Good for the planet — and the real estate industry?

Climate change is the new reality, and building owners and developers that want to remain in business need to adapt. So says a recent Urban Land Institute (ULI) report that calls last year’s Paris agreement “a potential game changer” for the real estate industry.

The upside: what’s good for the planet is also good for business. Promoting denser urban fabrics, greater energy efficiency, and increased climate resilience can help building owners and developers stay ahead of the market.

Doggerel chatted with Sarene Marshall, executive director of ULI’s Center for Sustainability.

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Where did the idea for this report come from?

We were hearing from our membership at Urban Land Institute that they were interested in climate change and COP21. They thought it was an important topic for the real estate sector to know about but that it wasn’t being talked about.

What are you hoping to achieve with it?

I hope we’ll raise awareness within the sector that what might seem like a very remote and irrelevant conversation among government bureaucrats actually does pertain to business.

I assume that people in the industry worry that adapting buildings for climate change will mean losing profits or having to figure things out from scratch. Is it hard to convince them to act?

One of the very good pieces of news from last year is that for the first time we saw global GDP go up and global carbon emissions go down, which debunks the idea that addressing climate change will mean an economic contraction. A lot of that is because technology is advancing so rapidly and costs are coming down so fast.

Many people in the sector already know this. They’ve seen what happens when they address energy efficiency in a building: they have a more marketable building. They have a building that generates more revenue and tenants that stay longer or pay more or lease faster. They also have lower costs because they’re not spending so much on utilities and energy. It’s a win-win.

What might seem like a very remote and irrelevant conversation among government bureaucrats actually does pertain to business.

The report makes the case that this isn’t just about the right thing for companies to do, it’s inevitable.

Our main point in the report was the world is changing very fast, and if folks haven’t yet felt the pinch of regulations or of market expectations and changes, they will soon. Laws are changing; regulation is becoming more stringent. The market is demanding greater energy efficiency. Energy efficiency is going to be a default in the future. If you’re not prepared, your real estate investments are going to suffer.

I think that’s especially true if we see an economic slowdown. The buildings that are likely to retain their value are those at the high-quality, energy-efficient end.

How are developers going to have to change how they build? Is it just about buildings, or about the urban fabric as a whole?

Both. There’s an increasing recognition that how a building is built — how energy efficient it is, how much water and energy it uses, how much waste it generates — is important.

ULI Sarene Marshall

But there’s also increasing attention being paid to where it’s built. This is happening for two reasons. One, as climate impacts are increasingly felt, some places are just riskier to build in. We saw what happened to buildings in low-lying places like the Rockaways during Hurricane Sandy.

There’s also a recognition that you can build the greatest building in the world, but if you put it far from everybody who needs to get there, you’re still going to have a lot of carbon impact from transportation. You need to locate buildings close to transit, in denser patterns, so that people can walk and bike and take public transportation.

Is there one city, or one building even, that you look to as an example?

Lots of cities deserve credit for being very proactive on this front. Many have put in place energy-benchmarking policies — if you track your energy use you can begin to bring it down. Lots are providing incentives through their utilities and helping building owners make developments efficient.

In terms of buildings, ULI has the Greenprint Center for Building Performance. Greenprint members have been voluntarily tracking their energy performance and seeking to improve efficiency for the last six years, and they’re making great strides. Great work was done on the Empire State Building — it’s now one of the greener office buildings in the world. That building has also been a laboratory for addressing energy use in tenant spaces, an effort that now lives with ULI.

The great news is that those energy-efficiency investments are paying off with really attractive returns.

 

Questions or comments for Sarene Marshall or Peter Moskowitz? Contact sarene.marshall@uli.org or peter.moskowitz@gmail.com.

Read more about the Greenprint Center in our previous interview with Sarene.

 

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