Commercial Real Estate and Sustainability

Commercial Real Estate and Sustainability

The demand for greener, more sustainable buildings has extended into the commercial real estate sector. As investors become aware of the importance of the environmental and social implications of financial decisions in addition to the traditional bottom line, more commercial real estate buildings are being constructed and/or retrofitted with environmentally friendly ideals in mind. Thanks to changes in state and municipal laws, tax credits offered at the federal, state and local levels, budget-minded asset managers, and the needs of many commercial tenants to comply with efficiency standards, the growing trend to increase the sustainability of commercial buildings continues.

What Is Driving the Demand for Sustainable Commercial Buildings?

Besides increasingly global awareness regarding the importance of environmental and social impacts on all financial decisions, the following incentives are driving developers to include more sustainable concepts in their designs:

  1. The needs of commercial tenants.

    Many government and corporate commercial tenants are now required to comply with minimum LEED or similar green building standards in order to lease a particular location. As a result, commercial buildings that comply with such standards can charge higher rental rates and are projected to maintain a higher-than-average market value.

  2. Budget-minded asset managers.

    Greener buildings reduce energy consumption and often provide a short return on financial investments after sustainable retrofits are completed. Utility costs alone may be reduced by up to 20 percent with relatively low-cost improvements. Add to this the fact that rental premiums increase, and you have a very attractive situation for budget-minded asset managers.

  3. Federal, state and local tax credits.

    Income tax credits, rebates, grants, property tax abatements and more are available at the federal, state and/or local levels for everything from solar installation projects to interior energy retrofits of commercial buildings. These incentives make it much easier for investors to observe the clear financial gains obtainable with a more sustainable mindset.

  4. The legal requirement to disclose energy efficiency.

    With the passing of state and local laws that require commercial and multi-family residential building managers to track and disclose the energy usage of these locations, investors now have an additional incentive to improve the efficiency of these buildings. The details of the situation determine whether the information must be shared publicly or only to tenants, buyers and/or potential lenders, but in either case, poor energy efficiency translates into lower rental fees and loses on the financial bottom line.

A Thriving Future Starts With a Triple Bottom Line

We live in a world that is rapidly changing for the better, and the trend toward sustainability in commercial real estate is a prime example of this fact. People ready for a career change and wishing to help usher in greener era in commercial building may consider pursuing a higher education in this real estate. Education in real estate and sustainability will leave you with a detailed understanding of how the triple bottom line for simultaneous social, environmental and financial gain is possible. Visit Marylhurst University online for more information.

Sources:

“8 Reasons Sustainability Trends are Driving Commercial Real Estate Value” National Real Estate Investor http://nreionline.com/green-real-estate-investment/8-reasons-sustainability-trends-are-driving-commercial-real-estate-valu#slide-2-field_images-94401 (Accessed Aug. 2, 2016)