Real estate sector: sustainability and digitalization Real estate sector: sustainability and digitalization

Buildings are responsible for around one third of CO2 emissions in Switzerland. The need for decarbonization is evident and the topic of ESG is on the rise. At the same time, digitalization is opening up an increasingly wide range of options in the area of real estate planning, construction and management.

As part of this year's annual survey for the Swiss Real Estate Sentiment Index (sresi®), we have supplemented the questions regarding price and market expectations with some on sustainability and digitalization. We have summarized the key findings for you below.

An impressive 93 percent of those surveyed consider ESG to be an important differentiating factor for real estate investments and expect to see a clear segmentation in the real estate market in the medium term that will produce both winners and losers. Interestingly enough, the sresi surveys of the past 10 years reveal that only between 7 and 15 percent of the respondents have entertained the thought of adapting their investment style. That means their long-term assessments stand in contrast to short-term planning, which only reflects ESG-related strategic thrusts (such as asset allocation) and investments in those strategic directions to a limited extent.

Mounting disclosure obligations in connection with sustainability-related topics and the growing need for information on the part of investors, clients and the general public will result in even greater pressure to embrace sustainable development. As the sresi survey shows, increasing demand for sustainable investments will continue to shape the real estate investment market in the future. Real estate investors are well advised to step up their efforts to address the issue or else run the risk of being punished by the market.

A strong contingent of 47 percent of the market players surveyed believe that artificial intelligence will have a major impact on the planning, construction and operation of real estate and expect this to result in structural changes in the sector. More than half of the respondents are convinced that tokenization will either become prevalent in real estate financing (35 percent) or even change the way we own property (18 percent). Here, too, it is obvious that real estate investors and developers will have to deal with this topic eventually.

In this context, it is interesting to see respondents' clear opinion on the topic of autonomous driving: 73 percent either expect nothing to change at all or for it to have only a minor impact on the real estate market. All the same, 27 percent of respondents expect autonomous driving to result in higher demand for real estate outside cities. While this attitude may seem surprising at first glance, we think it is related to the fact that Switzerland is rather small and the distances driven are correspondingly short. The considerations probably neglected to factor in freight transport and the networking of different mobility modes, not to mention the ESG-related aspects.

Visit our interactive dashboards at kpmg.ch/sresi to see for yourself how sentiment is shaping up on the Swiss real estate investment market.