As workers continue to trickle back into the office, tenants are demanding more sustainable and energy efficient buildings. Because of this, property teams are reevaluating their current sustainability strategy. Many commercial real estate (CRE) teams are finding that buildings are presenting unacceptably poor environmental conditions, or they are simply lacking the proper equipment and systems to reach necessary levels of efficiency. Either way, establishing sustainability in commercial real estate buildings has proven to be no small feat.
A recent report, “The State of Commercial Real Estate Building Operations for 2023,” outlines the top sustainability insights for 2023 to help guide property teams in developing more energy efficient buildings. In this report, over 250 commercial property professionals answered questions about the state of CRE building operations.
Energy efficiency still a top goal
Sustainability continues to grow in importance for the CRE industry, especially as governments implement more green building mandates and tenants increase their demands for such properties.
Property teams surveyed in the “The State of Commercial Real Estate Building Operations for 2023” said they will prioritize energy efficiency/expense reduction in 2023 (61%). This result was perhaps not surprising given the fact that respondents noted energy management/sustainability as a top area for enhancing their tech stack. This followed a trend from last year’s report when energy efficiency was also the clear top choice (71%) for 2022.
Yet, comparing additional sustainability priorities for 2022 versus 2023 shows some shifts. Health and wellness, while still a priority in the top five, has fallen from No. 2 to No. 4 (tied with building planning and design). Meanwhile, pursuing green building certifications has risen in priority.
But that shift doesn’t necessarily point to something bad. “The best explanation is that we have done a really great job over the last 10 years, even five years, of responding to the changing expectations around health and wellness – whether it’s fitness centers, programs in buildings, healthy eating options,” said Randy Fink, Managing Director, Property & Asset Management, JLL, during a recent webinar, “What’s in Store for CRE Building Operations in 2023.”
“I wonder if we’ve hit a bar. We have finally arrived at a place where we are meeting expectations in many of our buildings,” he added.
New sustainability priorities in 2023
ESG reporting and the path to net zero/carbon neutrality have made their way onto the priority list for sustainability in commercial real estate in 2023, according to the report. Perhaps this isn’t surprising, given respondents’ focus on energy efficiency over the past couple years. And commercial buildings produce 40% of global carbon emissions, making the built environment one of the top global producers of carbon.
While the path to net zero might seem like a daunting task, it will create opportunities for CRE owners and operators. The CRE buildings market size – including construction, materials, equipment, and operations – could grow 38% by 2030, according to McKinsey.
On the path to net zero, McKinsey suggests that CRE professionals can create value by investing in next-generation technology, replacing equipment with low-emissions models, and improving energy efficiency. However, while there are some opportunities, some challenges also lie ahead when it comes to net zero buildings and ESG reporting.
“It’s not easy to measure your energy usage at the level of detail, the granularity you need, to manage it effectively. If you can measure your energy at the granular level, then the next challenge is, ‘How do you reduce it?’ It’s not easy. And then I need to report out to my tenants and to the government, which is also not easy to do,” said Tim Curran, Executive Managing Director, Property & Asset Management Technologies, Building Engines, during the webinar, “What’s in Store for CRE Building Operations in 2023.”
The bottom line is that whether your property’s path to net zero includes measuring energy usage or procuring clean energy, CRE teams need to establish concrete ways to meet sustainability goals.
“At the end of the day, no matter how much we’re able to reduce, we need to get clean energy into our buildings. We must have a way to procure,” Curran said.
Lean into technology to help meet sustainability goals
Over the past several years, commercial real estate technology has begun innovating the way property teams operate buildings. The pandemic forced the CRE industry to adapt to a new world. Intelligent buildings and automation are working to shape the future of CRE. That means owners and property managers need more information at their fingertips than ever before.
In the report, “The State of Commercial Real Estate Building Operations for 2023,” CRE property teams revealed what areas they would focus on as they enhance their tech stacks in 2023. Similar to last year, the research shows trends that suggest property teams are doubly focused on running better buildings in the year ahead.
These respondents noted their tech investment would be focused on several areas, including:
- Building operations and equipment maintenance (68%)
- Tenant experience (54%)
- Energy management/sustainability (49%)
With the top three goals so closely aligned and energy management/sustainability coming in at No. 3, other property teams may consider what their industry peers are investing in, including technology for sustainability.
Sustainability in commercial real estate
For the CRE industry, there is no choice but to face the current and future climate change-induced sustainability challenges. CRE sustainability rules and regulations continue to be a focus for the federal and local governments. Not only are these policies pushing property owners and operators to meet new sustainability requirements, but they’re also putting pressure on investors to back up their efforts to go green.
CRE leaders must begin to do things differently in their buildings. And tenant demands for more sustainability in commercial real estate, including creating healthier and more energy efficient workplaces, must also be met. The biggest takeaways for CRE property teams? Energy usage must decrease, and efficiency must improve.
Learn more valuable CRE insights for this year and download the full report, “The State of Commercial Real Estate Building Operations for 2023.”