Sustainable Investing In Real Estate En Vogue

Joshua Schroeder

green real estateThe economic crisis changed the real estate landscape in numerous ways. Traditional financing dried up, inventories spiked, prices cratered and the long held belief that property only appreciated was replaced by an ongoing skepticism about the true value of real estate. However, out of this depressed real estate market has grown a renewed focus on saving money. This, in addition to increased environmental awareness, has led to buildings and communities that are more sustainably designed, constructed, maintained and operated.

Energy usage and efficiency is one area that has become increasingly important to attracting and keeping tenants. “The better credit and best credit tenants globally prefer to be in a green building if not requiring it” states Brenna Walraven, managing director of USAA Real Estate. This is leading to property owners retrofitting existing properties with new HVAC systems, installing solar power and making other improvements to energy efficiency in order to remain competitive with new buildings that are often being built to higher standards such as LEED.

Developers are increasingly innovating and creating communities that consist of high performance buildings that conserve energy, reduce water consumption, improve indoor air quality and are made from more sustainable materials. “Whether people are trying to save the environment, or money, or both, the majority of building owners recognize the value of having green buildings that reduce expenses and contribute to the bottom line.” In fact green buildings and sustainable operations are increasingly evolving from a value added service to a basic requirement in order to compete.

real estate growth graphic 2014

source: www.Huffingtonpost.com

 

Brandywine REIT (BDN) has established green teams that implement sustainable initiatives such as introducing environmentally friendly cleaning supplies and creating LEED compliant landscaping. Other commercial property owners are also incorporating sustainability as a core business principle as consumer demand for health and well-being are increasing their desire for high quality indoor spaces. This demand for sustainable options also extends into commercial real estate finance where Regency Centers Corporation (REG), a shopping center REIT, recently completed the sale of $250 million of 10 year “green bonds”. This marked the first time that a US REIT has issued bonds that exclusively target investment in environmental sustainability projects.

While commercial real estate seems to be making the shift to environmental responsibility quicker than their residential counterparts, Delos Living is working to change the status quo. “As the pioneer of Wellness Real Estate, Delos Living is putting health, wellness and sustainability at the center of residential design and construction decisions.” By prioritizing human health and environmental responsibility developers like Delos are changing how homes are designed, what building materials are used and how much energy they consume. This new approach to residential development is in response to consumer trends that point to increased awareness of a home’s air, water and light quality and energy consumption. This is evidenced by some “forward looking homeowners greening their home for better resale value to increase their ROI.”

Whether we call it responsible, sustainable, or impact-based investing the trend of consumers integrating their values into their investment choices is here to stay. Investing ethically and profitably is no longer an oxymoron and it is driving significant change in the real estate landscape.

References:

  • REIT.com News: Energy Efficient Buildings Raise Tenant Demand, 7/26/2011
  • REIT.com News: Green Buildings Producing Satisfied Tenants & Investment Returns, 3/2/2011
  • REIT.com News: Sustainability Financing REIT Expanding into Commercial Sector, 1/15/2014
  • REIT.com News: Regency Centers Sells $250 Million of 10 Year Green Bonds, 5/16/2014
  • Green Real Estate Trends: Huffingtonpost.com/tara-campbell/green-real-estate-trends, 12/8/2014

 

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No position in any of the mentioned securities at the time of publication.  Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.

 

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