Why Green Real Estate is the Next Sustainability Movement (Intro)
By: Julianna Eng & Mary Kate Henderson (Lookthrough Research)
Jz Lim via Unsplash
Intro
Driven by recent global sustainability commitments like the United Nations Sustainable Development Goals (UN-SDP), many countries have set aggressive carbon emissions reduction goals and laid out plans to enforce sustainability standards in all sectors. A significant component of these reduction goals is the real estate sector, which accounts for almost 40% of worldwide greenhouse gas emissions. Due to its large contribution to emissions, real estate has become the focal point of many sustainable innovations. These improvements in technology and structural design can be applied to new and existing structures and aim to provide the most emissions reductions for the lowest possible cost.
One of the challenges to real estate emissions reduction is gathering enough data to have a baseline emissions starting point. A large portion of real estate emissions are from indirect sources of building use and operations that are not easily tracked. Many data collection and analysis solutions have emerged with the goal of becoming the standardized greenhouse gas emissions database. Some of real estate’s key disclosures include energy management, water management, management of tenant sustainability impacts and climate change adaptation. Once enough data from a building emissions is collected and analyzed, building stakeholders can target areas for improvement to reduce emissions and increase efficiency. Common areas of improvement for operational efficiency are in energy use and sourcing, waste diversion, and water usage.
New Construction
Zero Energy Buildings, or ZEB, are gaining more traction within the green real estate sector for many reasons. Typically green-certified buildings generally have positive sale and rental premiums compared to non-green buildings, while tending to have 9% higher occupancy rates and operating costs that are up to 14% lower. Homebuyers and tenants are willing to pay a premium for environmentally conscious features like solar panels, LED lighting, better insulation, and smart-home technologies. Not only do these features reduce the carbon footprint of a building, but they improve the experience of occupants and help reduce overall costs.
Building Improvement
Risk management can come in many forms with green real estate, the most relevant being improving and retrofitting buildings up to a sustainable standard. According to a study done by Deloitte, sustainable housing retrofits can maximize financial returns.
As climate change becomes an increasing risk, rising sea levels have financial effects on the residential real estate market. In the United States, homes that have risks relating to rising sea levels sell for around 7% less than similar properties that do not have this risk. In Europe, real estate that is exposed to floods and high winds incur higher costs of property damage. For example the winter storm of 2015–2016 in the UK cost £900 million in property-related damages.
Additionally, projects to integrate sustainable development within real estate are on President Biden’s radar, especially clean energy infrastructure, weatherizing buildings and constructing affordable housing units.
Urban Green
It is not just real estate and its structural changes that can have a positive impact on the environment. Green spaces are becoming increasingly common in urban areas, especially cities with limited access to designated spaces for nature. Developers have been working to incorporate green into building plans, whether that be rooftop gardens in city skylines or living walls filled with plants. The environmental benefit, alongside its aesthetic, would be improving air quality, reducing noise, and helping to regulate air temperature to a cooler degree.
Conclusion
The decarbonization of real estate will continue to gain momentum as climate change pressures become more imminent. Real estate investors with the foresight to invest in projects that will fare well with new sustainability standards will gain a competitive advantage against their competitors who need to play catch up to make large changes to lower emissions on their investments. In a study done by Morgan Stanley, 95% of millennial investors surveyed in a recent study are interested in sustainable investing. Investors are now more aware of these considerations and are recently putting sustainability at the forefront of priorities.
