Portugal's Energy Agency (ADENE) Calls for Real Estate Sector's Support in Accelerating Energy Transition Amid New EU Rules

Portugal's real estate sector is at a critical juncture, with the National Energy Agency (ADENE) calling for a united front to tackle the immense challenge of the green transition. During a pivotal session at Porto's Urban Rehabilitation Week, ADENE officials made it clear that the country's ability to meet new, stringent EU climate targets hinges on the proactive engagement of developers, investors, and the entire construction value chain. This marks a definitive shift where sustainability is no longer a niche interest but a central driver of property value and legal compliance.

The discussion, centered on the ambitious goal of creating nearly Zero-Energy Buildings (nZEB), served as a clear warning to the market. Bruno Veloso, vice-president of ADENE, emphasized a strategy of mobilization, stating, "The real estate sector has been a reference sector for the energy transition in our country." This statement is more than just praise; it is a declaration that the industry is now on the front lines of national climate policy. As Portugal prepares to implement the EPBD 2024, investors must prepare for a regulatory landscape where a building's energy performance is as important as its location.

For foreign investors, particularly in prime markets like Lisbon, this translates into both risk and opportunity. The directive will eventually mandate minimum energy performance standards, potentially rendering inefficient buildings unlettable or unsellable without significant upgrades. This underscores the importance of incorporating sustainability criteria into every stage of an investment, from acquisition due diligence to development and asset management.

Market Implications for Investors: The Financial Case for Green

The financial argument for sustainable building is becoming undeniable. Rui Oliveira of Saint-Gobain Glass Portugal articulated the market's direction succinctly: "the most sustainable buildings will also be the most valued." This is the core of the 'green premium' thesis, where properties with superior energy performance and sustainability credentials attract higher rents, premium tenants, and stronger valuations. Conversely, buildings with poor energy ratings face a growing 'brown discount,' becoming financially and reputationally toxic assets.

The Portuguese Energy Performance Certificate (Certificado Energético) is the primary tool for measuring this. Rui Fragoso of ADENE highlighted its evolving importance, noting its role in granting tax breaks on the annual property tax (IMI) and its necessity for assessing the investment needs of the national building stock. For an investor, a poor energy certificate is a red flag, signaling high future operational expenses and mandatory capital expenditure. This makes a building's energy audit a critical component of due diligence, directly impacting maintenance cost projections and overall profitability.

The scale of the opportunity is immense. ADENE officials acknowledged that Portugal's building stock is predominantly "old, inefficient," with "low deep renovation rates." This is not a weakness but a massive market opportunity for savvy investors. Capitalizing on this involves acquiring older properties in good locations and executing value-add strategies centered on deep energy retrofits. Such projects not only generate significant returns but also align with the growing demand for sustainable living and working spaces.

Industry's Response: Innovation Meets Bureaucracy

The construction industry is already stepping up with innovative solutions. The presentation of the DigiTrace digital product passport by Reynaers Aluminium is a prime example. This technology, already in use in a new building for the bank CGD, creates a digital twin of a building's material components. For an asset owner, this is revolutionary, providing perfect transparency for maintenance, repairs, and end-of-life recycling, thereby supporting a circular economy model and enhancing long-term asset value.

However, innovation is being stifled by familiar bottlenecks. João Sousa, representing the Order of Technical Engineers, voiced strong frustration with the administrative hurdles that persist despite the government's 'Simplex' reforms. He pointed to the absurd situation where developers can face licensing delays of up to 10 years and noted the crippling lack of standardization between municipalities. For instance, some city councils accept a pre-certificate of energy performance to grant a construction license, while others demand the final certificate, creating confusion and stalling projects. This highlights that even with the best intentions for a green transition, Portugal's bureaucratic machinery remains a major obstacle.

The Portuguese Context: Challenges and Advantages

Portugal's path to a sustainable built environment is unique. Rui Fragoso of ADENE provided a nuanced overview of the country's specific situation, which investors must understand.

• Favorable Climate: Portugal's moderate climate reduces the extreme heating and cooling demands seen elsewhere in Europe, providing a natural advantage for achieving energy efficiency.
• Renewable Energy: The country has a strong and growing contribution from renewable energy sources, which helps decarbonize the operational phase of buildings.
• Climate Vulnerability: Conversely, Portugal is highly vulnerable to climate change impacts like heatwaves and water scarcity, making resilient and sustainable construction a necessity, not a luxury.
• Economic Constraints: The limited financial capacity of many families and small businesses, coupled with a shortage of skilled labor, makes the financing and execution of deep renovations a significant national challenge.

This context means that successful investment strategies will likely involve partnerships, innovative financing models, and a focus on solutions that are both sustainable and cost-effective. Simply importing models from Northern Europe may not be effective without adapting to local conditions.

Investment Considerations for a Green Portfolio

For foreign investors, the path forward requires a strategic pivot towards sustainability. Every investment decision must now be filtered through a green lens. When acquiring assets, a low energy rating should be quantified as a future capital liability. When developing, aiming for the highest possible energy standard is no longer 'gold-plating' but future-proofing the asset against regulatory obsolescence and market trends.

A practical strategy involves engaging with specialized green building constructors and architects from the outset. These experts can navigate the complexities of energy certification, advise on sustainable materials, and design buildings that are not only compliant but also highly desirable to the modern tenant. The long-term ROI of this approach—through lower operating costs, higher rents, and stronger asset appreciation—is becoming increasingly clear.

Future Outlook

The green transition of Portugal's real estate is no longer a distant prospect; it is an immediate and pressing reality. Driven by the dual forces of EU regulation and market demand, the shift towards sustainable buildings is irreversible. While bureaucratic friction remains a significant headwind, the powerful tailwinds of financial incentives and climate necessity will ultimately prevail.

Investors who recognize this shift and position their portfolios accordingly will not only contribute to a more sustainable future but will also be the financial beneficiaries of this profound market transformation. For specialized advice on building a green real estate portfolio in Portugal, contact realestate-lisbon.com.