Capturing the value of sustainability has always posed a challenge to real estate. Increasingly stringent measures and targets, as well as the race to become carbon neutral, have required all pieces of the property jigsaw, from developers to big funds, to provide increasing transparency to demonstrate their commitment.

With real estate currently predicted to consume around 40 per cent of global energy annually, accounting for more than 20 per cent of international carbon emissions, there’s never been a more poignant time to tackle this issue. Indeed, earlier this year Microsoft made a public commitment to be carbon negative by 2030 and, by 2050, to remove from the environment all the carbon it has emitted either directly or by electrical consumption since it was founded. Other leading companies have made similar pledges.

The link between sustainability initiatives and the creation of value is becoming more apparent. There are four main sustainability value drivers: financial savings; worker attraction and retention; brand and reputation; and customer attraction and retention. Real Capital Analytics (RCA) data showing a rise in investment across all main asset classes rated BREEAM New Construction (NC) Excellent/Outstanding, provides us with a strong indication that investors are becoming increasingly aware with regards to this topic. 

Over the past year, total investment into properties rated BREEAM NC Excellent or Outstanding has risen. It is the office sector that stands out as the star of the show, with investment into BREEAM NC assets more than doubling year-on-year (£17.8bn in 2019 compared to £1.9bn a decade ago) as investors look to diversify their portfolios with high-spec, environmentally friendly assets.

So why offices? Although investment across other asset classes has also risen, offices have predominantly led the way over the last decade in response to the rise in global standards and initiatives that have been set to create as environmentally-friendly as possible working conditions. 

The What Workers Want Survey noted that environmental performance was an area of deep dissatisfaction for 18-24 year old office workers meaning tenants are raising the bar for landlords with regards to what they expect when they lease a building. Companies – both on a corporate and an individual employee level – have come to expect so much more from a building than an empty white box. 

Individuals expect their employers to have environmental and social policies with similar values to their own. Given the growing war for talent in a competitive employment battlefield, occupiers are having to take their action plans for a sustainable environment increasingly seriously in order to attract the best people.  

There’s no way to dress up the fact that we have a long way to go until we create a more sustainable real estate sector. There’s also work to do to prove that the return on investment from improving our environmental and social impact is worth it. Nevertheless, by listening to the requirements of both individuals and companies and working as a collective, we can certainly make positive strides.

Further information

Read more: What Workers Want