On the Path to Sustainability

10/26/2012 | By Donald Wood

Published in the July/August 2012 issue of REIT magazine.

As the stories in this issue of REIT report, REITs increasingly are incorporating environmentally sustainable practices into their business models.

For the past several years, NAREIT has encouraged this trend through its Leader in the Light awards competition, which recognizes NAREIT member companies that have implemented programs which have produced significant, ongoing improvements in energy savings. NAREIT’s decision to adopt the Global Real Estate Sustainability Benchmark as the platform for the Leader in the Light awards, which is discussed in this issue, will increase the value of the program as a tool to help REITs gauge the effectiveness of their sustainability efforts, since it will allow them to compare their achievements with a larger field of peer companies operating around the globe.

Environmentally friendly business practices in commercial real estate today are an important and growing global trend.

Sustainability increasingly is being recognized not just as good stewardship of the planet’s resources, but as a business strategy that can improve the bottom line.
Overall operating costs for Leadership in Energy and Environmental Design (LEED) certified buildings are 8 percent to 9 percent lower than those of conventional buildings. Over the lifecycle of a building, these savings can more than offset higher initial development costs. Lower operating costs also increase a building’s net income, in turn creating the basis for a higher valuation for the property.

Additionally, there is a growing body of evidence that indicates buildings based on environmentally sound technologies have a greater appeal to tenants, giving owners of sustainable buildings an edge in securing higher rents and maintaining higher occupancy rates in a competitive rental marketplace.

Triple net lease tenants have an obvious motivation to gravitate to energy-efficient, lower operating cost building space. However, many tenants show a preference for sustainable building design for other reasons, as well. Building systems that increase fresh air intake and make extensive use of natural light provide a more pleasant and comfortable work environment that promotes employee productivity and increases job satisfaction and employee retention.

Corporate social responsibility demonstrated by a commitment to sustainability is increasingly important to investors, as well – especially to institutional investors in countries where sustainable business practices have been the norm for many years. And for the Socially Responsible Investing segment, which is estimated to account for more than 10 percent of total assets invested in the U.S. and Europe, an environmentally responsible footprint is a prerequisite for investment.

From the perspectives of cost containment, tenant satisfaction and access to capital, green technologies today make very good sense. That is why a growing number of REITs are on the path to sustainability.

President & CEO,
Federal Realty Investment Trust


Other Features

A Changing Standard For REITs
With my term as NAREIT Chair beginning in November, I express my and NAREIT’s deep gratitude for the hard work of my predecessor, David Neithercut...
David Nethercut
The Ongoing Growth of REITs
One of the most significant realizations that I will take away from my tenure as NAREIT Chair is the significant, ongoing growth of the REIT approach...
Real Estate Companies are Investing in Green Technologies
The REIT industry committed long ago to the principles of sustainable building and operations. Real estate companies are investing in green...
REITs in the Public Eye
REITs in the public eye understand the rigorous discipline that investors expect from publicly traded real estate companies. Voluminous regulatory...
David Neithercut
REITs Are Well Suited to the Needs of Long-Term Investors
This issue of REIT magazine includes a roundtable discussion on REIT investment with the managers of some of last year’s top-performing real estate...
David Neithercut
Real Estate Re-Classified
As the REIT industry has grown and matured, it has had to deal with the misperception that Equity REITs generally are part and parcel of “Financials...
David Nethercut
The Long View
I’m honored to be taking over as NAREIT Chair at REITWorld 2014: NAREIT’s Annual Convention for All Things REIT. Thankfully, my predecessors,...
Ronald Havner, NAREIT Chair
International Reach
This edition of REIT magazine highlights the growth of the REIT approach to real estate investment across the globe. With the latest news from India...
Green Days Ahead for REITs
Sustainability is no longer a buzzword or niche in business. It is becoming a core aspect of corporate social responsibility and is increasingly...
Spotlighting Transparency
AS THE ARTICLE on “The Capital of Transparency” in this issue of REIT makes clear, transparency is entral to the REIT business model and the value...