Sustainability in Real Estate
By: Alexandra Richo and Julianna Cushner
Overview
In the realm of sustainability, there exist several subdomains falling under its umbrella. One of the most prominent segments is commercial real estate, which significantly contributes to approximately 40% of CO2 emissions. This critical factor has prompted investors to reconsider the significance of sustainability within the realm of real estate. The United States has set a target to achieve net-zero emissions by 2050, compelling many companies, including those in real estate development and investment, to reevaluate their existing business models. In this article, we will present a comprehensive overview of sustainability in the real estate sector and how it can enhance property value.
1. Cuts Operating Costs
Sustainability in real estate or “green buildings” can offer savings for investors and owners in the long run. First, they often incorporate energy-efficient systems and technologies, such as LED lighting, improved insulation, and efficient HVAC systems, which lower energy consumption and subsequently decrease utility bills. Additionally, green buildings may utilize natural light and ventilation, reducing the need for artificial lighting and air conditioning. Moreover, by implementing water-saving fixtures and systems, they curtail water usage and related costs.
2. Tenant Demand
In recent years green buildings have become a more attractive option to tenants. As awareness of environmental issues and the benefits of sustainability has grown, tenants have become more conscious of the environmental impact of the buildings they occupy. Tenants are also more likely to stay in the building for longer periods because they seek factors such as cost saving natural lighting. Additionally, businesses are now choosing real estate to align with their sustainability goals which further pushes demand.
3. Enhanced Property Value
Since there is an increase in demand and investors are shifting towards these green buildings it has caused the value of certain properties to rise. LEED (Leadership in Energy and Environmental Design) is a widely used certification for rating green buildings. Having your building LEED certified can give you a competitive advantage in the market and attract buyers or tenants who are more conscious about the importance of sustainability.
4. Regulatory Incentives
Regulatory incentives are government-driven mechanisms put in place to reward sustainable practices in real estate as well as other industries. These incentives can be things such as tax benefits, grants, subsidies, or expedited permitting processes. These designs are used to promote environmentally friendly initiatives, energy-efficient construction, and sustainable building certifications like LEED . These incentives play a critical role in encouraging professionals to invest in sustainable projects and align with broader environmental and energy efficiency goals.
Hotel Marcel
Right off the I-95 highway in New Haven, is Hotel Marcel which will be more than likely the first net zero hotel located in the United States. The owner and architect (Bruce Becker) saw an opportunity to transform it and showcase a green investment to the city. Becker has been able to electrify the hotel and has seen a significant impact which include a decrease in emissions. One of the main sources that powers the building is solar panels which have been a solid choice for alternative energy.
Startups Making an Impact
In this space there are startups that are helping to make this goal accessible. This is seen at the start of the real estate process, with the creation of buildings using materials that are less impactful on the environment. An example of this is with the company Katerra, who uses cross-laminated timber which produces far less carbon and energy then traditional materials such as concrete or steel.
Other startups aim to inform how much carbon is being produced and manage the environmental impact the properties have. This can be seen with a company called Measurabl. They provide transparency for companies, in order for them to make decisions on how to best act towards decarbonization.
Finally, some companies are even using AI to reduce energy consumption. One case of this is with BrainBox AI who uses algorithms to optimize HVAC. They have seen a reduction of energy in their buildings of 15-25% just by providing data and informing tenants what the optimized decision is to minimize carbon emissions and energy consumption.
Conclusion
In conclusion, sustainable real estate represents a smart long term investment, with its potential for cost savings, increased property value, and a positive impact on the environment. It meets the growing demand for eco-friendly spaces and government regulations, making it a great choice in the commercial real estate industry as well as residential.