(Chicago) – October 13, 2016 – A little more than a decade after “green” and “sustainable” became vernacular in the commercial real estate industry, investors are finding opportunities for enhanced risk-adjusted financial returns when energy-efficient, sustainable buildings are added to their portfolios. This was the consensus of a panel of experts who spoke last week at The Counselors of Real Estate’s 2016 annual convention in Washington, D.C. The invitation-only professional association attracts best-in-class property advisors from around the world to its annual meeting, which presents updates and trends about issues of critical importance to real estate.
Dan Winters, CRE, head of North America for GSREB, moderated the panel. Speakers included Cliff Majersik, executive director, Institute for Market Transformation (IMT); Chrissa Pagitsas, director, green financing, Fannie Mae Multifamily; and David Pogue, global director of corporate responsibility, CBRE.
Mr. Majersik said that when buildings are built or retrofitted to high sustainability standards, both owners and investors can financially benefit. Mr. Pogue agreed, explaining that real estate investment value can be influenced by multiple environmental, social and governance (ESG) factors. “In 1999, the first Energy Star label for energy efficiency was awarded to a building in St. Louis,” he said, marking the beginning of formal “green” status as a differentiator.
Since then, panelists said the trend line has moved steadily upward, demonstrated by the CBRE Green Building Adoption Index as building owners and managers find financial rewards in pursuing green building certifications such as LEED and Energy Star. They said consistent strides have been made in energy and water efficiency — key indicators of high performance – and buildings built and operated to be greener are typically cleaner and healthier, which can positively affect employee productivity and morale. These and other benefits continue to fuel interest in this investment category.
“I have yet to see a multifamily property built before 2005 that is unable to hit a 20 percent reduction in annual energy and water usage,” Ms. Pagitsas stated. She explained that Fannie Mae multifamily green mortgage loans, sold as Green Mortgage Backed Securities, have reached the $1.4 billion level in year-to-date volume through August.
Sustainable buildings impact the triple bottom line according to Ms. Pagitsas through environmental, social and financial factors:
• Environmental–-lower use of energy, water and other natural resources that are important to communities; green buildings tend to have features enabling a greater resilience to natural disasters.
• Social–-healthier overall environments, built from higher quality, durable
materials; lower cost of utilities result in greater affordability for all renters, including families and seniors.
• Financial–-lower credit risk, higher cash flow and higher property values.
“What also matters is whether or not these green buildings make people perform better,” Mr. Pogue noted. He says they do.
Mr. Winters said the number of commercial buildings that are LEED certified–indicating resource efficiency–exceeds 33,000 globally and is approaching five billion square feet. Such certifications are important to investors as they assess transparency, opportunity and risk in selecting investment properties.
The Counselors’ organization is known for providing objective, balanced perspectives on critical issues affecting commercial and residential real estate.
The Counselors of Real Estate®, established in 1953, is an international group of high profile professionals including members of prominent real estate, financial, legal and accounting firms as well as leaders of government and academia who provide expert, objective advice on complex real property situations and land-related matters. Membership is selective, extended by invitation only. The organization’s CRE® (Counselor of Real Estate) credential is granted to all members in recognition of superior problem solving ability in various areas of real estate counseling. Only 1,100 people in the world hold the CRE credential. For more information, contact The Counselors of Real Estate, 430 N. Michigan Avenue, Chicago, IL 60611; 312/329.8430; www.cre.org.