Leaders in the commercial real estate industry have repeatedly advocated for the practical implementation of sustainability measures in their portfolios, going beyond mere societal expectations. The necessity of integrating these practices was once again highlighted at a recent virtual forum hosted by Commercial Observer, titled “The Cutting-Edge Innovations Transforming Business”.
The panellists at this forum discussed why they consider sustainability a sound financial decision and how they are scaling innovations not only to meet tenant demands but also to save costs in the long term. The event, moderated by Cathy Cunningham, Editor-in-Chief of Commercial Observer, began with a panel titled “From Policy to Portfolio Performance: How ESG Regulation is Reshaping Institutional Real Estate Investment”.
This initial panel, moderated by Chuck Hurchalla of Evolution Sustainability Group, featured Dana Schneider from Empire State Realty Trust, Jonathan Hong from Silverstein Properties, Sarah King from Kilroy Realty, and Cope Willis from Greystar. The central insight was that policy frameworks are inconsistent across different markets. Therefore, it is advisable to act proactively and invest in the latest technologies, which also tend to be the most sustainable.
Inconsistent Regulations and Proactive Planning
Dana Schneider emphasised that investments in these areas make sense, regardless of current compliance requirements. She pointed out that policies are inconsistent in most major cities in the USA and many cities abroad, even between the UK and the EU, and that a federal policy is particularly lacking in America. In the absence of clear regulation, the focus is on the life cycles of assets and key equipment, as well as on long-term planning.
The second panel, “The Real Value of Sustainability: The Importance of ESG in Sourcing Capital & Driving Asset Valuations”, was moderated by Elizabeth Redmond from R-Zero. Participants included Ben Myers from BXP, Scott Thomsen from LuxWall, Lisa Brylowski from Brookfield Real Estate, and Apaulo Malloy from KBS. It was highlighted that before capital can be allocated and the net benefit for a portfolio assessed, landlords should begin with the gradual introduction of new technologies – initially in one or two buildings.
Phased Introduction and Measurable Results
Apaulo Malloy explained that when introducing a new energy management system, it is not just about innovation, but also about considering a learning curve, and a reliable partner for implementation is essential. He preferred testing in two different building types: a high-performing building and an older, yet well-functioning property. This allows for certainty that the solution is suitable for all building types in between, thus creating broader acceptance.
Marc DeLuca from KBS concluded the event with a fireside chat, discussing how landlords should meaningfully begin their sustainability efforts. He advised against becoming overwhelmed and to start with targeted, measurable initiatives. Attempts to implement everything at once easily lead to overwhelm and failure. The data gained from such focused approaches is crucial and would create a clear track record of success.
- —Inconsistent policy frameworks necessitate proactive, technology-based investments.
- —Sustainability initiatives should initially be piloted on a small scale and in selected properties.
- —Measurable results from pilot projects foster acceptance and scalability of sustainability strategies.
