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Sustainability trends in commercial real estate and the growing accreditation industry

Taking a look at the commercial real estate industry and some of the pressures including public perception, tenant and employee demands, and government bodies, we are seeing a commercial developments lean towards sustaining building planning

Collaboration with accreditation companies and consultants that build green building planning and construction is a growing trend.

The Obvious – sustainability is a growing trend

It’s no secret that in the past 10 years we’ve seen a cultural shift, both locally and on a global scale. Smart cars have replaced hummers, and bank statements now ding in your inbox at the end of the month.

In 2015 we saw Canada adopt the United Nations Sustainable Development goals, a bold agenda to improve the health of people and the planet by 2030.  Governing bodies, such as the Sustainable Development Act and Environment and Climate Change Canada, are responsible for enforcing acts and regulations set down to ensure the responsible protection of the environment, sustainability falling under this umbrella.

While the government is setting an agenda and creating an awareness of sustainability issues, compliance with their regulations is easy to meet for the majority of business owners. There is a president set by government, however, the pursuit of a sustainability certificate is more of a voluntary priority for most developers and property owners.

Public perception pushes businesses to go green

Public perception and the demand for transparency gives businesses an avenue from which they can communicate the businesses values, attention to detail, and consideration of long-term planning. In a compensative marketplace, corporate responsibility is another way they can communicate their brand message

Stakeholders reap the benefits of sustainable developments

More than branding, in commercial real estate (CRE), a green building can be marketed on this value-add based on the long term reduction in operating costs.

In fact, according to a 2014 report by Canadian Green Building Trends, companies investing in green buildings are seeing significant dividends from their investments:

  • 82% of reported decreases in energy consumption.
  • 68% of reported decreases in water consumption in their green buildings.
  • The median reduction in operating costs over five years is 17%.
  • The median payback for the investment in a new green building is reported to be eight years

In addition to reducing an owner or tenant’s long term operating costs, green buildings are attracting businesses the have global impact mindfulness, and consideration of strategic employee attraction, retention, and productivity.

According to the National Research Council of Canada, “green-certified buildings demonstrated higher scores on survey outcomes related to job satisfaction, value to clients and stakeholders, evaluation of management, and corporate engagement.”

For these reasons, real estate investors are seeking to meet sustainable building certification and reporting requirements as well as demonstrate effective governance. In an article by Principal Global in late 2017, they stated that “it is a growing belief among investors that good sustainability performance is a proxy for good investment management and raises awareness on what is material in commercial real estate.”

The growing ‘green’ certification industry.

To communicate a commitment to sustainability, rating systems and certifications make external communication seamless. A sustainable development certification makes it easy for the developer to communicate that the building is green. It also makes it easy for businesses looking for sustainable buildings to not only find them, but compare benefits based on rating systems.

LEED

In CRE, the widely respected and utilized as a green building certification program is LEED, or Leadership in Energy and Environmental Design. They have rated and certified more than 92,000 projects in over 165 countries.

Certifications of a building or construction are scored one to four, and are graded on five green design categories including sustainability sites, water efficiency, energy and atmosphere, materials and resources, and indoor environment quality. Based on a business’s score, they are eligible to recieve one of the following certifications:

  • CERTIFIED (40- 49 points)
  • SILVER (50-59 points)
  • GOLD (60-79 points)
  • PATINUM (80 + points)

Conclusion

Science-based targets set by these organizations are continually evolving with consideration for environmental and societal studies, and innovation in green technology. For investors in commercial real estate, this means that strong sustainability performance has become a prerequisite for market expectations of quality. With implications at every stage of the investment cycle, commercial real estate owners need to develop comprehensive approaches to sustainability with responsible property investment as a feature of their portfolio and asset management activities.