Technology CCIM Feature

Tech's Boost to CRE Sustainability

Luminaries in commercial real estate discuss sustainability and how to galvanize the industry to address climate risk.

One of the biggest challenges of our age is climate risk — an increase in average temperature of only a few degrees will lead to a catastrophic cascade of effects, resulting in built-world destruction, extreme weather, and enormous loss of human life. It’s therefore imperative that every industry accept its responsibility to decrease its carbon footprints with a tremendous sense of urgency.

The real estate industry, in particular, is the single largest contributor to climate risk, consuming 40 percent of the world’s energy, emitting 30 percent of all greenhouse gases, and consuming 40 percent of all raw materials, according to Fifth Wall. Despite my 30-plus years in the real estate industry, discovering these current statistics was a complete shock for me, and I’d bet most people in the industry also aren’t aware of these alarming facts.

While galvanizing the commercial real estate industry to embrace climate risk and create healthier, safer, and cleaner working and living environments is an extraordinary task, early signs show that the industry is rising to the challenge. Today, we already have some of the world’s leading CRE companies devoted to making strong, measurable commitments toward sustainability. 

For example, Cushman & Wakefield set ambitious science-based targets and has committed to partnering with its clients to achieve net-zero value chain emissions by 2050. Likewise, Boston Properties recently committed to carbon neutral operations by 2025, as well as establishing its Board of Directors Sustainability Committee. Tishman Speyer is aiming to reach net-zero across its entire portfolio by 2050, according to ESG Today. Industry titans such as Oxford, Hudson Pacific, and Prologis have been tracking sustainability improvements and are continuing to commit toward more sustainable ways of developing and maintaining properties. The number of startups developing climate tech solutions is also encouraging.

However, to truly tackle climate risk, the industry requires the collective efforts of all players, from landlords to construction companies, technology startups to the venture firms funding new solutions, and consultants to industry associations. I’ve collected thoughts from a few of these leaders on the climate crisis within their organization. While we as an industry have a long, long way to go to lead the world in decarbonizing and getting to net-zero, I, for one, am encouraged by these early signs that CRE will indeed be an example for other businesses to follow in addressing the greatest threat to the world we have ever faced.

Fingert

Jake Fingert, Managing Partner, Camber Creek

Real estate is the largest asset class in the world. That large an industry is going to have an outsized impact on the economy and the environment — annually, approximately 40 percent of U.S. carbon emissions come from the built environment. As an investor driving change in the industry, I view it as an imperative to identify companies that can help the CRE industry deploy more sustainable practices at scale. Collectively, our limited partners own and operate more than one billion square feet of office space and one million apartment units. When we find solutions that work, we can jump-start the process of widescale industry adoption. However, it’s important to not have rose-colored glasses about these companies — they have to work and drive industry value.

McGill

Connell McGill, Co-Founder and CEO, Enertiv

Operating commercial real estate is becoming more challenging. Manual, paper-based processes are still prevalent, and, even when technology is in place, numerous siloed systems remain across a portfolio, which limits transparency and performance. To add to this, owners and operators are facing higher expectations from tenants around ventilation and investors around ESG reporting — not to mention a slew of local laws and regulations.

Building operations are a big piece of the puzzle. Research shows that inefficiencies are significant considerations:

  • Improperly configured equipment accounts for 20 percent of building energy usage
  • Real-time energy cost transparency reduces tenant loads by up to 21 percent
  • Best practices in maintenance can cut energy by an additional 10 to 20 percent.
  • Losses such as these add up to over 10 percent of energy consumption in the U.S.
Grinis

Mark Grinis, Global Real Estate, Hospitality & Construction Leader, EY

We are committed to increasing awareness of real estate’s role in climate change, and we are helping clients across multiple sectors in three key areas. First, we are helping them learn about their potential real estate carbon tax exposure from evolving federal, state, and local legislation, such as New York City’s Local Law 97. Second, we are helping clients develop carbon strategies and reporting capabilities because in the U.S. and around the world, stakeholders, including investors, lenders, tenants, landlords, and local communities, are demanding greater transparency and accountability around everything from disclosing net carbon emissions to environmental policy, energy management, and ongoing efforts to improve building efficiency. Critically, the cost of capital is also becoming increasingly tied to broader environmental, social, and governance (ESG) metrics. Third, we are helping companies understand the technologies that can help them reduce carbon emissions. From manufacturing to demolition, there are numerous opportunities to employ climate technology and reduce carbon emissions across the building life cycle. It’s an exciting time, and we’re proud to be at forefront.

Singh

Deepinder Singh, CEO, 75F

Buildings are the fourth-leading contributor to greenhouse gas emissions globally, and approximately half of a commercial building’s energy consumption stems from heating and cooling. Building management systems can control these systems and dramatically reduce their energy consumption. However, most existing commercial buildings in the U.S. are not using HVAC controls, because many of the solutions available are expensive and complex to install and maintain.

Dockser

Brad Dockser, Founder and CEO, GreenGen

When we speak about decarbonization, it’s important to keep in mind that there are four levers to achieve net-zero: energy efficiency, on-site renewables, off-site renewables, and carbon offsets. Of these four, only one — energy efficiency — is guaranteed to show a return on investment. Focusing on this space is guaranteed to provide a net return through reduced operating costs that lead to an increase in an asset’s value. The ESG strategy brings sustainability and profitability together. Energy-saving technologies — LED lights, efficient HVAC, and improved building envelope — are a good start, but it’s not enough.

Companies and occupiers must go a step further with mindful conservation. By this, I mean those LED lights are on only when they need to be and they’re off when people aren’t there. It’s ensuring the air conditioning isn’t cooling an empty room. It’s consuming less with smarter technology — that’s the winning strategy. By embracing smart technology and acting on the data it produces, companies will see opportunities for continuous improvement based on real-time analytics and automated decision-making. Through this, companies can see a real return on investment while also moving closer to the goal of complete decarbonization.

Commercial real estate owners, developers, investors, occupiers, and state and local governments must all work together toward common sustainable targets in the race to net-zero. Energy efficiency, through technology and mindful conservation, should always be the first, but not only, step we take.

Smedley

Stacy Smedley, Executive Director, Building Transparency

Reducing embodied carbon by decarbonizing construction materials and equipment is an urgent opportunity because building material manufacturing makes up at least 10 percent of total greenhouse gas emissions and will account for more than half of total new construction emissions between now and 2050. To effectively reduce the embodied carbon of our buildings at scale, building owners and designers, construction companies, material suppliers, and policymakers should directly measure, compare, and reduce the embodied carbon emissions of their buildings and materials.

Schantz

Marta Schantz, Senior Vice President, Greenprint Center for Building Performance, ULI

Urban Land Institute is dedicated to creating healthy, resilient, and high-performance communities around the world. Through the work of its Greenprint, Building Healthy Places, and Urban Resilience programs, ULI provides leadership and support to real estate and land use professionals to invest in energy efficient, healthy, resilient, and sustainable buildings and communities. ULI’s mission is to shape the future of the built environment for transformative impact in communities worldwide, and net-zero is a crucial building block to help us achieve this. ULI’s Greenprint Center for Building Performance focuses on climate mitigation research, making the business case for green buildings by tying carbon emissions reductions to increased asset value. Greenprint also includes a worldwide alliance of leading real estate owners and developers committed to improving the environmental performance of the global real estate industry, striving to reduce greenhouse gas emissions by 50 percent by 2030 and to achieve net-zero carbon operations by 2050.

Rosen

Raphael Rosen, CEO, Carbon Lighthouse

CRE has certainly made advancements in sustainability over the years, from developing more sustainable new buildings to using sustainable products inside our existing buildings. Unfortunately, slow adoption of building technologies over the years means CRE is not ready for today’s demands from investors and tenants alike for data-backed evidence of decarbonization. Now, this digital divide is holding CRE back from achieving the magnitude of impact necessary to fight climate change. 

But it’s not too late! Investments in artificial intelligence that drive building decarbonization solutions can kick-start CRE’s effort to decarbonize by enabling owners to easily prioritize their assets, take action that yields real carbon reductions, and report on their progress. Solutions like Carbon Lighthouse’s CLUES AI will even do so while increasing NOI $0.20 to $0.50/sf at a cost of $0.07/sf while achieving science-based ESG objectives. To date, Carbon Lighthouse has delivered more than $250 million in client value and eliminated more than 584,000 tons of carbon emissions (equivalent to 24 power plants). While we have our work cut out for us, technology is already empowering CRE owners to confidently move from pledges to real decarbonization progress at scale that will be integral to CRE.

James

Jamie James, Managing Partner, Greensoil PropTech Ventures

Property owners are currently faced with an enormous challenge: addressing long-term climate-related risks and a growing array of near-term decarbonization requirements from local, state, and federal governments. Committing to assessing and addressing climate-related risks allows companies to define decarbonization goals and ways to operationalize them. Such prioritization lays the foundation for impact investment choices on building and construction materials, energy sources, and — most importantly — new property technologies for existing buildings and those being developed. Reductions of 20-30 percent in energy usage can be realized through improved efficiencies alone. 

Efforts to decarbonize built environments will naturally focus on electrification and load reduction. But proptech enables grid-responsive strategies to reduce and shift peak usage. Organizations can identify and address areas of improvement in everything from energy usage for lighting, heating, and cooling to whether a building is well-sealed and energy efficient. Intelligent software systems also can provide real-time analytics that facilitate automated decision-making such as when and how to run an HVAC system, while allowing firms to more easily meet ESG-related goals and legal reporting requirements.

New buildings alone won’t solve the world’s decarbonization challenges. Commercial real estate companies must think creatively about retrofitting their existing building stock. Embodied carbon constitutes 11 percent of the roughly 40 percent of global greenhouse gas emissions associated with the built environment. Beyond setting goals and strategizing, investor funding, public-private partnerships, and incentivization from local and federal governments, like tax benefits and grants, will be essential in CRE companies’ decarbonization efforts.


For more on this topic, CCIM Institute’s “Construction: Sustainability Planning and Management” course shares the fundamentals of sustainable construction management and planning.

Michael Beckerman

Michael Beckerman is CEO of CREtech.

 

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