How Sustainability is Changing Decision-Making

At this point, sustainability is a term you’re probably tired of hearing. But for commercial real estate it’s here to stay. In commercial buildings, sustainability is ultimately a push for the triple bottom line: planet, people, profit. Your tenants will appreciate the sustainability efforts that are tied to health benefits – so much that they are actually willing to pay up to 35% more for green building office space. Your shareholders will appreciate the drop in operational costs. And if you want to secure funds for new investments, you’ll probably have to demonstrate your commitment to sustainability. You can’t lose in these efforts, so it’s time to get started.

Sustainability Projects Draw Tenants

Commercial tenants are increasingly demanding sustainability features as standard building amenities. Showing off energy efficiency certifications have become the norm. Now, to stand out, you must offer more. Energy efficient fixtures and water-conscious appliances are a win-win: lower utility bills, responsible corporate choices, and a reason to be proud of the office space.

Studies show that a property’s sustainability and energy efficiency are directly linked to tenant satisfaction. There are countless ways that property managers can utilize sustainability for tenant engagement, a responsibility that is quickly becoming a necessity to compete in the modern market. Green leases have been growing in popularity in recent years because they allow tenants to choose an office space that fits their mission and values. 

Not to mention, being eco-friendly often raises the value of your building itself, as well. Many “green” choices and investments actually save money, and some efforts have quick returns on investment. In a world increasingly conscious of its own health, green office spaces are a growing trend, and making the leap toward such changes leaves you with a desirable space tenants will be happy to fill.

The Rise of Sustainable Investing

As global efforts to combat climate change, poverty, and inequality grow, investors are increasingly looking to do more with their money than simply increase returns. In fact, socially responsible investing and one of its subsets, impact investing, accounted for more than $1 out of every $4 under professional management in the U.S., according to a 2018 survey by the U.S. Forum for Sustainable and Responsible Investment. This amounts to over $12 trillion in assets under management yearly.

Some of the most common sustainable investment options are:

  • Socially Responsible Investing (SRI): Potential investments are screened according to specific ethical guidelines.
  • Impact Investing: Key objectives are positive social and environmental outcomes, not necessarily shareholder returns. 
  • Green Bonds: A bond designed to support projects on climate change and environmental stewardship. 
  • ESG: Also so known as Environmental, Social, Governance is used as a measure of greater risk and reward managements

Each of these investment strategies highlights key opportunities for commercial real estate portfolios looking to take advantage of market shifts by creating ESG strategies.