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3 Reasons Why Commercial Real Estate Brokers Should Pay Attention to Green Building Trends

By Guest Author | October 28, 2019

Green building practices are becoming more and more common.

In fact, 57% of building owners plan to make the majority of their projects green by 2021, according to a SmartMarket report.

It’s a myth that these sustainability trends bring challenges for commercial real estate brokers. The public’s increased awareness of sustainability is growing the market for green buildings.

Considering recent trends, there are three key reasons why commercial real estate brokers should consider sustainability during their deals.

  1. Sustainability certifications influence buyer and seller decisions
  2. Corporate clients demand greener buildings
  3. Green buildings bring financial benefits to clients

CRE brokers who’re aware of these sustainability trends will be better equipped to navigate the changing market.

  1. Sustainability Certifications Influence Buyer and Seller Decisions

Tenants continue to prioritize green building features such as energy-efficient heating and air conditioning. In this climate, they look to verified certifications for indications of what’s sustainable.

The use of green building certifications continues to rise each year.

These certifications indicate water, energy, and waste efficiency of the building. They may also cover aspects like lot design, wellness benefits, and construction techniques.

The internationally recognized LEED (Leadership in Energy and Environmental Design) certification is the industry standard. It’s awarded based on detailed documentation rather than in-person testing.

Source: CalPolyPomona

LEED vows to provide a healthier indoor space, a higher resale value, and faster lease up rates. The buildings also use less energy, water, and other resources—a valuable selling point.

According to Deloitte, 79% of building owners expect green buildings to attract more tenants. It’s becoming more common to include a sustainability summary in commercial leases, and certifications are a desirable point to include.

Brokers should ensure they understand the benefits of earning a green certification so they can communicate its value to both parties.

  • Corporate Clients Demand Greener Buildings

Client demand is the primary reason sustainable building methods are used (35%), according to USGBC. Corporate clients, in particular, favor green buildings due to employee benefits and promotional value.

The Bank of America and Sprint are two of many corporations that occupy energy-efficient buildings.

Greening aspects of office space brings marketing advantages when it comes to recruiting employees and selling goods.

For example, Honest Tea’s office space in Bethesda, Maryland, was featured in the Washington Business Journal. They’re recognized as a Montgomery County Certified Green Business for the sustainability of their office space and operations.

Source: YScouts

Sustainable features of the office space include plants for improved air quality, natural light, used desks, and renewable bamboo floors.

When executives look for new office space, they know that consumers are willing to pay morefor goods produced by companies with sustainable practices. Also, prospective employees, especially millennials, are looking for an employer that aligns with their values.

Corporate stakeholders reference annual corporate sustainability reports for data on company practices. When executives occupy a green building, they can include the social and environmental benefits of their office in their yearly report.

Also, sustainable offices have positive effects on employee performance and retention. According to Green Biz, sustainable buildings lead to improved health and productivity.

In fact, a Harvard study found that cognitive scores of tenants in green buildings were61% higher than those in conventional environments.

Due to these factors, it’s no wonder that green buildings are a growing trend among leading corporations.

When you’re engaged in office space discussions with a corporate buyer, make sure you understand their perspective and priorities when it comes to sustainability.

  • Green Buildings Bring Financial Benefits to Clients

Green buildings can save costs for buyers and increase revenue for sellers. According to the World Green Building Council, the upfront costs of greening a LEED building will be offset by lower long-term costs.

In addition, Deloitte reports that the increase in environmental costs has been outpacing revenue growth for real estate investment trusts. These costs come from sources like air pollutants and water extraction.

Considering the costs of environmental damage, buildings that function in harmony with the natural environment will save money in the long-run.

For instance, buildings re-fitted with sustainable features offer cost-savingsdue to energy efficiency.

The Empire State Building is a remarkable example. It was retrofitted with sustainable features in 2011 such as demand control ventilation and a tenant energy management program.

Source: Empire State Building

The upgraded features were expected to result in $4.4 million in utility bill savings each year. In its first year, it surpassed those goals by 5%.

Rocky Mountain Institute reports that the refurbished Empire State Building, “established a commercial real estate model for reducing costs, maximizing return on investment, increasing real estate value, and protecting the environment.”

Corporate customers, in particular, will benefit financially from greener building features. According to a World Green Building Council report, the reduced energy costs of a greener corporate building may pale in comparison to savings from a productivity boost.

In addition to saving costs, green buildings are easier to sell at a higher price, according to Deloitte. They depreciate slowly and are more likely to meet the expectations of discerning buyers.

A University of California-Berkeley study found that certified green office buildings rented for 2% more than similar buildings in the area.

Your discussions with prospective buyers and sellers should include the potential cost-savings of occupying a green building or greening an existing one.

Offer Advice About Sustainable Building Practices to Your Clients

Sustainable building trends are only going to become more intertwined with commercial real estate. Brokers must be aware of the benefits buyers are seeking.

Clients, especially corporate ones, value green infrastructure. Sustainable design choices increase employee productivity and retention. Energy-efficient characteristics of green buildings also mitigate long-term costs.

The demand for green buildings will continue to grow, and brokers must stay updated on the latest practices so they can serve this growing market.

Nicole Schlabach is a Content & Editorial Associate for Clutch. She produces, processes, and conducts quality assurance for Clutch reviews content which help make platform the leading resource for B2B research, ratings, and reviews.

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