The real estate and infrastructure sectors are going through a phase of profound changes driven by regulatory, technological and social developments. With the series „No stone is left unturned – real estate and infrastructure investments as drivers of transformation“, Börsen-Zeitung will focus on this dynamic in the coming weeks. The aim is to shed light on the drivers of change, the various players, and innovative approaches.

A key observation is the increasing polarisation within the real estate market. Ulrich Höller, managing partner of ABG Real Estate, describes this as a split between high-quality properties in prime locations, and so-called stranded assets. These are buildings that are no longer sustainable. „Quality determines the success or failure of a property,“ explains Höller. Top rents can be achieved in prime locations, while dilapidated properties often have to be extensively converted, for example, to be used as living space or as a school.

The green transformation of the industry is at the centre of many discussions. For many experts, ESG criteria (environmental, social and governance) are the key to reviving the real estate market. These standards are becoming an indispensable part of the strategic direction. Sustainability and infrastructure investments often go together „hand in glove“. Projects such as green data centres or renewable energy not only contribute to the transformation, but also offer attractive returns.

According to Maximilian Kufer, ESG head at Invesco, the real estate industry is facing the challenge of simultaneously reducing CO2 emissions and increasing the value of properties. „As regulation becomes more and more stringent, it is important to assess the energy consumption and CO2 intensity of a building and to take investments in energy-efficient systems into account in the assessment,“ says Kufer. „The renovation of existing buildings is of great importance for the ESG strategy, especially in Europe, where many buildings are older and space is limited.“ For example, when renovating an office building, sometimes up to 70% of the original building structure can be retained, which saves material and reduces CO2 emissions.

Digitalization plays a crucial role in the transformation of the real estate and infrastructure sectors. Institutions such as Union Investment are increasingly relying on technologies such as artificial intelligence and blockchain to optimise processes and better manage risks. André Haagmann, CEO of Union Investment, explains: „Sustainability and digitalization go hand in hand.“ New technologies not only offer efficiency gains, but also help to meet growing transparency requirements.

According to a JLL study from the end of 2024, transparent real estate markets attract significantly more capital worldwide. Germany, which currently ranks 10th, lags in categories such as ESG data and market data availability. This could affect the market's competitiveness, unless clear guidelines on data availability are created.

A future-proof infrastructure is a key to economic resilience. The need for financing is enormous, and innovative approaches are needed to mobilise private capital. Infrastructure funds and state owned infrastructure companies can play a significant role here. These mechanisms not only offer investors stable returns but also make a significant contribution to achieving climate goals. For example, linking energy and transport networks with sustainable technologies could also create new opportunities for the real estate and infra sectors.

The implementation of ESG strategies, and the modernisation of outdated existing properties, are costly and require significant investment. Nevertheless, these measures offer long-term benefits, such as lower operating costs and increased attractiveness for tenants who themselves pursue sustainability goals. Experts such as Ulrich Höller argue that these challenges should be seen as an opportunity. Technological innovations, such as smart energy systems and digital platforms, can help overcome existing hurdles.

Another obstacle is inconsistent ESG standards. The uncertainty in evaluating sustainable investments makes decision-making more difficult. Investors are demanding transparent and uniform evaluation models to better assess the impact of measures such as energy-efficient heating systems or photovoltaic systems. Uniform guidelines could not only strengthen confidence in the market but also increase the attractiveness of ESG investments.

Digitization and networking are playing an increasingly important role in the real estate and infrastructure sectors. Smart cities are an example of the connection between sustainability and technological innovations. There are already concrete investment opportunities today, for example in networked energy systems, intelligent transport solutions, and resource-efficient buildings. However, there are risks, such as the high initial investment and the need for a clear regulatory framework.

Another interesting development is the upcycling of existing properties. This strategy, the revitalisation and conversion of old buildings, offers a wide range of opportunities. It can represent a sustainable alternative to new construction and at the same time help use space more efficiently. Cities with high population growth and limited space, such as Berlin or Munich, could particularly benefit.

Despite all the challenges, the transformation of the industry offers numerous investment opportunities. The start of the series shows that real estate and infrastructure investments play a central role in shaping the transformation. The combination of ESG strategies, technological innovation and new regulation entails both risks and immense opportunities. In the coming weeks, the series will offer insights into regional peculiarities, specific investment topics such as private credit, and the prospects for various players.