Standing out in the commercial property space can be challenging. But owners, funds and managers who’ve learned how to operate and scale portfolios sustainably are leading the way.
As a global collective, if we are to limit warming to 1.5˚ C above pre-industrial levels, we must take the goal of reaching net-zero emissions in the built environment seriously. In Australia, the House of Representatives recently passed the Climate Change Bill of 2022, committing to a 43% emissions reduction by 2030. Termed the 'great reallocation' by National Australia Bank, $20 trillion of spending is expected to be redirected. For those in charge of the $1.2 trillion worth of commercial real estate assets in the country, the path to sustainability is the way to go.
An urgent, serious, strategic, and rigorous approach to incorporating sustainable practices is time-sensitive, and the time for greenwashing is over. Governments globally are clamping down on ‘greenwashing’. In a speech during the recent Sydney Morning Herald Sustainability Summit, ACCC (Australian Competition and Consumer Commission) chair Delia Rickard said businesses that make false or misleading claims undermine consumer trust and confidence in the market.
“Unfortunately, the ACCC is hearing growing concerns that some businesses are falsely promoting environmental or green credentials to capitalise on changing consumer preferences,” Rickard said.
In this article, we explore four ways to help senior property decision-makers avoid greenwashing and cultivate a deeper, more meaningful ethos of sustainability.
- Get audited, get certified, get transparent
- Align with the climate-conscious consumer wants
- Take green leasing seriously
- Explore retrofits to your existing portfolio
1. Get audited, get certified, get transparent
Publishing sustainability reports is no longer enough; the demand for holistic assessment of real estate assets, often with third party auditors, is rising.
If you’ve been serious about effecting a data-driven sustainability strategy, it’s likely you are already tracking the tried-and-tested progress indicators. From a financial perspective, these could include utility costs, asset values and maintenance bills. And from an environmental lens, these could mean energy reductions, energy use intensity, waste diversion, water usage, and of course, carbon emissions. Discover here how the three key standards that have emerged in Australia work together (NABERS, Green Star and GRESB).
We recommend adding social performance indicator metrics to your list. The idea is to associate yourself with certification standards that go beyond superficial measurements of activity. To get serious about measuring sustainability, try to account for the social and community impact of your real estate, and the effect it has on the well-being of your occupants.
2. Align with what the climate-conscious consumer wants
The Climate Bill is likely to effect a push in emissions reductions and property disclosures, which is further likely to show up in market demand. RICS’ latest Global Commercial Property Monitor reported that 42% of survey participants globally believe that green certified buildings attain a price premium over comparable non-green buildings. The majority state that the rent premium is up to 10%.
Avoiding greenwashing and investing in creating truly sustainable property portfolios is likely to pay off.
Commercial real estate tenants, who often themselves have net-zero targets, are beginning to affect the commercials of buildings. Having credible transition plans to net-zero carbon can also help with winning over banks and insurance companies. In the words of Guy Grainger, global head of sustainability services at JLL, owners increasingly need to “assess the opportunity to create a resilient long-term, real asset, (because) the risk is, if you don’t, the value is going to start really, really dropping because you’re not pricing in that transitory cost.”
3. Take green leasing seriously
Considering that over half of all commercial properties in mature markets are leased, using ‘green clauses’ in standard leases can help establish a collaborative approach for better environmental performance. The momentum is already strong, with 94% of premium property owners in Australia now using green leases.
Owners and occupiers, working together, can seek to take on shared responsibilities to improve sustainable operation and usage of the built environment. This need not be limited to new leases – consider adding Memorandum of Understandings (MoUs) for leases already in place to stay on top of environmental and CSR policies.
4. Explore retrofits to your existing portfolio
About two-thirds of the global built environment today will still exist in 2040, which means existing buildings play an important role in emissions reduction strategies. To this end, Amanda Steele of CBRE noted at our recent webinar: ‘When I look at our operations team and what we're trying to achieve, and when I look at our targets long term, both our clients’ targets and our own, we won't get to net zero by building new buildings, because the majority of buildings in 2050 are already here. We will manage our way to it.’
Research from Nareit (USA) shows that green buildings can translate into as much as a 31% increase in sales values, 23% higher occupancy rates, and 8% higher rental incomes. It is worth considering a retrofit revamp for your commercial portfolio to boost energy efficiency and lower carbon footprints, by tackling the core areas of heating, ventilation, air conditioning, lighting, water use, and sustainable electrification.
The real estate sector is responsible for 39% of global carbon dioxide emissions, only 30% of which comes from construction. The remaining 70% is caused by building operations. It’s time to go from greenwashing to effecting real, lasting change. It’s time to optimise energy consumption by leveraging technology, data and analytics as best as you can for better operations in an efficient, sustainable world.
CIM's PEAK Platform is a best-in-class building analytics and property operations software, improving efficiency, sustainability, and tenant comfort across property portfolios. Discover more by watching a demo.