When commercial real estate professionals consider investments, they tend to think deeply about the various challenges that influence the trajectory and scope of their placemaking initiatives. They carefully select a site, appeal to investors and public officials, identify tax incentives, research the most desirable amenities, and countless other important choices.
But what considerations have been added into that equation now that climate-related disasters have become a daily concern for people around the world? What lessons has the industry learned and how is the industry responding to the increasing number of millennials who demand sustainability and climate justice from the companies with whom they do business?
The decisions are, of course, business considerations, but they’re also impactful to community interests: the overall carbon footprint of each building in a firm’s portfolio, new rules governing bird safety, the protection of permeable ground in neighborhoods with flooding concerns, as well as the transportation load associated with diverse tenant populations in those buildings. Every decision counts on a human level; and current and prospective tenants pay close attention as they prepare to renew or sign a lease.
While the modern CRE executive must contend concurrently with existential concerns and meet the needs of their customers and investors, industry leaders are stepping up and investing in innovative new ways forward.
Reclaiming History
In order to combat climate change, some developers have committed to meeting sustainable standards across all their properties, making climate-friendly principles fundamental to everything they do.
And while many developers are finding vacant land upon which to build, some developers are choosing a different path that focuses on gut renovations to existing buildings with a strong underlying structure, choosing to rehab the interior and thus shrink the development’s carbon footprint.
Adaptive reuse projects that prioritize and encourage environmental responsibility by focusing on inclusivity, historical context, holistic health, and community activation can serve as great examples — think of opening previously closed-to-the-public spaces; installing wind-powered electricity and efficient fixtures; incorporating bike storage and service facilities that encourage limited reliance on cars; and ensuring easy access to public transportation. Additionally, construction crews may require far fewer raw materials to complete a project when a fundamental portion of the construction is substantially complete.
Each data point in the development pipeline matters and every company’s long-term environmental consideration includes small, practical ones such as using only Energy Star appliances, high-efficiency light fixtures, and HVAC systems, double-pane thermal insulated windows, heavy insulation, modern water-efficient fixtures, and intelligent landscaping irrigation controls.
Even locally-sourced labor and materials matter — when developers reduce supply chain carbon emissions, an exponential effect begins to take hold.
A Movement to Build What’s There
Thomas de Monchaux recently made an interesting argument in Metropolis Magazine for such placemaking in a piece called “A New Idea in Architecture? No New Buildings.”
Monchaux notes that ”the building sector accounts for about a third of global fuel consumption,” but its total impact may far exceed that. The environmental footprint of each new build is not limited to transporting goods and erecting the structure; we also have to consider the cost of the “extraction of raw materials, manufacturing and maintenance, demolition and decomposition. The other impact to consider is the energy and resources needed for lifetime operations such as heating, cooling and lighting.”
While there are many valid arguments for why new construction is needed (certainly not every building that exists today is prime for being repurposed or redeveloped), Monchaux’s point, ultimately, is that the energy embodied in the already built environment is a “precious unnatural resource” and that the commercial real estate industry would do well to acknowledge that and treat it as such.
Developers must consider the astounding costs — both financially and environmentally — when deciding how best to solve any community’s need for housing or office space.
To Protect Against the Predictable
When Hurricane Sandy slammed into the eastern seaboard of the United States — killing 72 people, causing billions of dollars in damages, and uprooting tens of thousands of New Jersey and New York residents — real estate developers were faced with an inevitable question and put in an unenviable position: Would they reclaim the lands decimated by this monumental climate event or retreat to safer environs?
Undoubtedly, many cut their losses and stopped investing in high-risk areas. But for many, resilience became the key to avoiding future financial setbacks. (That resilience also applies to many of those who were displaced.)
Affordability and aesthetics could no longer be the principal concerns for developers in areas such as Staten Island’s coastal neighborhoods and the Jersey Shore.
Holistic approaches to sustainable placemaking — from developing a cogent master plan to working with the international community to mitigate the causes of global crises — are critical to building communities of the future, especially when one considers the destructive forces that have caused so many to reevaluate our developments in the first place.
These aren’t live and work communities planned to appease a trend. Rather, they are communities designed to sustain the population for generations to come.
Deciding with Their Wallets
Prevailing socioeconomic winds also point to a financial boon for developers willing to commit to honest, engaged environmental brands that invest in sustainable technologies.
“Millennials and Gen Zs, in general, will patronize and support companies that align with their values,” according to Deloitte’s 2019 Global Millennial Survey. ”Many say they will not hesitate to lessen or end relationships when they disagree with companies’ business practices, values, or political leanings.”
And according to that same Deloitte survey, “climate change/protecting the environment/natural disasters” are the top concerns for both millennials and Gen Zs.
The business community may have, at one time, seen this as an opportunity to dig in and weather the backlash from a sliver of residents and tenants, but recent events around the world and significant movement in the financial sector suggests things may be changing.
For example, Blackrock Founder and CEO Laurence Fink made headlines with the announcement that his firm would fundamentally shift its investment strategy, prioritizing environmental sustainability.
According to The New York Times, this decision from “the world’s largest asset manager could reshape how corporate America does business.” As the Times noted, Fink isn’t the first, but his annual letter has the influence to disrupt the course of conversations inside boardrooms around the globe.
“As a fiduciary, our responsibility is to help clients navigate this transition,” wrote Fink. “Our investment conviction is that sustainability and climate-integrated portfolios can provide better risk-adjusted returns to investors. And with the impact of sustainability on investment returns increasing, we believe that sustainable investing is the strongest foundation for client portfolios going forward.”
So while we can’t turn back time and reclaim what’s lost to the ravages of the ongoing climate emergency, we can be good shepherds of the lands that remain, and revolutionize the way we build through radical use and reuse of the spaces around us.