Real Estate Sustainability a "Serious Topic" for Major Investors, Consultant Says

David Stanford, founder and executive managing director of professional services firm RealFoundations, joined REIT.com for a video interview at NAREIT’s 2015 Leader in the Light Working Forum in Reston, Va.

RealFoundations is a Dallas-based management consultancy firm that specializes in the commercial real estate sector.

Stanford discussed the changes he has seen in the development of sustainability during the last few years.

About five years ago, he noted, sustainability was still a “very nascent thing.” However, the development of the Global Real Estate Sustainability Benchmark (GRESB) and growth of interest from institutional investors have changed the landscape.

“It’s become a serious topic, and it has the weight of capital behind it. I think that’s the biggest push,” Stanford noted.

Stanford also commented on whether sustainability activity and reporting has become a major differentiator in the commercial real estate market.

“We do see some separation, certainly in the retail world, where some are certainly stronger than others, but across the board it’s still a little bit hard to tell the outperformers versus the ones that are just trying,” he said. Stanford stressed that GRESB does help by highlighting corporate sustainability outperformance.

Companies that are struggling, according to Stanford, are facing challenges in obtaining data as well as coping with a variety of reporting standards.

“It’s a new world," he observed. "It’s tough.”

Meanwhile, Stanford discussed trends in financing sustainability projects. He noted that socially responsible investors represent between $5 trillion and $15 trillion of capital, which is “significantly underinvested in real estate.” Stanford added that while these investors understand fixed income, “they’ve had a hard time picking and choosing how to deploy capital in real estate.”

During the last 18 months, however, that has started to change, he said. Interest in green bonds, for instance, has started to emerge, according to Stanford. “There’s a significant amount of interest in the investment community and the REIT community to be able to tap into that market,” he noted.