square metre per efficiency class, and by 118 euros per square metre for apartment buildings.

An analysis by ImmoScout24² on condominiums and single-family houses, which examines the price development of properties advertised on the portal between the first quarter of 2021 and the fourth quarter of 2025, points in a similar direction. According to the study, prices for apartments with energy efficiency class A will rise by 13 percent throughout Germany during this period. With class B, the price increase is only four percent. Unrenovated apartments with classes F, G and H lose four to twelve percent of their value in the same period.

Low operating costs become a competitive factor

The importance of sustainability is shifting away from an abstract ESG criterion to a clearly quantifiable economic size. Inefficient buildings are increasingly at risk of becoming so-called "stranded assets". For example, the sharp rise in energy prices since the beginning of the Iran war means that operating costs are becoming even more of a focus for tenants and thus a decisive competitive factor. Furthermore, regulatory frameworks such as the EU taxonomy and ESG reporting obligations increase the pressure on portfolio holders to systematically address energy deficits. At the same time, capital market players are increasingly explicitly taking energy risks into account in their valuation and financing models. Buildings with poor efficiency are subject to a structural valuation discount. Banks and investors are increasingly differentiating according to energy quality. They grant inefficient portfolios of restricted loans, provided that no repositioning is planned.

Against this backdrop, energy efficiency is increasingly becoming an integral part of institutional investment strategies – along the entire life cycle of a property. This starts with the purchase, where energy-efficient new buildings or new stocks are preferred in order to limit future capex risks. At the same time, active asset management is gaining in importance, as energy optimisations in the portfolio make a significant contribution to the long-term value preservation and development, as well as the exitability of the asset. At the same time, energy indicators are increasingly being incorporated into portfolio management and risk assessment.

INDUSTRIA has taken account of current market developments with its new fund concept. In addition to investments in energy-efficient new construction projects, the aim is to acquire existing properties with energy-efficient optimisation potential in a targeted manner. By implementing appropriate modernization measures within a defined period of time, the energy efficiency of the property can be sustainably improved, energy consumption reduced and the long-term competitiveness of the properties strengthened. In this way, the fund concept combines the opportunities of active asset management with the increasing demands of institutional investors on the sustainability, resilience and long-term value of real estate investments.

Energy efficiency reduces investment risk

Against the backdrop of rising energy prices, the trend towards efficient residential real estate will continue to intensify. At the same time, energy indicators are increasingly being incorporated into portfolio management and risk assessment. Energy efficiency has an impact on key risk dimensions of institutional real estate investments – from cash flow stability and capex predictability to exit capability and access to financing. It is therefore a central lever for securing and increasing real estate values.