With every passing day, we see more widespread acceptance of the additive value of sustainability strategies in real estate investment and management. And as the data set on green buildings gets bigger and better, the case for sustainable real estate investment gets stronger.
Data come from many sources, from smart-building sensors to old-fashioned utility bills. Human resources departments track employee interest and participation in sustainability programs, and asset managers quantify tenant interest in green building certifications and performance. The rising generation of socially minded millennials is leading a movement for increased commitment to sustainability from corporate tenants — and they want data that show their building, and their employer, is living up to its commitments.
As such, green buildings are highly desirable workplaces because they help employers attract and retain highly prized talent.
Today, a high threshold of evidence backs up what we've intuited for years — sustainable investing pays off. We know that buildings with LEED, BOMA BEST and/or ENERGY STAR certifications tend to outperform similar non-certified buildings in terms of rental rates, occupancy levels and tenant retention. In 2015, a third-party research team conducted an in-depth analysis of Bentall Kennedy's North American office portfolio, encompassing 58 million square feet at the time.
The researchers, Nils Kok and Avis Devine, found:
Net effective rents, including the cost of tenant incentives, average 3.7% higher in LEED-certified properties in the U.S. than in similar non-certified buildings.
Occupancy rates during the period were 18.7% higher in Canadian buildings having both LEED and BOMA BEST certification, and 9.5% higher in U.S. buildings with ENERGY STAR certification, than in buildings without certifications.
Tenant renewal rates were 5.6% higher in Canadian buildings with BOMA BEST Level 3 certification than in buildings with no BOMA BEST certification.