8 Sustainability Trends Driving Commercial Real Estate for Earth Day 2022
Over half a century ago, the United States inaugurated a special day, April 22, as Earth Day. As we prepare to commemorate the global phenomenon, The Robert Weiler Company is excited to announce that the green movement is alive and well in the commercial real estate industry.
What began in 1970 as a localized, American movement, is now celebrated by 197 countries. The goal is simple but profound: raise awareness regarding humanity’s impact on the global climate and how, collectively, we can affect positive change. Commercial real estate developers are ensuring that the goal of Earth Day is being met, as evidenced by widespread initiatives in green design and sustainable building.
World Green Building Trends 2021, a thought-provoking annual report of the efforts to build green, revealed that sustainability initiatives have skyrocketed in recent years by more than 60 percent with 28 percent currently increasing green building efforts in their projects and 42 percent who plan to do so in the near future. Even more impressive is that 19 additional countries adopted these initiatives in recent years, making an even greater global impact.
With such encouraging news leading up to this important annual day, The Robert Weiler Company has taken this opportunity to highlight current trends in commercial real estate sustainability. To be clear, some of these developments have been gaining momentum for decades. But if the latest dire climate change warnings from scientists the world over are any indication, the time for enhanced action is now.
Benefits of Green Building in Commercial Real Estate
The aforementioned World Green Building Trends 2021 report also showed compelling business cases for building green:
- New green buildings brought an average of 10.5% reduction in operating costs in the first year and a 16.9% savings over five years.
- Upgrades to existing buildings brought an even bigger reduction in operating costs globally, with green renovations at 11.5% and retrofits at 17%.
- Construction of new green buildings and green renovation or retrofit projects increase the asset value of buildings by upwards of 9%.
- Improved quality of life for occupants, such as health and well-being is one of the most important drivers.
- Encouraging sustainable business practices among occupants is also another important driver.
- Reaching net-zero/net-positive energy targets for buildings to control embodied carbon.
Watch for These 8 Sustainability Trends in Commercial Real Estate
Sustainable, responsible, and impact investing (SRI) is a powerful investment discipline that considers environmental, social, and corporate governance (ESG) criteria when making commercial real estate investment decisions. Socially conscious investors use these standards to produce long-term competitive financial returns and a positive impact on society. According to a January 2022 Bloomberg Intelligence (BI) report, the total assets managed under the umbrella of values-based, socially responsible, and impact investing had grown from $22.8 trillion in 2016 to $30.6 trillion in 2018, then surpassed $35 trillion in 2020. And now, BI predicts that global ESG assets under management may exceed $41 trillion this year (2022) and climb to $50 trillion by 2025. This trend isn’t expected to slow, with companies, commercial real estate development projects, and central banks leading the assets. The rise of ESG assets is said to have been a perfect storm generated by the pandemic and the green recovery efforts in the U.S. Pressure is increasingly placed on companies, developers, and governments to increase their efforts to build a more sustainable future.
The reports we’ve cited above tell us that the commitment to increase green building efforts continues to strengthen. Building owners, commercial real estate investors, architects, engineers, and contractors plan to boost their green building strategies and use more green building products and systems. We’re expected to see growth in the use of green products in the areas of electrical, mechanical, building automation systems, thermal and moisture protection, construction waste management, and building materials (flooring and mass timber structural systems), as well as finishes and furnishings. The top reasons for increasing green building efforts are lower operating costs, environmental regulations, healthier buildings for occupant wellness, and simply the right thing to do. With these factors framing the conversation, below are the eight key trends defining the new age of sustainability:
1.) Building Automation System (BAS)
Implementing a computerized building automation system (BAS) that monitors and controls major systems in your building can have a big impact on energy savings. A BAS can also help you make decisions with regard to changes in the building’s operations and other energy-reduction investments. Some systems a BAS can handle are heating, cooling, ventilation, and lighting. Be sure to test and repair or replace your BAS regularly to ensure all components are running smoothly.
2.) Thermal and Moisture Protection
Thermal and Moisture Protection refers to the materials used to seal the exterior of a building to prevent moisture, thermal, and air penetration. The material and how it’s installed are critical to the construction of a building and to ensure a tight building envelope. Some examples of thermal and moisture protection include waterproofing, dampproofing, vapor retarders, air retarders, fireproofing, as well as insulation and joint sealers.
Thermal and Moisture Protection provides a barrier inside a wall, ceiling, or flooring. The results include increased energy savings, in addition to moisture control, reduced noise, climate control, and fire protection.
3.) Waste Management
A new construction project always results in a lot of waste. For your next building project, divert a large portion of waste from landfills or incinerators by reducing total construction waste generation and reusing or recycling debris. Research the most responsible disposal method for each type of waste. Composting and standard recycling (glass, metals, plastics, paper, and cardboard) can make a big dent in the volume of waste discarded.
What types of building waste can be recycled or reused?
Construction and demolition (C&D) materials amount to a significant amount of waste in the United States. These C&D materials can be diverted from disposal and reused, recycled, or repurchased and given new productive uses. Examples of C&D materials are:
- Salvaged building materials (e.g., windows, doors, and plumbing parts)
- Natural debris from clearing sites (e.g., trees, stumps, and rocks)
4.) Space Design and Integration
When you think of “green” design, you may not consider the layout or function of the interior building space. But, companies are seeking innovative ways to drive productivity via their workspaces. Ultimately, companies believe that the optimized use of office space will increase employee engagement in meeting organizational objectives and drive higher revenue. It’s why the demand for mixed-use property for sale has become so popular, as a live-work-play hybrid.
Builders and commercial real estate investors must plan for and create flexible spaces that will include sit/stand workstations, lounge-like waiting areas, and active meeting rooms to accommodate this new corporate, co-working dynamic. Ceiling height, room dimensions, furniture, and other facilities must be adaptable and remain in multi-purpose mode.
The flex space approach has helped produce a surge in mixed-use buildings, which is currently an attractive investment for those in the commercial real estate space. As such, builders need to prepare areas for load-sharing opportunities and gain an enhanced awareness of how people are working, living, and playing together within structural environments.
The demand for employee wellness — as it applies to different work environments — has permeated into almost every work culture across a broad spectrum of industries. The greatest challenge to assessing, implementing, and investing in wellness initiatives is cost. As such, building design can have a significant impact on creating wellness-friendly environments. Wellness concepts are initiated during sustainable building projects through the following examples:
- Proper ventilation and moisture control
- Optimal acoustic performance
- Maximum natural lighting
- Minimal use of materials with volatile organic compounds
Advocates of wellness environments see these elements as critical to employee productivity and health. From an Earth Day perspective, there’s an implied ripple effect, where happy, healthy, employees surrounded by a greener, cleaner working space positively impact the natural environment. Moisture controls reduce bacterial growth, limiting infections and the secondary carbon footprint of having to drive to a doctor. Improved acoustic properties also reduce potential medical intervention, whereas natural lighting reduces energy usage.
Resilience is a property’s ability to rebound after an anticipated disaster. And, with all of the destructive storms in recent history, climate resilience has taken a foothold in commercial real estate development. Building developers have pushed the resilience methodology one step further by using a disaster as a way to improve a building’s performance during restoration. From a commercial real estate investment standpoint, the concept strengthens the property from a storm’s impact, while significantly reducing maintenance work in the future.
So, what is the practical implementation of climate resilience? Builders evaluate a variety of factors when planning for a resilient property. Can local materials be sourced? Are labor resources nearby to decrease time in fixing critical issues?
Also, since more durable materials are necessary to combat potential storm damage, builders look for other ways to reduce project costs, whether it means using less (fossil) fuel-based machines or integrating renewable energy alternatives. Not surprisingly, companies are already investing about $1 trillion annually in climate resiliency and climate change by purchasing more eco-friendly properties.
Investments that address climate change by helping companies adapt and prepare for climate impacts are good for business and will pay dividends over time. They also help reduce costs and potential losses by making companies more resilient to environmental risks. Keep in mind that these investments can finance buildings as well as manufacturing, water, agriculture, waste management, and pollution control.
7.) Solar Energy
Solar power investments have quintupled over the last five years. Why? Property owners, lawmakers, and other entities are continuing to create more momentum for solar power as it becomes more affordable to buy and less expensive to generate.
Leading corporations, along with over 180 American cities in eight states, commit to transitioning their communities to 100% clean, renewable energy including solar energy. The United States Energy Information Administration (EIA) released its Annual Energy Outlook 2022 report, which shows promising data on renewable energy. The U.S. power generation share of renewables will increase from 21% to 44% from 2022 to 2050. This spike in renewables primarily consists of new solar power and wind power. Fossil fuels are expected to decrease from 60% to 44%. EIA also projects that solar power will account for almost 50% of new electric generating capacity throughout the U.S. in 2022. And utility-scale solar generating capacity in the U.S. will grow by 21.5 GW in 2022. This expectation would exceed the 15.5 GW of solar capacity additions we saw last year. Solar energy installations are going to continue growing astronomically year over year; thus, making it a more viable investment for commercial real estate developers.
As a whole, the EIA January 2022 monthly inventory of electricity generators showed that developers and power plant owners expect 46.1 GW of new electricity generating capacity to start commercial operation in 2022 — which is now already underway. Solar will make up the greatest share of new capacity (almost 50%), followed by natural gas (21%) and wind (17%).
With commercial buildings and industrial facilities accounting for roughly 40% of energy use in the U.S., it’s hard not to overlook their impact on the environment, the economy, and society at large. However, environmental concerns are not the only reason why commercial real estate developers are shifting toward sustainable building solutions. Recent trends suggest that the market demand for sustainability becomes greater each year. As such, investing in green initiatives can result in substantial financial rewards while playing a role in saving the planet.
8.) Sustainable Net Zero Energy and Net Positive Energy (NZ/NPE) Buildings
Net Zero Energy and Net Positive Energy buildings go beyond solar energy. Net Zero Energy (or NZE) refers to buildings that generate their own energy by means of renewable power that is generated on-site. This would bring the building’s energy cost down to “zero.” Net Positive Energy (or NPE) is similar to NZE except the building creates more energy on-site than is needed to operate the building; the excess energy can be used over time to offset the energy used to construct the building or for uses such as electric vehicle charging. Net Zero Energy Ready basically means that you construct the building with partial NZE or NPE solutions with capabilities to expand on-site generation to NZE or NPE in the future. It’s motivating to see that architects, engineers, designers, and contractors are now vested in achieving Net-Zero Energy buildings and even Net Positive Energy Buildings.
There are three core elements of constructing a Net Zero Energy and Net Positive Energy building:
- Make significant improvements to the building envelope (e.g., support, control, and aesthetics) and energy conservation to reduce energy loads.
- Integrate renewable energy technology to supply the building’s power. Some examples are a solar electric system from Photovoltaics (PV), wind electric system, microhydropower system, and hybrid electric system (both solar and wind).
- Install a green mechanical system (i.e., a high-performance mechanical system) to vent, heat, and cool the building. These systems can include energy recovery ventilation and ground/air source heat pumps.
As of November 2021, 44 more businesses joined World Green Building Council’s Net Zero Carbon Buildings Commitment to tackle operational emissions and embodied carbon. These new pledges bring the total to 156 signatories who have signed up to meet the requirements of the commitment (including 122 businesses and organizations, 28 cities, and 6 states and regions). Their commitments to take increased action propel a whole life carbon approach pledging to decarbonize the built environment across their commercial real estate portfolios and business activities.
Ohio Is a Boom Market for Solar Power
Solar projects in The Buckeye State have been booming in recent years; most of Ohio’s solar capacity has only been initiated since the start of 2020. Ohio’s solar power capacity is on track to exceed coal-fired electricity by the end of this decade. Coal plant facilities have been closing due to declining renewable energy costs and stricter environmental regulations. This shift has allowed opportunities for more solar and wind capacity projects in Ohio. With Energy Harbor — one of Ohio’s largest coal-fired power plants — announcing their retirement, solar projects in Ohio’s queue already exceeds the coal generating capacity that will remain after 2028.
Ohio has not only seen a surge in applications to build solar projects but from companies looking to build large-scale solar projects. As of March 18, 2022, the Ohio Power Siting Board had a combined 8,747 MW of solar projects in its regulatory pipeline, between operational, approved, and potential solar. In fact, out of the seven solar projects that won approval from The Ohio Power Siting Board in Q4 2021, three are utility-scale solar projects. These three projects, alone, are expected to bring an additional 530 MW of capacity to Ohio’s current 800 MW, according to the Solar Energy Industries Association.
Going Green by Growing Green in Columbus, Ohio
Over our 84-year history, The Robert Weiler Company has seen enormous changes to the Columbus, Ohio landscape. From single-family neighborhood developments in the 1940s to mixed-use properties such as Highpoint on Columbus Commons today, our commercial real estate team has adapted to the effects of climate change. That’s why we’re dedicated to exploring ways to develop cleaner, greener, more environmentally sustainable structures. In fact, our priority item at the moment is looking to install solar panels on our new commercial real estate developments.
Rather than standing in defiant opposition to the natural world, today’s buildings are returning to an ethos espoused by leaders from earlier times. President Franklin Roosevelt may have said it best: “A nation that destroys its soils destroys itself. Forests are the lungs of our land, purifying the air and giving fresh strength to our people.”
In 2017, Columbus Mayor Andrew Ginther unveiled “Sustainable2050,” a sustainability initiative to promote environmental efforts in our community. Mayor Ginther along with Sustainable Columbus have also taken other initiatives. In 2020, Mayor Ginther announced his goal for the Columbus, Ohio community to be carbon neutral by 2050. And in December 2021, Sustainable Columbus announced their Climate Action Plan (CAP), which seeks to reduce carbon emissions by 45% in 2030 and by 100% in 2050. Also, the Smart Columbus initiative from the City of Columbus seeks to reinvent our transportation system, forging new ways to combine sustainability with better mobility for the citizens of our region. To that end, we look for new ways to join these efforts while meeting the demands for walkable communities, smart technology, reusable energy, and green building trends.