Sustainability Role In Real Estate Investments

Due to increasing global population and climate change effects knocking on the door, the importance of effective and sustainable use of energy forms becomes more crucial than ever before. The calculations for primary energy consumption account buildings for 30% of total C02 emission production on a global scale. The merits that will derive for new or updated government legislations to promote sustainability in real estate market will face geographical, demographical, environmental and corporate challenges. These challenges related to market conditions and asset class flexibility to accept or accommodate new regulations. Cost versus benefit analysis tool is the simplistic form to assess financial and non financial benefits derived to applying new standards in energy, waste management, water consumption, air quality and well being of working environment. It is less expensive in terms of time, cost and effectiveness to apply sustainable standards on new developments rather then upgrading existing buildings. In either case effects will take place on buildings direct attractiveness to the market place reducing void periods and bringing long term tenants, reduction of C02 emissions during asset life cycle and becoming a sample of efficient modern living.

Sustainability levels will vary with investment objectives; however they should satisfy minimum mandatory standards. The sustainable investment strategies listed below can be used as a guideline to determine personal investment path:

1.   Selection / Screening: Purchase and/or disposal of property assets that meet / don’t meet predefined environmental and social performance requirements;

2.   Build and operate / Build and sell: Investments into new building projects that are designed, constructed and subsequently managed according to the requirements of sustainable buildings;

3.   Optimization: Investments into the existing building stock in order to systematically improve sustainability performance;

4.   Cause-based investment: Investments into community projects such as affordable housing and urban revitalization in order to foster a more sustainable society“

Table 1: Different aspects of property value –Superior building performance adds value in many ways

The questions that come after reviewing these strategies are:

1.   How is sustainability likely to affect property performance?

To enhance value, buildings and their landlords must be flexible to accept environmental changes dictated by central government. Failure of compliance to new standards may lead to penalties and loss of tenants. The level of savings will be related to primary fuel prices replaced with sustainable alternatives and competiveness of the asset in the market place.

           2.   What makes a sustainable building?

Well planned, designed, constructed or upgraded and managed building will deliver tangible savings over time. Primarily focus falls on energy conservation, however secondary attributes must be treated with a favorable response:

a.    Green leases – part of sustainability transferred to building tenants;

b.   Good access to the public transport – reduces travel time and dependency on personal transport;

c.    Effective Monitoring/Management of the building system – smart energy saving controls, micro power station installation;

d.   High level of water efficiency – collection of rain water, water percolation and economic management systems;

e.   High standards of lighting, ventilation and humidity levels – passive building design;

Sustainability standards changed the paradigm of real estate investing. It is more oriented into efficient use of the asset through integrated management systems.

Table 3: Return and Security is achieved through sustainability