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Value depreciation and fear of stranded assets

“How can investments be permanently protected against value depreciation while simultaneously modernizing and maintaining profitability of portfolios?”

In the real estate industry, the term “stranded assets” refers to properties or real estate projects that lose value or become unprofitable due to various factors. This can have several reasons:

  1. Changes in demand: If the demand for certain types of real estate changes, real estate projects based on previous demand forecasts may lose value. For example, changes in lifestyle or demographic shifts can alter the demand for certain types of residential or commercial properties.
  2. Environmental policy factors: Stranded assets in the real estate industry can also be caused by environmental factors, such as environmental regulations that can affect the value of properties.
  3. Technological developments: Advances in operation, renovation, and construction technology or new building regulations can lead to older properties no longer meeting current standards and therefore losing value.
  4. Economic factors: Economic fluctuations, changes in interest rates, or changes in the labor market structure can also affect the value of real estate and lead to certain properties being considered stranded assets.

Overall, the term “stranded assets” in the real estate industry refers to certain properties or real estate projects losing value or becoming unprofitable due to external factors. Climate change and the associated energy transition pose enormous challenges. Global economic and financial policy developments, as well as high energy prices, add additional difficulties. In this uncertain environment, real estate industry stakeholders face the growing risk of value losses of their assets.

The situation is further exacerbated for real estate investors and owners by the recently expanded EU ESG regulations as well as increasing credit levels, which additionally complicate the financing of investment properties. Therefore, the real estate industry is faced with the question:

“How can investments be permanently protected against value depreciation while simultaneously modernizing and maintaining profitability of portfolios?”

PAUL provides answers amid current challenges.

The energy efficiency of buildings proves to be a crucial factor in their profitability. Recently, the American consulting firm JLL found a value loss of up to 28% in energetically inefficient properties compared to their “clean counterparts.”

However, while conventional renovation measures such as insulation, new windows, etc., are usually associated with immense investment costs, PAUL’s smart solution does not incur additional costs for the property operator. The trick: PAUL finances itself through a percentage share of the energy savings.

The AI-driven combination of specially developed software and hardware enables significant energy savings of up to 40% and dramatically improves the energy efficiency class of buildings. For example, an old building classified as class G or H (< 200 kWh/m²a) can be upgraded to class E with PAUL – a quantum leap for the building stock.

Equipped with smart technology, PAUL not only enables its customers to digitize building management but also offers a significant increase in the value of the investment property and additional cost savings, quickly amounting to tens of thousands of euros per building.

A convincing solution.

PAUL is aimed at real estate investors, private and municipal housing companies, as well as companies with portfolios for which the real estate sector is not the primary core business. Our solutions work for buildings with 6 residential units as well as for portfolios with tens of thousands of residential units and for properties in all asset classes such as commercial, office, hotel, hospitals, and even ships.

PAUL, with its currently unique complete solution, is not only an available response to current challenges but also a measure with a future due to forward-looking planning and continuous optimization. Artificial intelligence promises continuously optimized heating systems, regardless of changes in tenant structure or building conditions.

In a time of unpredictability, where stranded assets pose a growing threat to investors, PAUL is the solution that not only reduces CO2 emissions but also sustainably increases the profitability of real estate.

Further articles

Value depreciation and fear of stranded assets

“How can investments be permanently protected against value depreciation while simultaneously modernizing and maintaining profitability of portfolios?”

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Kristina Klehr