A pair of investment managers have set up a new fund that will invest €1B (£850M) on wooden commercial buildings over the coming years.

Cromwell Property is partnering with sustainable real asset manager Dasos Capital to establish the pan-European wooden building property fund.

The open-ended fund will target an initial first close of €100M committed equity by the end of 2021, with a target portfolio value exceeding €1B over the longer term.

The venture will fund the development of new buildings, as well as buying existing assets, and will target deals in the UK, Ireland, Nordics, France, Netherlands and Germany.

The fund will tap into growing demand for investment strategies that help tackle climate change, the duo said, and growing appetite for wooden buildings as part of that.

Dasos said it estimated there has been 8% annual growth within the European market for wooden building projects since 2015. This growth is set to continue in line with the market and new regulations strongly supporting the usage of wood, mass timber and other recyclable materials in new real estate projects. France has plans to implement legislation to enforce all new public buildings to be constructed with a minimum of 50% wooden or other sustainable materials from 2022 onward.

Storing atmospheric carbon sequestrated by forests into wooden buildings leads to substantial carbon savings compared to normal steel and concrete-intensive building practices, Cromwell said. Using wood in construction helps to address the property industry’s growing climate change challenge, as the world’s building stock is expected to double by 2050 and buildings and construction already accounted for 39% of global greenhouse gas emissions in 2019.

Cromwell will contribute its real estate investment, fund, asset, project and development management experience to the joint venture and Dasos will provide the timber, land, sustainability and wooden building expertise.

They aren’t the first such partnership; Ivanhoé Cambridge and Icamap teamed up in 2019 to launch a joint venture that will invest up to €1.6B in wooden buildings, primarily in France.