Here's What CRE Pros Say Really Matters With ESG Investment

Commercial real estate pros are most willing to pay a premium for on-site renewable energy generation and smart technology that adjusts building operations to reduce environmental impact, according to a new yet-to-be-released survey from CBRE.

“Features that reduce energy consumption seem to be the environmental building feature that is under consideration the most when reviewing a deal,” the firm’s analysts note in a preview of the report, which surveyed 500 CRE market participants and will be available next year. “Almost half of respondents would seek a discount or walk away from a deal altogether (negative impact) if a building lacked features that reduce energy consumption. Green building certification and buildings that have superior resilience to the effects of climate change also made the top five list.”

Thirty-five percent of respondents said features that reduce energy consumption would be positive to valuation if present, while 49% said a lack of such features would have a negative impact or would be a dealbreaker.  Forty-five percent said green building certification would have a positive impact while 33% said a lack of the certification would have a negative impact, and 58% said on-site energy generation would have a positive impact. Another 53% deemed smart technology a positive.

On the social front, nearly 60% or more of respondents agreed on the top five building features they deem to have the most impact when valuing a transaction with nearly half willing to pay a premium for building features that improve the physical and mental health of employees and for buildings that have health and well-being certifications.

And “buildings that are conveniently near public transportation systems seem to be the social feature that is under consideration the most when reviewing a deal,” the report notes. “Nearly two-fifths of respondents would seek a discount or walk away from a deal altogether (negative impact) if a building wasn’t near public transport. Facilities that support cycling and walking and buildings with inclusive design also made the top five list.”

The recent CBRE survey polled more than 500 commercial real estate professionals globally about the relative importance of ESG criteria in their real estate strategies. The full report will be available next year.

“The real estate industry is uniquely positioned to positively impact our properties, communities and overall environment with ESG initiatives,” the preview notes. “This survey highlights that real estate professionals and companies are taking note of this and increasing their efforts across the ESG spectrum.”