Romania’s Real Estate Sector Goes Green: Trends and Opportunities

The transition to a green economy is no longer seen simply as an opportunity; it has become an indispensable and crucial factor driving the evolution of the real estate sector towards innovation and sustainability. With the application of the CSRD being phased in from early 2024, environmental, social and governance (ESG) reporting requirements are becoming increasingly relevant and influential in the decision-making process regarding the development, operation, leasing or acquisition of real estate in Romania. The impact of ESG criteria in the Romanian real estate market is multifaceted, influencing various aspects of the industry from development and construction to property management and tenant relations. By incorporating sustainability considerations into their decision-making processes, real estate developers create buildings that are more energy-efficient, environmentally friendly, and socially inclusive. This not only benefits the environment and the community but also enhances the long-term value and profitability of the assets.

Companies that prioritise sustainability and corporate responsibility are seen as more resilient and better positioned for long-term success. This has led to a growing number of real estate developers and property owners seeking ESG certifications, such as BREEAM, LEED, and WELL, thereby demonstrating their commitment to environmental stewardship and social responsibility.

In light of this, we note a significant change in the attitude of tenants and buyers. They are increasingly aware of sustainability aspects and are focusing their deals on sustainable buildings. Many large developers have started to prepare and publish sustainability reports, following the transposition of EU provisions on sustainability reporting obligations into national legislation earlier this year. This procedure may sometimes be a challenging task, involving the collection of data from various operational streams, their systematisation and the adjustment of existing policies or the implementation of new policies tailored to the situation of each project.

As a result, both property developers and tenants will be under pressure to provide relevant information about their buildings and rented space. However, although national legislation covers this reporting obligation, there is no direct commitment between developers and tenants to mutually share the information required for such sustainability reports. Thus, a voluntary collaboration is needed.

Therefore, it is recommended that active players in the real estate field introduce specific sustainability obligations in their lease contracts, known as “green clauses”. These clauses target specific provisions aimed at integrating ESG principles into the business and operations of the parties involved. Some of the main categories focus on:

By including green clauses in contracts, property owners and tenants can ensure that their buildings are constructed and operated in an environmentally responsible manner, minimising their carbon footprint and reducing their impact on the planet.

Also, such clauses can regulate, on a case-by-case basis, several aspects, including the co-operation of the parties in the reporting process and the obligation to provide each other with information on ESG factors.

New opportunities are also emerging for developers, owners, contractors, and professional advisers. Thus, market players who integrate ESG requirements into their business models benefit from medium- and long-term advantages in terms of financing opportunities, reduced raw material and energy costs, the ability to anticipate and adapt to regulatory changes, improved risk management, and access to new client segments. In an environment where sustainability and responsibility are becoming more and more important, the simple pursuit of profitability is no longer enough.

Green financing is therefore becoming a vital component of the economic infrastructure, contributing to the alignment of our economy with climate friendly and sustainable business practices. Instruments of green financing, such as green bonds, green loans and grants, which support renewable energy projects, energy efficiency and other viable initiatives, offer important ways to invest capital in projects with a positive ecological impact. In this context, banks have a key role to play in promoting green financing, both in Europe and in Romania, adopting various strategies to build significant portfolios in this area.

Romanian legislation is adapting to the above-mentioned changes. There is already a legal framework that addresses the smart city concept and focuses on urban regeneration, such as the Urban Mobility Law and the Energy Performance of Buildings Law. In turn, the draft Spatial Planning, Urban Planning and Construction Code focuses on construction predictability to a greater extent than the current legislation, setting a framework with clearer and more stringent rules. These changes not only meet regulatory requirements but also reflect a broader shift towards environmentally friendly urban development, aligning with evolving market demands and global sustainability goals.

While there are challenges and barriers to overcome, the momentum towards sustainability in the real estate market is undeniable, and the potential for positive change is significant. As more investors and developers incorporate ESG criteria, the future of the Romanian real estate market appears increasingly prosperous.