There was a time when sustainable features and operation of any kind was a “nice-to-have” in the commercial real estate (CRE) industry. But those days are gone. Now, businesses must incorporate sustainability into every aspect of their operations possible. No ifs. No buts. Good environment, social and governance (ESG) practices are all an absolute must to get on the right side of investors or tenants. 

Below is a look at the shift of sustainability from compliance-driven to value-driven, how sustainability drives asset value, how CRE is edging towards smart building management, green energy management and more, and the future of sustainability as a competitive advantage. 

Compliance to value: a shift in driving forces

Regulation has grown tighter and had a powerful effect on sustainable practice in the CRE industry. Commercial properties are under increasing pressure to implement sustainable practices and upgrades or retrofits. If not, they face stiff action for failing to comply. A wider spectrum of regulations on waste management, building materials and overall environmental impact highlights the importance of compliance.

However, governments are not the only ones forcing commercial property owners hands on the subject of sustainability. Tenants and investors are factoring ESG considerations into their investment decisions, and satisfying their requirements is resulting in longer rental agreements and higher yields. 

Anyone with any sort of interest in a building may even do some digging and research into a building or operators ESG history. Especially those in construction as you may need to find contractor leads that specialise more towards sustainability. 

Driving asset value

Today, workers have shown a clear preference for sustainably operating businesses, and they want to serve employers whose values align with their own. This is persuading employers to get serious about sustainability to attract the best talent, which is tough when talent is in such short supply. Occupiers, too, are trying to meet their own sustainability targets by ensuring the building they operate in is green. 

Sustainable buildings are in short supply, which is why sustainable buildings yield better returns than unsustainable ones. This makes it important to boost green credentials where possible and incorporate sustainable consideration into any building or refitting work. Green certification drives up property value and achieves higher occupancy rates. 

The move towards automation, energy management and smart technology in buildings

The smart building market is growing because people want buildings that are more than just a space. Smart buildings, through the Internet of Things (IoT) and artificial intelligence (AI) technologies, can make buildings greener by monitoring outputs and adjusting the building’s outputs to satisfy energy requirements. 

IoT and AI technologies optimize energy consumption, which reduces carbon emissions and related costs. Technology detects occupancy and usage patterns and then optimizes heat, ventilation and air conditioning (HVAC), plug loads, lighting and other systems. This cuts waste and costs. 

The use of technology to improve sustainability also contributes to occupier wellbeing, and this can translate into greater productivity of employees. Better lighting and air quality have been found to increase productivity. 

The future of competition is sustainability

Making a concerted effort to be sustainable can lend commercial property owners and the businesses that operate in their buildings a huge competitive advantage. Demand for sustainable assets continues to grow, and sustainability’s value stretches beyond being good for the planet. There’s a connection between firm social policies and employee retention, and responsible governance builds trust between stakeholders. 

But the competitive advantage gained from sustainability isn’t just in terms of costs or the environment. Sustainability is a long-term strategy and can futureproof businesses against the impact of climate change or in the event of extreme weather conditions. Sustainable design is also adaptable and permits easier adaptation to changing needs and future regulations. 

Sustainability is essential in commercial real estate, whether you’re an owner or an occupant. It matters to anyone with an interest in a particular piece of commercial property and drives value and growth while also preparing stakeholders for the future.