Corporate Green Real Estate Goes Fast

Although the housing market continues to fluctuate, the green corporate real estate market is expanding. With half of corporate real estate executives willing to pay more for "green" locations, the market for efficient and healthy workplaces continues to grow. Since real estate typically is around 20-50% of corporate assets, this has become a significant factor in decision-making. The top three factors for sector growth include: operational costs, employee health, and sustainability as a permanent tenant for corporations.

Operational Costs

Since space to operate is a necessary business expense for the majority of corporations, efficiency has been deemed highly profitable over the last five years. Eco-efficiencies, or improvements to a system that is both eco-friendly and highly efficient such as energy saving devices, have been the most popular investment. Since "green" went global, companies have been working to find investments that are both profitable and environmentally sound. By reducing energy inputs and increasing efficiency, corporations have seen large and important savings during the recession. The prospect of leasing a space with highly efficient systems has become not only attractive but a priority for a growing percentage of businesses. This increases the demand for LEED, BREAM, and other green building certifications in office complexes.

Employee Health

The atmosphere and safety of a workplace can increase employee productivity numbers dramatically. Many employers are looking to environmentally healthy workplaces with adequate natural lighting, ventilation, and limited furniture and paint off-gassing as a profitable investment in their workforce. It also communicates a higher level of concern for employee welfare, and helps create a safe and healthy workplace that may increase employee retention.

Sustainability Investment is Permanent for Corporations

Many corporations have shifted their view of sustainability from a Mega-Trend to a basic tenant of operations and strategy. With limits to growth becoming more evident through resource scarcity, climate change, and alarming falls in biodiversity, corporations are eager to get ahead of the game. By investing in sustainable workplaces, companies are able to "green" their operations on a new level. When reviewing their corporate portfolios, 88% consider green building certifications and 87% consider energy labels. This is a marked increase, and demonstrates the growth in corporate valuation of green investments.

In terms of real estate, executives are more interested in the greening of company-owned spaces than leasing already greened spaces. Understandable given the payback periods and publicity for greening efforts. Over half of the surveyed executives found 1-3 years as an appropriate payback period for energy efficiency measures in spaces they owned, longer payback periods had smaller amounts of interested executives. Nearly half of the executives were also willing to pay a 10% premium for green spaces, but little more than 10 percent.

So which factor was ranked important by 92% of the executives? Some form of sustainability criteria when choosing locations. Since sustainable office spaces lend themselves well to reducing operational costs, increasing employee health, and embracing as well as communicating sustainability as a key tenant for business, this market is expected to grow.

Poll conducted by Jonas Lang LaSalle and CoreNet Global. Additional information from Bob Willard and corporate real estate advisors.

Photo Credit: Dana Wheelock at Nilan Johnson Lewis Office