Widespread and growing adoption of sustainability goals by commercial real estate investors and tenants will require developers and owners to expand their adoption of green design, clean energy systems, building retrofits and information sharing technologies in the near future, according to a report by JLL.
For its “Decarbonizing the Built Environment” report, JLL set out to measure the extent and nature of sustainability goals among CRE investors and occupiers, and determine how those goals could impact real estate portfolios.
“This decade is being seen as a tipping point in decarbonizing real estate,” the report states. “Investors and occupiers are making bold commitments at a fast pace, with most companies now setting ambitious net zero goals for 2030 or sooner… The pandemic acted as a wake-up call for environmental and social responsibility, which will require real estate to make complex changes in what will be a critical shift for the industry.”
JLL’s research included surveying senior executives of 647 companies that invest in or occupy commercial real estate about their companies’ sustainability initiatives to date and near-term objectives. The survey identified several trends.
Commitment to Sustainability: Two-thirds of occupiers say reducing their carbon emissions is part of their corporate sustainability strategy, 56% say they are looking to achieve reductions through their corporate real estate strategy and another 29% plan to start seeking those reductions through CRE by 2025.
Renewable Energy: Forty-one percent of occupiers already self-generate renewable energy. That number is expected to reach 64% by 2025. Survey respondents cited renewable energy – either generated onsite or offsite – as a core part of their sustainability and net zero objectives. Fifty-one percent of leading investors say renewable energy will be one of their top three investment priorities in the next three years.
Building Performance: Twenty percent of occupiers say that monitoring and benchmarking energy performance is the ‘biggest game changing activity’ in their sustainability plans. A large majority of occupiers (84%) said that digital energy-management solutions will be critical to achieving their sustainability goals. At the same time, 46% of investors identified digital technologies that monitor and optimize building performance as one of their top three investment priorities in the coming years.
Those trends are evident in Maryland’s CRE market.
“We have had a growing number of tenants reach out about purchasing emissions-free ‘green power,’ installing EV charging stations and requesting LED lighting upgrades within their spaces,” said Ryan Schwabenbauer, Director of Sustainability at St. John Properties. “In addition, many current and perspective tenants have been requiring LEED certified space as part of their Environmental, Social and Governance (ESG) strategy or per government mandate.”
To meet those sustainability goals, St. John Properties has pursued LEED certification for most of its new buildings over the past 10 years, resulting in 87 building certifications.
“For our existing buildings, our most common initiative is retrofitting to efficient LED lighting. HVAC and building system tune-ups have also provided great savings to our tenants,” Schwabenbauer said. “We have the majority of our multi-story buildings connected to EnergyStar/Portfolio Manager for tracking purposes. Accordingly, we have the ability to share this information with a tenant in live time, so they can continue to monitor their energy usage and savings.”
St. John Properties is also working on an ambitious initiative to increase the sustainability of its buildings.
“We are making a push to figure out the best way to roll out a scalable and economic PV solar approach on top of all St. John Properties building types throughout the region,” Schwabenbauer said. “Our largest ambition is to deliver a building that produces more energy than it uses – net positive – while making good business sense.”