REITs Generating Better Returns from Going Green

Alok Singh

In the latest episode of the NAREIT Podcast, Alok Singh, director for energy solutions with RealFoundations, discussed the results of research into real estate companies’ sustainability platforms.

A study of data from NAREIT’s Leader in the Light (LITL) program released this month by RealFoundations found that REITs’ investments in sustainability keep rising—along with their returns from those investments.

Singh said he took the survey’s high response rate as a “very positive sign.” Regarding the survey data, Singh singled out the increasing size of sustainability projects as one of the most important takeaways. He also noted that the return on investment of projects last year increased from 29 percent to 40 percent.

“The trends are very positive,” Singh said. “When you think about any kind of capital allocation exercise, it’s very hard to believe that a CFO or any organization won’t go after projects generating 40 percent ROI.”

Comparing the data sets from 2014 with the previous three years, “all the trends are moving upward,” according to Singh.

In describing the mindset of the real estate industry toward sustainability, Singh said companies are sticking with a “measured” approach. Rather than making widespread changes, companies remain focused on enhancing the sustainability at the asset level. That process, however, is being accelerated based on the demands of investors.

“When you think about sustainability and what has happened over the last few years, there are many types of stakeholders who are asking for action on this front,” he said.

Whereas companies had previously emphasized harvesting the low-hanging fruit, those opportunities are dwindling, according to Singh. Consequently, firms are looking deeper for solutions, he said.

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