Sustainable construction has been shown to improve a building’s environmental and social performance. To this end, a number of commercial green buildings have been designed with features that promote workplace productivity and ambiance. With advances in technology, green buildings can also be built at fairly competitive prices.
According to the World Green Building Council (WGBC), the following findings support a case for green building:
- Lower operating cost – the construction of green buildings can help building owners and occupiers save money thanks to efficient energy and water usage. The cumulative cost impact often adds to lower building operation and corresponding maintenance cost.
- Higher asset valuation – growing awareness about the environment; the social impact of buildings and the need to meet sustainability credentials is increasingly making real estate investors and occupiers turn to green buildings. The push is spurred by a growing body of evidence linking green building characteristic with the ability to attract tenants and increase rental incomes and property sales prices.
- Design and construction cost – the enforcement of strict building codes at different levels of governance coupled by the need to reduce building design and construction cost is fueling the development of green buildings across the US and the rest of the world. The trend has also led to the growth in green materials supply chain and a skilled workforce in the construction industry.
- Healthy workplace and enhanced productivity – new research suggest that the state of indoor building environment and physical characteristics can impact worker productivity and their health and well-being. Following the right practices, employers can implement construction strategies to raise the business’ bottom line in both the short and long term.
- Risk mitigation – governments all around the work have set regulatory requirements for buildings such as a ban on inefficient buildings and mandatory disclosures. Some of these regulatory risks can impact rental income and the value of the real estate over the long term. To overcome most of these challenges, real estate investors and homeowners can turn to green building as a strategy to mitigate climate change, conserve resources, enhance quality of life, save energy and more importantly, comply with the set building construction codes.
Overseeing Sustainable Plan Implementation for Commercial Real Estate
The amount of greenhouse emissions emanating from US buildings is slated to grow faster in the coming decade. By incorporating sustainable practices, commercial real estate investors can do a lot to save the environment and enhance the quality of life. According to Moxiefuture, US buildings account for over 70% of the electricity consumed domestically. Energy regulators have come up with targets aimed at encouraging the use of renewable energy on-site. In California, regulators have forwarded a measure to have buildings achieve zero net energy consumption.
The measure aims to have buildings consume nearly the same energy that is produced on site. The most impactful initiatives being taken to achieve this goal include:
• Installation of LED lighting
• Introduction of smart metering
• Upgrading of the HVAC system
• Reduction in water consumption
Besides the cost savings, positive property evaluation makes it easy for sustainable structures to command higher rents and a corresponding tenant satisfaction. For real estate investors looking for better Returns on Investments (ROI), the sustainability strategy can inform future investment strategies. A comprehensive sustainable real estate investment decision must put into consideration Environmental, Social and Governance (ESG) issues. The environmental issues include climate change adaptation and water, waste and energy management.
The critical issues to analyze under the sustainable social impact include community relations, tenant satisfaction and human capital management. The other important social issue is the net tenant health and well-being. Under governance, the evaluation analyzes key issues like diversity, shareholder rights and executive pay. The authorities and regulators charged with overseeing the implementation of sustainable plans of actions often evaluate progress on the said metrics by reviewing company’s environmental disclosures and other statements.
During the evaluation, the company managers may be asked to list the progress or attainments they have made in reducing energy consumption, implementing a renewable energy plan and water and waste management. To ensure the health and well-being of tenants, regulators will focus their attention on strategies taken by property owners to create a healthy and conducive working environment. The specific areas of interest include improvements in natural lighting, air quality and access to healthy food choices, among other recommended practices.
How Real Estate Companies Can Use ESG to Stay Competitive
Sustainability now ranks in the same level as demographic shift and technological advances in revolutionizing the real estate industry. For corporations that want to go beyond positive property performance and valuation to achieve competitive advantage and add brand value, a lot more work is required. To this end, real estate investors and managers must acquaint themselves with the opportunities and risks present and implement the right policies with green buildings. According to a Wall Street Journal report by Deloitte, the following sustainable initiatives are critical:
- Co-opting environmental, social and governance (ESG) risk management as part of investment process
When implementing this plan, make sure the ESG is supported by credible narrative. The plan can then be used in making future business and investment decisions, investment appraisals and portfolio strategy. The portfolio strategy covers the risk of exposure arising from tenant migration, physical problems and liabilities arising from property leasing.
- Improve measurement and reporting to effectively manage sustainable risk factors
Compliance with the existing accounting standards and structured reporting in the real estate sector needs to be enhanced. For future success, real estate entities need to utilize predictive analytics to read old and new sustainability data. The newfound transparency will ensure reliable reporting and provide critical insights into the future risks.
- Craft an efficient resource allocation plan to enhance occupant satisfaction and ROI
Sustainability adoption means much more than obtaining the LEED certification. For starters, commercial business real estate owners can work closely with tenants to realize energy savings. An equal effort should be made to achieve water and waste management goals. A strategy of sustainability is crippled if tenants do not buy in and control their use of water, energy and other resources.
The Rusty Tweed Led Renewable Energy Initiative
Studies point to a strong correlation between economic growth and the use of renewable energy. The trend towards clean energy has also helped create thousands of jobs for Americans. Distinguished entrepreneur, Rusty Tweed is a strong proponent of renewable energy. He has written many articles on this topic and initiated a number of projects, including a solar energy venture to promote the use of renewable energy in California. Solar panels work by tapping the energy from the sun to provide much needed electricity for industrial and domestic use.
The US is currently home to more than 9,000 solar energy companies. Most of these entities have been established in the last decade and do everything from solar system installation to undertaking replacement and repair works. Tweed was born from an entrepreneurial family. His grandfather started the hugely successful insurance brokerage before his father took charge of the company in the 80s. Besides renewable energy, Tweed’s business interest spans sectors like finance and real estate. Outside business, Tweed regularly participates in various community activities.
