State of Play: The Sustainability Imperative: Practical Strategies for Office Buildings

October 2, 2024 | By: Brian Bollinger
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As property managers of office buildings, you’ve seen the industry shift in many directions over the years. Tenant expectations have evolved, regulations have tightened, and the pressure to maintain the value of your properties has only increased. Now, as sustainability becomes more central to both tenant demands and regulatory frameworks, it’s clear that our industry is facing another significant challenge. But with that challenge comes the opportunity to future-proof your buildings and stay competitive in a market that increasingly values environmental responsibility.

Staying Ahead of Regulatory Changes

Across the country, cities and states are rolling out new regulations aimed at reducing carbon emissions, increasing energy efficiency, and managing waste more effectively. I asked LEED Fellow Asa Posner of Sustainable Investment Group what they are seeing this year as advisors to an array of commercial properties, and he shared the following:

One trend we’re consistently navigating with our office clients is the roadmap towards decarbonization efforts. Certain markets where GHG emissions reduction laws are prevalent (NYC, Boston, SF, DC, Denver, etc.) are pushing building owners and operators to think more critically about how their buildings can operate without fossil fuels in more of a short-term mindset then they’ve previously needed to. We’re seeing this bleed into other markets, as well, as building electrification becomes a hot button topic. We’re also helping other office clients with the potential reality of adaptive reuse conversions, where they need to reevaluate the future of the office market entirely and what other potential uses their assets may hold.

Regulatory shifts are not new to property management, but, as Posner pointed out, the recent focus on sustainability adds a layer of complexity that requires more than passing attention.

For example, New York City’s Local Law 97 is setting a new benchmark for carbon emission reductions, applying stringent limits that will soon impact thousands of buildings, and come with massive annual fines for non-compliance. These regulations are being mirrored in other major markets, creating a regulatory landscape that demands proactive management. The goal isn’t just compliance—it’s about positioning your building as a leader in a market where sustainability is becoming a key differentiator for the highest quality tenants.

Energy Efficiency: Practical Steps for Immediate Impact

Energy efficiency has always been a cornerstone of building management, but today’s tools and technologies allow us to take this a step further. While upgrading HVAC systems and switching to LED lighting are still effective strategies, the integration of smart building systems and real-time energy management tools can lead to even greater efficiency gains. Building operations platforms like Aetos Imaging are beginning to leverage the plummeting cost of high quality 3D scanning to enable both training and facility management to happen faster and better than ever.

Another area seeing significant advancement is peak shaving through on-site battery storage. With the U.S. Department of Energy investing $2.2 billion to add 13 GW of grid capacity, including initiatives that support battery storage and peak shaving technologies, commercial properties are increasingly positioned to benefit from advancements in energy management​ (Energy-Storage.News). Once considered an expensive and futuristic option, battery systems are now being effectively used to manage peak demand charges and reduce overall energy costs. These systems work by storing energy during off-peak hours when electricity rates are lower and releasing it during peak times, effectively smoothing out energy consumption and easing the burden on the grid. But it’s not just savings that impact a property: the improved ENERGY STAR rating makes the property more attractive to sustainability-conscious tenants, offering an even more clear return on investment.

Waste Management: Moving Beyond Recycling

Waste management has evolved far beyond the days of simply providing recycling bins. Tenants, particularly those in sectors like tech and professional services, are demanding more comprehensive waste reduction programs that align with their corporate sustainability goals. This shift presents both challenges and opportunities for property managers.

Composting programs, for instance, are gaining traction as a way to significantly reduce the volume of waste sent to landfills. Implementing a full-building composting initiative can be complex, but the potential payoffs in tenant satisfaction and sustainability metrics are substantial.

Consider the experience of a property in Minneapolis I audited with my team at Waste2Zero in Minneapolis. By introducing a composting program, the building not only reduced its waste disposal costs but also attracted positive attention from their best tenants. They also were able to achieve a diversion rate of 75 percent with over 40 percent of all their waste being composted for a fraction of the cost of landfill hauling.

Water Conservation: An Often Overlooked Opportunity

While energy efficiency and waste management typically dominate sustainability discussions, water conservation is an equally important component that often receives less attention. In regions where water scarcity is a growing concern, the adoption of smart irrigation systems and greywater recycling can lead to significant cost savings and environmental benefits.

A project in Phoenix illustrates this well. A mid-rise office building installed a smart irrigation system that adjusts watering schedules based on real-time weather data and soil moisture levels. The result was a 25 percent reduction in water use within the first six months, with the system paying for itself in just over a year. These efforts not only conserved a valuable resource but also contributed to the building’s sustainability profile, making it more attractive to tenants and investors alike.

Certifications and Green Leasing: Aligning Interests

Achieving sustainability certifications like LEED, WELL, and ENERGY STAR is no longer just about earning a plaque to hang in the lobby. These certifications have become essential tools for differentiation in a market where tenants and investors are increasingly focused on environmental responsibility.

Green leasing is another strategy that’s gaining traction, paradoxically appealing to high quality tenants in a larger market straining for occupancy. By incorporating sustainability clauses into lease agreements, property managers can ensure that tenants and landlords are aligned in their sustainability efforts. This approach fosters a more collaborative environment and helps ensure that both parties are working toward shared goals. Jacob Ruppel, a long time Atlanta-area facility engineer with Portman Holdings observed, “We are in an interesting time. The narrative is shifting from facility engineers saying, ‘this is how we can save money’ to [sophisticated] tenants saying, ‘this is how you can save us money’ They’re part of the conversation and it trickles down from the top for them, to meet global initiatives they have.” He noted that whether it’s a company like Cisco or a local institution like Georgia Tech, tenant initiatives to achieve sustainability are driving the buildings to be operated greener and cleaner.

One building in Chicago implemented green leasing clauses requiring tenants to participate in energy audits and waste reduction programs. This not only enhanced the building’s overall sustainability performance but also strengthened the relationship between tenants and management. The tenants appreciated the building’s commitment to sustainability, and it became a key selling point during lease renewals.

The Human-Centric Approach: Where Sustainability Meets Tenant Satisfaction

While sustainability is often discussed in terms of energy and resource efficiency, it’s also about creating environments that enhance the well-being of the people who use them. Tenants are increasingly looking for spaces that go beyond the basics of comfort and convenience, seeking environments that promote health, well-being, and productivity.

Indoor air quality, natural lighting, and biophilic design are becoming more important as tenants prioritize these factors in their leasing decisions. As property managers, we have an opportunity to lead by example. By integrating these human-centric design principles into our sustainability efforts, we can create buildings that are not only environmentally responsible but also places where people want to work and thrive.

A WELL-certified building, for example, could attract tenants who value a workplace that supports their health and well-being. WELL-certified office buildings consistently demonstrate better indoor air quality, often achieving pollutant levels that are 25 percent lower than those found in the average American home, thanks to stringent standards for air filtration, ventilation, and material selection​ (delos)​ (resources.wellcertified). This improvement in air quality not only supports tenant health but also contributes to higher satisfaction and productivity levels. The certification process requires attention to details like air quality, water quality, lighting, and overall occupant comfort—factors that are increasingly influencing tenant decisions.

Looking Ahead: Preparing for Future Trends

The sustainability landscape is constantly evolving, and staying ahead of the curve requires a forward-thinking approach. Emerging trends like carbon capture, renewable energy integration, and advanced building materials are poised to reshape the market in the coming years.

For property managers, the key to success lies in staying informed and adaptable. By embracing these innovations and integrating them into our buildings, we can not only meet regulatory requirements but also create properties that are future-proof and attractive to a new generation of tenants. As my friend, and LEED Fellow, Charlie Cichetti, host of the Green Building Matters Podcast, puts it, “Buildings that are designed with future sustainability trends in mind will be the ones that stand the test of time. It’s not just about meeting today’s standards—it’s about anticipating tomorrow’s needs.”

Conclusion: Embracing Sustainability as a Strategic Advantage

The path to sustainability is filled with challenges, but the rewards are undeniable. As the demand for environmentally responsible buildings continues to grow, those who embrace sustainability as a core component of their operations will be well-positioned to succeed in a competitive market. For commercial buildings owners and managers, the opportunity is clear: lead the charge on sustainability, and your building will not only stand out but thrive in the years to come. The future is green—let’s make sure we’re ready for it.

References
Carolyn Swope. (n.d.). What is the ROI for Office Indoor Air Quality Improvements?. Delos. https://delos.com/blog/what-is-the-roi-for-office-indoor-air-quality-improvements/
Jacobo, J. T. (2024, August 7). US DOE invests US$2.2 billion to add 13gw of grid capacity. PV Tech. https://www.pv-tech.org/us-doe-invests-us2-2-billion-to-add-13gw-of-grid-capacity/
WELL @ Work: The benefits of a WELL Certified office. International Well Building Institute. (n.d.). https://resources.wellcertified.com/articles/well-work-the-benefits-of-a-well-certified-office/

 

Interested in learning about the state of play of the CRE industry? Read the full State of Play publication with this link. The publication features articles on the State of The Medical Office World; the Reality of Cyber Threats and Your Liability: Cybersecurity Outlook for CRE; Looking Ahead to CRE’s Next Normal; The Sustainability Imperative: Practical Strategies for Office Buildings; and Elements of Economic Development.

Interested in learning about the state of play of the CRE industry? Learn more about the state of the Industrial Real Estate Market with this video. And learn more about the state of the overall State of the CRE Market with this video.

 

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