Article | Creating Resilience
The Role of Energy Saving in the Future of Real Estate
July 20, 2022
Until a few decades ago, energy saving was a minor concern for most businesses and related mostly to what happened on the bottom line. But since a series of climate conferences in the 1980s and ‘90s, the environment has emerged as one of the most pressing issues of our time. This puts energy saving in the unique position of being both the ‘right thing to do’ as well as an act of sound financial decision-making that makes businesses significantly more competitive.
Why is Energy Saving Relevant to Real Estate?
Energy saving (only possible thanks to efficient energy management) isn’t growing because companies have suddenly and magnanimously decided they want to contribute to a greener world; there are clear monetary advantages to pursuing such policies. For example, energy costs represent roughly 40% of the operating expenses for many office buildings—with healthcare and industry being among the biggest energy consumers—yet effective energy saving strategies can slash such expenses by 20%. Green building certificates are also of interest here. While certificates such as LEED or WELL don’t themselves save energy, their growing popularity has led to workplaces that are healthier and more environmentally friendly. Such buildings are invariably preferred by tenants, and mature real estate markets worldwide have shown that certified buildings achieve higher rents and experience lower vacancy levels, leading to immediate benefits for owners and tenants: it’s win-win.
All property owners want to lower their long-term costs and lengthen the life of their assets, but real estate doesn’t exist in a vacuum. All buildings are exposed to the physical effects of climate change to some degree, whether that be a greater risk of flooding or increased exposure to higher daily temperatures, and the result of this is often higher insurance premiums and operating costs. A company that reduces its carbon footprint will enjoy lower operating costs over the long term and energy saving that makes the building more attractive to tenants, resulting in higher rentals. Policies for energy saving and a more mindful energy management strategy also contribute to improved public image. We are living through the most information-rich age in history, and the public is more engaged than ever on topics like the environment and the responsibilities companies have to the planet we all share. A company with a reputation for energy saving not only gives it a stronger position in the market, it also makes it easier for that company to attract and retain talent, which in turn has a positive feedback effect: ethical energy management leads to better staff leads to better business performance.
What is The Future of Energy Management?
There are a number of areas property owners will want to focus on to maximize their energy management capabilities. The first of these relates to effective energy management and energy auditing. Companies like CBRE can assist businesses in developing energy and sustainability strategies in order to maximize the efficiency of their energy usage, as well as ensuring that buildings are environmentally friendly in terms of energy conservation, water resources, and the reduction of waste and carbon dioxide emissions.
Renewable energy is another major element of energy management, and any business that is serious about energy saving will need support when it comes to carbon reduction goals. We have heard a lot about the so-called New Normal since the emergence of COVID-19, but the new normal for real estate may well be net-zero carbon emissions—in the sense that an activity releases no carbon into the atmosphere. Such expectations have seen a boom in the use of green construction materials like recycled steel and precast concrete slabs.
Smart building technology is another relevant area. The fact is that the rental gap between best-in-class green buildings and increasingly obsolete ‘brown buildings’ is widening and there are growing demands from tenants (and the wider public) that businesses fulfill their environmental commitments. Designing, installing, managing, and integrating solutions that improve a building’s energy and sustainability performance are essential, and reveal how technology is at the heart of any successful drive toward meeting environmental goals. New technology also makes sustainability analytics possible; energy management and energy audits utilize raw data (for example from utility bills), converting it into actionable information with cutting edge tools to meet savings targets.
Lastly is the energy audit. These are mandatory by law and encompass areas like energy management and savings recommendations. They also necessitate the review and certifying of energy reports for DEDE submission using licensed energy engineers. Moving forward, regulatory requirements will continue to tighten so it pays to be prepared.
How to Take Your First Steps into Energy Saving
Businesses taking their first steps into energy saving should start by generating a road map which identifies environmental, social and governance (ESG) opportunities to increase efficiency. The next step will involve executing a road map plan by operationalizing the process improvements and initiatives. Finally, sound reporting means a business can align itself with industry benchmarks: Sustainability Benchmarking (GRESB), Global Reporting Initiative (GRI), ESG Acquisition Due Diligence, Green Lease Advisory, and Green Building Certifications (TREES, LEED, Green Mark).
To learn more or get started with sustainability solutions for your business, contact CBRE.