see more socially conscious funds be another push factor withincommercial real estate,” he says.
Still, Gutter says investors are increasingly looking to the ESG
performance of organizations. “REITs are under a tremendous
amount of pressure to prove they are shooting for that triple bot-
tom line and that comes through ESG ratings and rankings,” she
says. “The most important one for real estate is GRESB.”
GRESB, which stands for the Global Real Estate Sustainability
Benchmark, is the ESG benchmark for real assets. It validates
scores and benchmarks ESG performance data, providing busi-
ness intelligence and engagement tools to investors and man-
agers. “Businesses at large, especially publicly traded compa-
nies, are looking for all the different ways in which they can
max out their ESG performance,” Gutter says. “They are look-
ing to be at the top of the scoreboard when it comes to GRESB
The healthy building movement picked up a large win in 2019
when it was incorporated into the GRSBE. “Now part of your per-
formance according to GRESB and part of the benchmarking to
your peers is based on your commitment to health and wellbeing
practices,” Gutter says.
Besides feeding into GRESBE, the certifications themselvescan show a building is sustainable or provides a healthy occupantexperience.
“Green building and healthy building certifications are so critical because they provide validation that an organization has actually done what they said,” Gutter says.
Hatcher agrees. “Self-approving sustainability just doesn’t go asfar in the investor world,” she says.
But the benefits of these certifications can extend beyond the
investor class. “Green certifications make more sense than ever as
consumers are more aware and conscious of these products,”
Fanning. “The third-party validation is necessary as it is not enough
to say, ‘designed to’ or ‘built to’ a certain standard without the
assurance of the certification.”
Baker agrees. “It is really important to people just for market-
ability of having a third-party certification,” she says.
But in some markets, like Chicago, where a large amount ofoffice is green certified, it’s hard to distinguish one green buildingfrom another.
“You need to do other things to attract these tenants,” Levy says.
“Some of them [building owners] are adding other green features
such as green building materials, green space and other environ-
mentally conscious things that are beyond those standards.”
Still there are some energy efficient features that the certifica-
tions don’t reward. For instance, in apartments, smaller, more effi-
cient units can offer tremendous energy benefits, according to
Levy. In offices, he says open floor plans allow for greater densifica-
tion and less square footage for the average person.
“Having more efficient use of space is actually greener than having a larger, more inefficient units in the building because it is amore efficient use of resources,” Levy says. “But the challenge withthat is that’s not the type of thing that will get you ranked in someof the traditional LEED or Energy Star metrics.”
A DIFFICULT EQUATION
Hatcher fully admits she is a nerd when it comes to sustainability
and green building products. Right now, she’s immersed herself in
the new options for residential ventilation systems that help
improve air quality by introducing outside air and accommodating
higher grade air filters.
“Indoor air quality is something that we talk to residents
about and we get a lot of interest in,” she says. “If they have
allergies or other concerns or sensitives, it’s something that
they can directly benefit from.”
AMLI focuses on designing this technology into new build-
ings. “If you were to retrofit a property, it would be very costly
to do that, but possible” Hatcher says.
While incorporating green features in new constructioncan be done seamlessly throughout the construction, retrofitsare more challenging because upgrading larger systems, suchas glazing and facades, are still expensive. Not only doesinstalling green features require a financial investment in abuilding that is already collecting rents, but it can also be anuisance for current residents.
Still, there are reasons to make the investment. Going
green can increase the property value of an old office building
by up to $800,000, according to a new report released by the
Urban Land Institute
“Energy efficiency continues to be the easiest and most cost-
effective way to reduce a building’s utility bills and greenhouse
gas emissions,” says Lauren Hodges, director of communica-
tions at Energy Star for Commercial Buildings & Industrial
Plants at the US Environmental Protection Agency. “By start-
ing with low-and no-cost measures, buildings can reinvest their
savings into larger capital upgrades.”
AMLI has found there are marketing benefits to large-scale
renovations with LED lighting, WaterSense plumbing fixtures
and Energy Star certified appliances that incorporate sustain-
“These features have pretty quick impacts both from a marketing and utility savings standpoint.” Hatcher says.
Most building owners start their upgrades of existing buildings with items such as lighting, smart home devices and boilers. “LED retrofits have increased in popularity and have beenshown to reduce lighting energy use in some buildings by asmuch as 60%,” Hodges says.
Sensors are another product that can work well in existing buildings. In fact, sensors have gotten so inexpensive that consumers canbuy them online for less than $100. More advanced sensors not onlyhave the potential to locate leaks and excessive energy use, but alsolet operators remain in real-time dialogue with buildings to ensurethat air quality is good, among other things, according to Gutter.
“There are also sensors that detect when water is aroundand shut off the water supply to prevent flooding from happening,” Gutter says.
Hardly a new trend, improving lighting remains a way toreduce energy consumption “Switching out all of the lightingand having automatic controls on your lights too, so that whenpeople move from a space the lights automatically turn off, canprovide major benefits,” Baker says.
The good news is the return on costs of these upgrades hasimproved, according to Baker. “The technology is advancing andwhen that happens, prices come down,” she says. “I actually thinkthat the ROI is a lot quicker now than it may have been five or 10years ago.” ◆