Investing in a Sustainable Future
It is commendable for commercial property investors to support initiatives that enhance the sustainability of assets, but does it pay off? Our experience tells us that the answer is a resounding YES. Developing a green building serves more than altruistic goals. Investing in a sustainable future generates long-term, stable investment performance. And cutting utility costs with energy-efficiency programs is just the tip of the iceberg.
When property managers prioritize sustainability, they can in turn create a superior tenant experience, which may lead to higher occupancy and retention rates as well as lower operating costs. For investors, that may translate into higher net operating income and improved valuations overall.
Greener Buildings Create a Rosier Outlook for Tenant Loyalty
For many commercial tenants, the real value of occupying green buildings is in the promise of increased productivity of their employees. Green buildings boast many features that can help companies advance health and well-being goals, from amenities such as fitness centers and indoor bicycle storage, to boosting access to natural light and expansive exterior views of the building’s surroundings. A shift in thinking is taking place towards a greater societal consciousness of our environmental footprint and its impact on our health and wellness. Tenants have come to expect that the buildings they reside in and the companies that manage these spaces reflect this same thinking.
Investing in sustainability goes well beyond the building itself. As companies compete more intensely than ever for employees, they’re looking to locate in high-growth and urban communities that attract young educated talent. These workers are choosing live-work-play neighborhoods that offer a range of nearby amenities, allowing them to reduce environmental impacts and time lost to commuting. In these communities, higher Walk Scores and proximity to transit hubs can enhance long-term relevancy of building locations.
Investment Value Grows With Green Certifications
At Bentall Kennedy, we’ve been pursuing sustainability strategies for more than a decade, which gives us a wealth of experience and data to draw from. We confirmed the value of this approach in 2015 when we commissioned an independent study of our office portfolio, totaling nearly 300 buildings across North America. The study, published in the Journal of Portfolio Management and conducted by Dr. Nils Kok and Dr. Avis Devine, showed that properties with some combination of LEED, BOMA BEST and ENERGY STAR certification generally generated higher rents, maintained higher occupancy and enjoyed higher renewal rates with fewer rent concessions than similar buildings with no certifications.
As these findings reveal, it is not only the certificate that generates higher value — it is the actual created environment that has investment value. That’s why it’s important to continually innovate and take sustainability to the next level.
Focusing on sustainability offers other avenues for value creation as well, from mitigating the risks of climate change to enriching communities. Working with and engaging tenants to achieve shared sustainability goals can foster a sense of community that in turn creates happy, loyal tenants.
It’s possible to generate tremendous economic value while giving new life and purpose to the structures that will contribute to the sustainability of our cities for generations to come. Ultimately, by prioritizing sustainability, we position the buildings we invest in today to thrive tomorrow.
Anna Murray is Vice President, Sustainability at Bentall Kennedy (Canada) Limited Partnership. Bentall Kennedy is one of North America’s largest real estate investment advisors and a recognized leader in sustainable building practices. Bentall Kennedy includes Bentall Kennedy (Canada) Limited Partnership, Bentall Kennedy (U.S.) Limited Partnership and the real estate and mortgage operations of their affiliates.
