Sustainable Commercial Properties are More Competitive and Profitable

Sustainability. Green design. Environmentalism. Regardless of the label you choose, the trend toward energy efficiency and other practices to reduce the human footprint on planet Earth shows no sign of slowing. Every day, more and more businesses are jumping on the bandwagon, too, in order to create a healthier and more productive work environment for employees. As a result, developers and building owners are finding that sustainable commercial properties are more competitive and profitable.

Commercial Property Energy Use

Of all the things you use in a day, which one do you think uses the most energy? If you said the building or home you’re sitting in right now, you’re right.
According to the U.S. Energy Information Administration, the residential and commercial sectors used about 40 percent of total U.S. energy consumption in 2016 (the latest year for which statistics are available). That number was considerably higher until 1975 when building codes were established to regulate energy use. Now, international building codes are updated every three years to advance sustainable construction and reduce energy consumption.

The Benefits of Being Green

Green building is by no means limited to large corporations seeking the distinction of LEED certification from the U.S. Green Building Council. Your property does not have to generate a percentage of its electricity needs or harvest rainwater to be more desirable to tenants looking for office space that will have a positive impact on employees.

Yes, there may be some initial costs to keeping up with building codes, but you can count on a pay off. For instance, the latest technology can monitor the interior environment in order to control heating and cooling. Thus, the HVAC system is on only when necessary, thereby decreasing the costs of maintaining your building. Research shows that what you save in electricity will refund your initial technology investment in about two years.

Similarly, between 35 and 50 percent of a commercial building’s energy consumption can be attributed to electrical lighting. Daylight—which is free—reduces the need for electrical lighting. Thus, sustainable buildings that take advantage of daylight might not only save on energy, but may also be able to trim cooling costs by an additional 10 to 20 percent.

Sustainability and Employee Productivity

And what about the impact of sustainability on people working inside those buildings? Consider this: the U.S. Green Building Council and The Rocky Mountain Institute conducted research showing that energy efficiency and sustainable design deliver a 6 to 16 percent increase in employee productivity thanks to reduced absenteeism and turnover, as well as better work quality.

On average, for every dollar companies spend on energy per square foot, they spend 60 to 70 times that on the employee costs of salary and benefits. Therefore, a mere one percent increase in worker productivity can cover or possibly even exceed a company’s yearly energy costs.

But it’s not only worker productivity that increases as a result of sustainable design. Tenants in these buildings deal with less sick time and see employee morale and happiness increase. In short, an environment that is pleasant and comfortable to work in keeps employees feeling well and performing at their best.

The Bottom Line

So what do all of these numbers, statistics and happy workers mean for commercial property owners? Only that investing in sustainability can make your property more competitive and ultimately more profitable.

For years, health and safety were not measured and factored into a budget. Now, however, that has changed.

With the support of scientific research, the sustainable building movement is being touted by commercial real estate brokers and requested in the market. The upfront costs are typically recovered through reduced operating costs and higher rental rates. Thus, building owners and developers that incorporate sustainable practices in their properties help the bottom line as well as the environment.

 

The information contained in this article is general in nature and should not be construed as financial, tax or legal advice.  As with any financial or legal matter, consult your tax advisor and legal counsel.