How Sustainability Helps in Enhancing Property Values
By Michael Lanning | National Real Estate Investor
There was a time when we spoke of green buildings, and it was a conversation focused in large part on the building envelope. Over the years, that conversation has advanced; in a sense it has been turned inside out. Today we speak of high-performance buildings measured by their degree of sustainability and their ability to maintain and enhance the comfort, health and productivity of those occupying the space.
In this ever-advancing field, the ongoing education of property and asset managers is key. As IREM stated in last year’s “Building Performance That Pays,” a report on the Institute’s first Energy Efficiency Survey, “The on-the-ground activities that contribute to building energy efficiency put property managers in an ideal position to impact operational efficiency, in conjunction with their teams and in cooperation with tenants.”
There are multiple goals in the practice of sustainability. As we have said, there is the professional and personal well-being of the tenants. This, in turn, supports long-term occupancy and for commercial buildings in particular, the ability of corporate occupiers to hire and maintain employees. This leads to the ultimate goal of the asset and property manager: value enhancement.
We are seeing the industry respond to that multifaceted outcome. First, more and more practitioners are investigating our educational offerings to enhance their understanding of the issues involved with sustainability. In addition, the number of properties that have achieved their IREM Sustainable Property Certification continues to grow. (The Institute also hit a major milestone this year. We are proud that IREM has earned the U.S. Environmental Protection Agency’s 2017 ENERGY STAR Partner of the Year Award.)
Recently in this space I wrote about the intricate and subtle relationship between asset and property managers. Both disciplines have indeed been early adopters of sustainable best practices. Asset managers are being driven by their portfolio managers and shareholders to drive value for assets in their portfolios. They recognize that to stay competitive and increase the value of the assets, sustainability needs to be near the top of their to-do list.
That cannot be done without the presence of property managers to provide the building analytics that support sustainability initiatives. As Sara Neff, Kilroy Realty’s senior vice president of sustainability, stated in the Building Performance report, “Property managers are a great group to do these analyses. They understand the full benefits of a project because they know their buildings so well.” Indeed, asset managers look to property managers to create a baseline of sustainable property operations and management.
In most cases the asset managers set goals for resources and cost reductions and task the property managers to meet those goals.
Of course, there are many variables in this scenario. Different buildings demand different solutions to the sustainability question. Not every asset needs to perform like a trophy tower in Midtown Manhattan.
Then there are the mindset and capital considerations of ownership. Obviously, if the owner supports the program, it will be easier for the asset manager to implement those processes. If they do not, the on-site manager simply cannot make those upgrades.
Also, smaller shops might find it hard to develop that in-house understanding because of restraints in time, manpower and focus. But sustainability is a critical expertise, no less than the need for HVAC or roofing expertise. If that knowledge does not exist in-house, that’s when you have to look to an outside contractor to provide it. One way or another, today every management concern needs a sustainability expert as part of the team.
Whatever the needs of the building, whatever the mindset of ownership, whatever the business restraints, the marching orders remain the same. All property managers today need to be knowledgeable about best practices and the products and services available to them that will best fill their shared goal of value-enhancement.
Michael T. Lanning is 2017 president of IREM. In addition, he serves as senior vice president and city leader for the Cushman & Wakefield, AMO, office in Kansas City, Mo.