Commercial Real Estate Owners Avoid Sustainability Revamps with Higher Costs, New Report Says

When it comes to greening up commercial buildings, it seems that making it as visible as possible to tenants is the norm, according to a new report by real estate financial services company Jones Lang LaSalle called Global Sustainability Perspective. It says most real estate companies have avoided making capital investments requiring financing, focusing instead on self-financed projects that can demonstrate a direct financial payback.

Even though there is more capital available for energy retrofits and renewable energy installations, real estate businesses tend to favor projects with a more moderate budget such as lighting retrofits and temperature controls as opposed to expensive HVAC upgrades that would save more energy in the long run but which are not as obvious to tenants.

“They need to know that every dollar they spend produces a financial return, not just in energy savings but also in terms of ROI and building value,” said Dan Probst, chairman of Energy and Sustainability Services at Jones Lang LaSalle. Companies tend to opt for projects with a more obvious financial return.

Another motivation for green upgrades is attracting more tenants, although not necessarily higher rents. The objective is to improve ROI and the value of the building. The report suggests that if owners analyze carefully the cost and financial payback of a whole-building energy retrofit, and take advantage of tax incentives, they may find more extensive retrofits make financial sense as well.

The report also includes articles on what cities can do to address sustainability and resource issues, the business case for LEED certification, renting performance in Shanghai, and the results of a sustainability performance survey of property companies.

There’s a strong environmental and financial case for the greening of commercial buildings. According to the U.S. Department of Energy, they account for 35 percent of the country’s electricity consumption – the figure goes up to 40 percent on a global scale. Commercial buildings account for almost 20 percent of all global carbon emissions. The potential to reduce emissions and costs is huge.

Follow the link to access the Global Sustainability Perspective report.

Image credit: Jones Lang Lasalle