Sustainability and real estate: investors keener to be greener
In 2018, for the first time in the 4-year history of CBRE’s Investor Intentions Survey, more investors said sustainability is an important criteria in asset selection than unimportant. This reflects a gradual trend of increasing investor interest in sustainability.
Investors based in CBRE’s EMEA (Europe, Middle East & Africa) region lead the way in factoring sustainability into investment decisions. Only 4% of investors in EMEA in 2018 do not consider it as important, compared with 23% in the Americas. APAC lies in between at 12%.
Other research points the same way. The Green Building Adoption Index produced by CBRE and Maastricht University has shown that since 2007, the quantity of ‘green’ certified space across Australia, Canada, and Europe has increased threefold. In addition, the number of real estate investment firms agreeing to have their businesses scrutinized for the Global Real Estate Sustainability Benchmark (GRESB) has increased from 198 in 2010 to 759, representing US$2.8 trillion of assets (gross value).
With real estate investors committing to more strenuous sustainability targets, what are the effects on performance? Recent research has shown sustainably certified buildings owned by REITs command rental premia. In addition, this research has found lower interest expenses associated
with investment in more sustainable properties. It would therefore appear that, rather than having to sacrifice returns to achieve sustainability targets, investors can benefit financially from achieving them.
Yet the growth of interest in the sustainability of commercial buildings is not confined to investors. 92% of occupiers surveyed in CBRE’s EMEA Occupier Survey said they prefer wellness-capable buildings. To respond to demand, occupiers have been turning to standards such as the WELL building certification scheme to improve and advertise the standard of their workplaces. WELL evaluates buildings according to their impact on human health and wellbeing. It is linked to many existing green certification schemes such as LEED. Since its launch in 2014, the scheme now has 57 million sq. ft. of commercial property either registered or certified. The simplified certification process under WELLv2 should help occupiers and owners achieve WELL status more easily.
The introduction of WELL-certified schemes is not simply a marketing gimmick. A recent study by CBRE’s Netherlands office in partnership with the University of Twente has shown that workplace performance improves with the introduction of wellness-related schemes. This supports findings elsewhere that tenant turnover is lower in sustainable buildings.
With ‘green’ building certification becoming increasingly mainstream, I would expect wellness to be the next frontier. The design of corporate offices has always been a way for companies to project their brand. A top quality workplace experience, as demonstrated by WELL certification, is increasingly becoming a way to do this.
For more commentary on green issues that impact real estate, take a look at the Green Perspective, CBRE’s global sustainability blog.
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