By Dees Stribling,
Reprinted from and with the permission of theslatinreport.com
Are sustainable practices and green buildings now the norm in commercial real estate? Not quite, according to participants in the Conference Board’s second annual Corporate Real Estate Conference, held recently at New York’s Waldorf-Astoria Hotel, but they’re close on the horizon.
“We’ll see a swell of demand for sustainability in the near future that we don’t see today,” predicted panelist Stephen D. Lane, executive vice president of Citigroup Realty Services, addressing an audience of real estate executives during the panel discussion “Sustainable Real Estate Practices and the Global Corporation.” For its part, he said, the financial services giant is awaking not only to the environmental benefits of sustainable real estate practices among its sprawling portfolio, but also to the concurrent business opportunities that sustainability presents.
“Sustainable real estate practices haven’t reached a tipping point yet, but it won’t be long,” agreed panelist Kenneth W. Hubbart, executive vice president and partner at developer Hines. “The business case for sustainability can be made and is being made." He noted that pressure from tenants for green buildings – the heart of sustainability in commercial real estate – will probably be felt among developers and owners through brokers. “In the very near future, the brokerage community will be leaders in demanding sustainability, not only because it’s environmentally worthwhile, but also because it’ll be an important way for their clients to control costs.”
It was a theme the panel returned to time and again: owners and developers and tenants are now figuring out that real estate sustainability can mean business practices that cut costs upfront and increase productivity among workers in green building. But what is sustainability in the context of real estate?
Panel moderator Charles Lockwood, a noted environmental consultant and author of “Building the Green Way” in the Harvard Business Review, explained first what sustainability is not. “Ten or even five years ago, the concept of sustainability was dismissed too often as ‘hippie’ – a sentimental and costly concern with the environment,” he said.
“Now that perception has been turned on its head,” he continued. “Now companies are realizing that pursuing sustainable real estate practices is about reducing operating expenses. Green building practices are good business.”
Green buildings are consciously designed to reduce their impact on the environment through the use of recycled materials during construction and the use of less energy or energy from renewable sources after completion. Also, Lockwood said, good green design can improve worker productivity by offering a more pleasant and healthier workplace – a factor that could prove even more valuable to companies in the future, considering that personnel expenses tend to outstrip the cost of real estate operations.
But the panelists also pointed out that sustainability is more than just green-building design per se. According to panelist William Reinert, national manager of advanced technology for Toyota Motor Sales USA Inc., it’s also about “building teams in your organization to address how sustainability is going to be applied throughout your portfolio.” In the automaker’s case, he said, dealing with IT (a notorious energy user in most companies) was a “wild ride.”
“Eventually we were able to consolidate 56 data centers into 26 more efficient ones with controls in place, such as software to shut down unused systems and cut energy use,” Reinert said. “It was really a matter of wringing out waste, rather than curtailing activity. It wasn’t easy, but it paid off.”
Sustainability is also, the panel opined, about developing in places that don’t contribute to sprawl, such as infill urban locations. “It’s about site selection that reduces vehicle-miles traveled,” said Lane.
He contrasted two large office expansions to make his point. In the late 1980s, retailer Sears moved its headquarters from a city-center location – the Sears Tower in downtown Chicago – to a far-flung suburban location miles away. “There was absolutely no consideration as to how the move would affect the environment, especially by encouraging vehicle use in the area,” Lane said.
On the other hand, one of the goals of Microsoft’s major expansion in Redmond, Wash., announced earlier this year, is to encourage workers not to drive among the facilities. “Sustainability is much more than building operations,” Lane noted. “And as awareness of the concept increases, as companies begin to understand the impact of a deleterious location not only on the environment but also worker productivity, those locations are going to be harder and harder to sell.”
Panelist Charles Zimmerman, vice president of prototype and new format development for Wal-Mart, detailed the retail giant’s efforts at making its real estate greener, a move he said is being driven by both environmental and cost-containment considerations.
“Where are the most efficient Wal-Mart buildings?” he asked the audience rhetorically. “Actually, most people guess wrong. They’re in the United States and Canada.” In rapid succession, he discussed Wal-Mart’s domestic sustainability initiatives such as high-efficiency HVAC systems, reclaiming waste heat, LED-illuminated signage and refrigeration systems, and skylights that distribute sunlight throughout a store.
“Energy efficiency is very important to us because energy is our No. 2 expense after wages, and Wal-Mart is the No. 1 private purchaser of electricity in the world,” he said. “Also, others will follow our lead.”
Some of Wal-Mart sustainability initiatives have been in the works for years, according to Zimmerman, but a recent tipping point for the retailer was the havoc wrought by hurricane Katrina. That shocked CEO Lee Scott into ratcheting up the retailer’s efforts to do something about climate change, Zimmerman said.
Of course, he added, for Wal-Mart sustainability also has to reflect the cost-cutting ethos of the company by paying for itself. “All the initiatives have so far, within three years or less,” he said. “And we believe there are still plenty of other opportunities left for our real estate to be even more sustainable.”
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