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How Sustainable Space Creates a Better Business - Transcend Commercial Real Estate Brokerage

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November 4, 2020

How Sustainable Space Creates a Better Business

How Sustainable Space Creates a Better Business

No longer is sustainability just a trend for brands to publicly “do the right thing.” The business case for sustainability is growing and has accelerated in light of the COVID-19 pandemic. For companies unsure about investing in office space or aiming to retrofit improvements to make it a safer place to work, consider the ways making sustainability part of the decision can help your overall bottomline. 

Research is showing that more recent decisions to go green are based upon positive impact on revenues, reduction of operating costs and the reduction of capitalization rates, all leading to higher property values.

  1. Lower default risks on commercial mortgages

One study shows that office CMBS loans can have more than 30 percent reduction in default risk after the collateral property becomes Energy Star labelled or LEED certified.

  1. Lower interest rates and longer interest-only periods

Similarly, companies with “green” assets tend to receive better loan terms.i In European markets these assets are being “green tagged” by banks to monitor the value of these assets overtime to create sustainable financial markets.

  1. Lower operating and utility cost

There’s a myth out there that sustainability is an expensive venture that is not easily earned back, but it’s also clear in studies of businesses with long-term sustainability efforts in play, that the higher upfront costs associated with greening a building tend to be offset by lower long-term life cycle costs.

USAA is one major company to institute sustainable practices more than 20 years ago. Now they are seeing their aggregate energy cost savings since 2000 reach $24.5MM. Their analysis of the results on performance shows that the LEED-related audits and implementation of recommendations show a 59% ROI and less than 2 years payback. 

Considering that utility costs (as they relate to energy, water, and waste) impact CRE company profits, it makes business sense to adopt green buildings, which are estimated to consume 29 to 50 percent less energy than “non-green”; use 40 percent less water; 12 emit 33 to 39 percent less CO2; and produce about 70 percent less solid waste. Consequently, environmental measures targeted towards reducing these costs stand to have a positive impact on asset values.

  1. Lower depreciation overtime

Along with retaining greater value as an asset overtime as maintenance costs are lower, there is increasingly clear evidence that buildings (re)designed with green features will depreciate less quickly than others. They’re projected overtime to be more likely to meet the growing demand of a more discerning occupier and be more appealing to investors.

  1. Higher employee productivity

Companies are considering the positive impact of sustainability measures on employee absenteeism, productivity, and well-being. According to a WGBC report, certain design attributes of a green office building enhance occupant health and well-being, therefore resulting in healthier, happier, more satisfied, and ultimately more productive workers. In fact, per a 2012 Deloitte CFO survey, 93 percent of CFOs believe that there is a direct link between sustainability programs and business performance.

  1. Higher wellness factors

COVID has forced the improvement of air filtration and cleaning practices in office space, but it’s also brought on a growing wave of other helpful changes that can be beneficial to the health of people as well as to the environment such as optimal acoustic performance, maximized natural lighting and outdoor workspace, and minimized use of materials with volatile organic compounds.

Michael Wolf, leader of one design firm, said that although part of his company is hired for design and interior layouts, their work increasingly includes air filtration. “These things were already a part of the design in terms of wellness,” he said. “[But] it’s accelerated with COVID.”

For those who are “green-minded” they see the human and environmental impact of these improvements. 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.

  1. Higher resiliency 

As more powerful and a greater number of storms rack the coasts, architects are looking for ways to make commercial office structures more able to stand up to bad weather. One Miami firm is looking at ways to reduce wind pressure on buildings and work with materials that put off fewer gases. From an investment standpoint, the concept strengthens the property from a storm’s impact, significantly reduces maintenance work in the future and potential for a business to be threatened by disaster.





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