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Real estate executives worldwide increasingly understand the importance of sustainable and green issues in our industry.  The establishment of sustainability departments in large property consultancies has gained traction since 2005.   Jones Lang LaSalle took a strong position with its acquisition of Upstream, the UK’s leading sustainability consultancy, in 2007, and ECD, a recognized Canadian firm, in 2008. Other companies have taken a more organic route, but the ongoing challenge remains the same: how to fully  integrate the growing body of energy and sustainability expertise in these teams into the wider firm..  As knowledge and skill sets expand within the core group of sustainability professionals, consistent and clear communication with the larger company is needed to ensure leading-edge client service delivery—not to mention the extra fee opportunity.

A new report by Maira Petrini and Marlei Pozzebon in the Brazilian Administrative Review offers an insight and a direction but does not offer a practical path. Entitled  “Integrating Sustainability into Business Practices: Learning from Brazilian Firms,” the report can be summarised by the Corporate View, Organisational Structure and Organisational Mechanisms which are all interlinked and considered fundamental to the process of sustainability integration in to firms.

Sustainability strategies allow firms to reduce costs and/or make money.  There is potential in almost every department to be able to enhance and broaden client service through integrating sustainability.  These benefits will only be established through a greater understanding of the sustainability issues, mechanisms and legislation, the functions of the departments and the clients needs and targets.

Posted by:
Julie Hirigoyen
Energy and Sustainability Services, UK

The nation’s mounting X Factor fever is nothing compared to what the UK’s ‘green’ community was feeling as we waited for last week’s Comprehensive Spending Review. George Osborne’s performance would probably not have won over Simon Cowell but there were some welcome surprises in the Chancellor’s plans. Defying all predictions that the worst of the cuts would be turned against green investment plans, environmental spend was carefully positioned as underpinning the “growth” principle – or as our Prime Minister coined it to the CBI yesterday, the “new economic dynamism”.

Obsorne announced a number of measures in support of the transition to a low-carbon economy:

-  £1bn towards a world leading carbon capture and storage facility.
-  Over £200 million directly invested in renewable technologies such as wind farms.
-  £860 million of new finance to support the renewable heat incentive.
-  No reduction in Feed-in Tariffs although some refocusing on the most cost effective carbon abatement technologies.
-  Further support for the take up of low carbon vehicles and better quality high speed transport links.
-  The “Green Deal” to enable households to improve their energy efficiency at no upfront cost, repaying loans through energy bill savings.
-  The much anticipated Green Investment Bank also made it past the Treasury cuts, albeit with limited teeth to begin with.

Last but not least in the Chancellor’s repertoire was the alleged simplification of the CRC Energy Efficiency Scheme by removing the recycling payment back to participants. The policy instrument now looks more like a straight tax on carbon, with initial payments being deferred twelve months until Spring/Summer 2012. While the Department for Energy and Climate Change and the Environment Agency are busily trying to figure out the precise implications of the announcements, it’s clear that real estate owners will be subject to higher financial burdens for their carbon liabilities and further incentivised to reduce their energy consumption.

So, no standing ovation from the green community, but certainly a performance that will get the Chancellor into the next round.

Check out the latest Global Sustainability Perspective.

The Cancun Climate Summit is scheduled to start on November 29, and Jones Lang LaSalle has just signed the Cancun Communiqué, which sets out the case for action on climate change. Not much is expected to happen at this “last-chance” summit before the first commitment period for the Kyoto Protocols ends in 2012. The U.S. and China, the world’s largest carbon producers, have not been able to agree on ways to measure, monitor and verify emissions, and are unlikely to sign onto the Protocols before the commitment period expires.

You can read more about the goals and challenges of Cancun, as well as an overview of where various countries stand on carbon efficiency and other sustainability indicators, in the newest installment of, Global Sustainability Perspectives, our quarterly report on energy and sustainability issues around the world.

One passage in particular I found enlightening. The report notes that the 15 European Union signatories to the Kyoto Protocols are on track to reach their goal of reducing CO2 by 8 percent between 2008 and 2012 compared to the 1990 baseline year—“and this in spite of a 45 percent economic growth over the same period.” So despite what many in the U.S. seem to believe, CO2 reduction and economic growth are not mutually exclusive goals.

Data Center energy usage makes up approximately 2 percent of the total energy use in the United States, and is growing at a rate of 12 percent a year. The illustration here shows energy use, if we follow the current trend.

The DOE “Save Energy Now” program has partnered with the industry in the development of a process leading to practitioners qualified to evaluate the energy status and efficiency opportunities in data centers. The key objective of the Data Center Energy Practitioner (DCEP) Program is to accelerate energy savings in the dynamic and energy-intensive marketplace of data centers.

I was fortunate enough to be in the BETA group for this program and earned my DCEP – HVAC Specialist certification last month.  The program trains on DC-Pro assessment tools, energy saving technologies and incorporates key metrics for all data centers. It consisted of intense training at a generalist and specialist level and includes up to six hours of exams. 

 Using the techniques and processes taught, energy savings of 20 percent to 40 percent is achievable.

To find out more about the program or to sign up, click here.

One of the big questions about investing in energy and sustainability improvements in buildings is whether it adds to property value. Maybe that question will be answered in the next 12 months.

There weren’t very many LEED Certified existing buildings prior to 2007, when commercial real estate investment went from boom to bust. The handful of studies comparing prices of LEED buildings to the average of all sales before the downturn were mainly about new buildings, which may trade at premium prices whether or not they’re green. The past three years have not yielded enough sales overall to draw a solid statistical conclusion about investors’ perceived value of LEED. The value of an ENERGY STAR label has also been hard to benchmark, since owners of buildings with low scores don’t disclose that fact.

Now comes Jones Lang LaSalle’s 2010 Investor Sentiment Survey, which finds that 85 percent of investors plan to increase investment in commercial real estate in the next 12 months, with 30 percent of optimistic investors expecting to increase their investment by up to 30 percent and another 18 percent predicting an uptick in volumes up to 20 percent. By comparison, the 2009 survey showed 30 percent predicting a drop in investment spending by up to 30 percent.

There are many more LEED and Green Globes buildings than three years ago, and more than twice as many buildings participating in ENERGY STAR. We’re starting to see more energy retrofits. Plus, laws requiring measurement and disclosure of energy performance data at the time of sale are taking effect in several states and cities. Will green buildings will trade more quickly and at higher prices than other buildings? I think so, but a couple of years from now, we may not have to guess.

Owners, investors, tenants and government bodies all want to reduce energy usage and greenhouse gases associated with buildings. A properly conducted retrofit can achieve those goals and pay for itself through energy cost savings in less time than the average lease term. So, why are retrofits the rare exception rather than the rule? And more importantly, how can we collectively overcome the obstacles?

Those are the questions I’ll explore at ULI’s “Green Retrofit Financial Strategies” session Friday morning with executives from JPMorgan, PNC Bank, KeyBanc and Greenprint Foundation. These organizations are leaders in addressing the issues around retrofit financing, and these executives know from experience that forward progress is possible.

The challenges include a difficult market for accessing any kind of financing; underwriting standards developed before energy became a factor in residual value; and split financial incentives between tenants and owners. Are there solutions? I’m convinced that there are, and these executives are on the right track to reaching them. We’ll make plenty of time for audience participation, so if you have any ideas to exchange or questions, please challenge us.

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A strong commercial real estate market always includes two essential elements: job growth and capital liquidity. Right now, we don’t have much of either one. Peter Linneman, the Wharton Professor of Finance and Business and Public Policy, shared his thoughts this morning at the ULI conference on what it will take for the economy to get back on track.

On the jobs front, Peter feels we need to put 3 million people to work each year for three years, including 1.8 million new positions and 1.2 million repositioned workers. If we can achieve that – and it’s not an unrealistic goal if we can stop the ballooning deficit – we’ll be back to a 7.5% unemployment rate.

Peter had an interesting take on the government’s role in financial standards. What we need is “predictability of rules” even if the rules are kind of lousy. What we don’t need is continuation of a situation where nobody knows the rules—some institutions are bailed out while others are left to fail, healthcare and banking sector reforms are up in the air. One council member referred to this condition as “a state of suspended animation.

How ever the upcoming elections turn out, I hope the people left in charge of government are listening to people like Peter.

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I had the privilege of participating in a panel discussion on green building practices and sustainability in the New Jersey Real Estate and development arenas. The state is on the leading edge with the programs it has in place since 2001.  Two of the programs got a lot of attention at our conference, the solar energy program and the Pay for Performance Program.

New Jersey boasts the fastest growing solar market in the country representing 15-20 percent of the U.S. solar market. The linchpin in the success of the New Jersey solar market is its adoption and ongoing use of Solar Renewable Energy Credits or SREC.  For every megawatt of generation that a solar array produces, its owner is granted one SREC, which can be sold on an open market.  Current SREC values help to drive down the payback period for a typical solar installation from 25 years to about 9 years.  Coupling the use of SREC with other government incentives, owners are seeing significant financial advantages to installing large arrays at buildings.

The Pay for Performance Program pays for improvements made to existing buildings that result in 15 percent or greater reductions in peak energy use. With the average age of the built environment within New Jersey at over 20 years and with the recent slowdown in development, the program has drawn the attention of owners of office buildings and industrial buildings alike.  Incentives from the program are paid in three phases: at completion of an energy reduction plan, after installation of planned improvements and after a post-project verification of energy savings.

With the nation’s first offshore wind farm likely to be built off the coast of Atlantic City, NJ in the next 3-5 years, New Jersey continues to lead the rest of the country in the development of real renewable energy projects.  Read more about the clean energy programs that have made New Jersey a model of leadership here.

I was impressed by the quality of the 2010 Green Building Expo produced by Colorado Real Estate Journal in Denver last week. The 500 or so attendees were highly engaged and the sessions focused on practical strategies to make commercial buildings greener.

In one way or another, every session touched on the business case for making buildings more energy efficient and sustainable. That means analyzing the upfront costs against some form of financial—and hopefully measurable—benefit. We heard perspectives from tenants, owners, banks, investors, design and construction firms, all prepared to discuss what works in green buildings, and which issues still need to be addressed.

It was great to participate in this results-focused conference.