Study: REITs Raising Investment in Sustainability, Growing Returns

REITs’ investments in sustainability keep rising, as do their returns on those investments, according to research on NAREIT’s Leader in the Light (LITL) program.

A study of data from LITL found that participating companies increased their total investment in energy efficient projects by roughly 30 percent over their three-year moving average from 2011 to 2013. The study, which was conducted by RealFoundations, also determined that savings in 2014 from sustainability projects nearly doubled the previous three-year moving average. A similar comparison found that return on investment for those projects was up approximately 40 percent—a 54 percent increase when compared with the ROI of 26 percent for projects between 2011 and 2013.

In terms of where sustainability dollars are being invested, the RealFoundations study revealed that more than half of all investment in 2014 was directed to heating, ventilation and air conditioning (HVAC). Previously, lighting-related projects had attracted the greatest share of investment.

“This data, in conjunction with the positive trend in project ROIs, suggests that 2014 Leader in the Light respondents are continuing to strategically target investments with the intent of maximizing returns,” RealFoundations stated in the report. “HVAC systems consume a lot of energy to maintain the required comfort conditions in a building, so targeting HVAC is a tactical approach to increasing savings across a building or portfolio of buildings.”

Based on its findings, RealFoundations concluded that LITL participants are still accruing benefits from investment in green technologies.

“Following the trends seen in the past, it appears that real estate organizations are becoming more focused when it comes to energy management, making smarter investments in energy efficiency projects in order to maximize their returns over the life-cycle of the project or equipment,” the report stated.

“The industry should be proud of its accomplishments,” said Alok Singh, director of energy solutions at RealFoundations. “This is the second year we have analyzed Leader in the Light Award entries, and the results are stellar. It’s clear that improving sustainability performance at scale is becoming more of a norm than exception in the real estate industry.”

Sheldon Groner, NAREIT’s executive vice president of finance and operations, echoed RealFoundations’ sentiments.

“Kudos to RealFoundations for conducting this insightful analysis,” said Groner, who oversees the LITL program for NAREIT. “The results clearly demonstrate the progress we have made in all things sustainability as an industry, and I look forward to a similar upward trend moving forward.”

CLICK HERE to read RealFoundations’ report in its entirety.