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Rasha Rehman headshot

The Real Estate Sector Learns Sustainability Is Key for Both ROI and Resilience

Sustainability

The path to net-zero is taking another step forward, as one of the world’s highest carbon-emitting sectors says it is amplifying its focus on sustainability and decarbonization. We know the scientific rationale driving the worldwide push for decarbonization: The process minimizes the total greenhouse gas output largely by relying on low-carbon energy sources. This is critical for mitigating climate change and, according to a new survey, it offers a compelling business opportunity for real estate owners, occupants and investors. 

The real estate industry, specifically building and construction, is responsible for 38 percent of global carbon emissions, according to the U.N. Environment Program. Key players within the sector are starting to reply in kind: The worldwide commercial real estate services company JLL recently released a survey that revealed real estate senior executives are now more focused than ever before on sustainability. By and large, they have accepted the reality that climate risk is a financial risk. Further, the COVID-19 pandemic added a sense of urgency to taking on climate change risks while ensuring the safety of the buildings the real estate industry builds, sells and leases. Meanwhile, people are demanding safer and more sustainable spaces in which they live and work.

“People are beginning to see buildings as becoming agents of change and a force of good again rather than a cost ramification but that's exactly what's going to have to happen for all of these commitments that are coming out to be met,” said Robbie Hobbs, JLL’s global product group leader of sustainability and workplace management, during a recent interview with TriplePundit. 

The economic benefits of decarbonization 

As the interest and demand for sustainable real estate increases, its industry leaders are left with a few options to increase the attractiveness of their assets and remain competitive. For existing infrastructure, upgrades can be made. For this alternative, Hobbs explained that new technology and the promise of a competitive return on investment (ROI) supports the extra expenses necessary to make the real estate industry secure long-term resilience.

According to JLL’s research, investors believe decarbonization creates value and a competitive edge for them. Hobbs addressed three options within the decarbonization process that investors can lean on: onsite renewable energy, the procurement of off-site renewable energy, and carbon offsets. Through these steps, investors can differentiate their asset value beyond the standard factors like location and square footage.

Such options, along with prioritizing progress on the road to a net-zero economy, can help companies ensure they can continue to thrive in a competitive real estate market. The business opportunities resulting from real estate companies’ increased focus on sustainability and decarbonization for their buildings’ tenants, Hobbs said.

One such opportunity for these companies’ clients is the ability to attract and retain talent, as the next generation of employees will often make their career decisions based on wishing to work for companies that align with their values. The real estate industry’s commitment to building and retrofitting buildings for long-term resilience is crucial, as climate change is often stated as one of the five largest concerns of millennials and Generation Z. 

Enabling sustainability in real estate 

An increased focus on sustainability, defined by making bold, long-term climate action commitments, is not enough. Businesses need to be able to show their progress if they are to reap any future economic opportunities while scoring a boost in brand reputation. Real estate developers and investors indicate they are well aware of this. For example, the survey indicates they understand that any current ambitious climate mitigation plans need to be translated into targets. In fact, 81 percent of the stakeholders who JLL queried believed that strong partnerships between cities and their industry can help drive net-zero action plans. 

“We need owners, investors, city governments all working together to drive regulation, to drive investment, and to drive the development of supply to the level that it needs to get to,” Hobbs said. Collectives are impactful and can drive change because they have more lobbying power, he added. On the other hand, governments have a duty, too. Hobbs elaborated on this point by explaining that clear guidance and regulatory frameworks provided by cities can drive the right behaviors in the wider real estate industry.

Right now, leaders within the real estate industry are increasingly focusing on new technology, data collection and measurement. These three focal points can close the digital gap in this industry and enable net-zero plans, according to JLL’s data. For real estate owners and occupants specifically, technology is the top investment focus, as it can provide opportunities for improvement, analytics and decision making. Despite technology’s immense potential, which could help the real estate sector make progress on climate action, nearly half those who JLL surveyed claim their current data systems are in the works, the survey finds.

The current attitudes of senior leadership within this industry are clear. Owners, occupants and investors have no choice but to meet the increasing demand for sustainable real estate in order to maintain their livelihoods. A commitment to a net-zero or even low-carbon economy presents the obvious path, as it can result in the earning of higher returns while averting climate change.

Image credit: Laura Tancredi/Pexels; Chait Goli/Pexels

Rasha Rehman headshotRasha Rehman

Rasha is a Toronto-based freelance journalist with experience in communications and publicity. She is passionate about storytelling for impact. 

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