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The Increased Importance of Environmental Sustainability In Real Estate

Laura - July 9, 2019

https://www.forbes.com/sites/forbesrealestatecouncil/2019/06/25/the-increased-importance-of-environmental-sustainability-in-real-estate/#4554be3837a1

POST WRITTEN BY Nathan Miller

Staying one step ahead in the uncertain and competitive real estate space can be a challenge. We started out the year with many experts predicting that sustainability would once again be a “trend” for 2019. This is not an “aha” moment for most of us: Green building and sustainability have been enduring trends in the industry for the past couple of decades. However, as the real estate space continues to transform, this topic takes on increasing importance as we look at overall societal, economic and cultural changes.
People want to go green.

Sustainability can no longer be considered a niche. In fact, consumers demand and expect it from most aspects of their lives. Even professional sports leagues, like the NFL, now have formal sustainability initiatives in place. According to a recent survey by Nielsen, 81% of consumers around the globe believe it is extremely or very important for companies to have environmental improvement as an objective.

Green building really kicked off in the early 1990s, reaching more widespread awareness about a decade later. It was long heralded as a special feature, something that was above and beyond the norm. Now, it has gone mainstream, and many expect a certain amount of sustainability in their homes and commercial buildings. Some governing bodies are even requiring resource-efficient measures to be in place.

According to the National Association of Homebuilders, homebuyers want — and will pay more for — sustainable features like energy-efficient appliances, windows and the like, alongside features that ensure better air quality. As younger generations are expected to enter the homebuying market, this socially conscious group is looking out for green features and sustainability that is built in.

What about real estate investors?

Investors who are looking to buy or upgrade rental properties can expect many of these same premises to ring true. The largest pool of tenants is likely coming from the younger generations — millennials and even Gen Z — who care about their carbon footprint. Properties can stand out from the crowd if they have features that highlight environmental consciousness.

Obviously, if an investor is exploring a new purchase, it is good to keep this fact in mind and look for a home that offers sustainable features. These features can be highlighted later when marketing the property, and can even help bring a premium when it comes to rental income.

If upgrading an existing rental property, some of the easiest things to do include:

• Ensure exterior windows and doors are caulked and insulated properly.

• Install energy-efficient appliances and HVAC.

• Paint the interior with eco-friendly paints with no VOC emissions.

• Maintain and insulate the water heater, and install a drain-water heat recovery system.

• Switch to energy-efficient lighting, such as LED light bulbs.

While these are just a few simple steps, property owners can even work on things like installing a solar system or re-insulating the home and getting it certified for energy efficiency.

Beyond sustainable property features, real estate investors should consider local environmental factors that will make a property more attractive as an investment and to future renters. Consider low-water landscaping, walkability and access to public transit, as well as community features like a garden, bike sharing and an on-site recycling program.

These are all things that can be used to market to tenants who are increasingly environmentally conscious and will appreciate the extra effort to reduce resource usage.

It’s the right thing to do.

The World Commission on Environment and Development has defined environmental sustainability as "a process of change in which the exploitation of resources, the direction of investments, the orientation of technological development and institutional change are all in harmony and enhance both current and future potential to meet human needs and aspirations." As fairly large consumers, the building and construction industries must be part of this “process of change.” Calls to curb resource usage and environmental impacts will continue to rise, especially as Gen Z hits adulthood in earnest. The real estate space will not be immune to their demands.

I expect that more investors, builders and real estate investors will continue to make green practices part of their business plan. A climate change report from last year said, “Real estate has been proactive on sustainability issues for many years. As a matter of self-interest as well as social responsibility, the industry is moving ahead to advance its sustainability performance regardless of the direction of national policy.”

Real estate professionals can prioritize sustainable property features to positively impact the environment and stand out to future investors, homeowners and renters. Homebuyers are willing to pay more for sustainable features, giving builders more incentive to include these options during planning and building. Sustainability will continue to be a major focus as younger generations enter the housing market, both as buyers and renters.