Green building certification

Benefits of green building certifications for commercial real estate

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Property managers looking to increase revenue and decrease costs while providing value for their tenants can do this by getting green building certifications for their properties. In London alone, there has been a significant increase in BREEAM certified office space of more than 600% from 2005 to 2014.

While obtaining a green building certification is still mainly voluntary in most parts of the world, there are several reasons why investors and owners should consider assessing their portfolios.

What are green building certifications?

Green building certifications, also known as sustainable building certifications, are a set of systems and tools which are used to assess and recognise buildings that meet certain sustainability and environmental criteria and standards. Certification methods can vary and can relate to the planning, design, construction, operation, maintenance, renovation, and even the demolition of a building.

Green certifications can also be applied to different types of buildings such as homes, commercial real estate, or whole neighbourhoods, with specific tools or subsets of tools used for each type.

While getting a green certification is often voluntary for commercial real estate owners, some recent push in current and upcoming regulations will most likely make it mandatory. For example, from April 2023, both new and existing commercial lettings in the UK must have an EPC rating of E or above, a C rating from 2027 onwards and a B from 2030. Buildings which don’t comply with regulations face consequences like “brown discounts” – a sharp reduction in value and inability to be leased.

Benefits of  green building certifications for investors

Commercial real estate with green certifications is attractive for investors as it offers benefits such as higher property value, rents, and occupancy rates. In the US, data from the representative body for Real Estate Investment Trusts (REITs), Nareit, shows that green certified buildings can have a 31% increase in sales values, 23% higher occupancy rates and an 8% increase in rental income.

With the whole world moving towards a more sustainable future, it is highly likely that investors with less sustainable portfolios will have difficulty accessing loans or would be forced to pay higher interest rates in the future. This not only financially incentivises investment in green-certified buildings, but also increases their sales value.

Benefits green building certifications for owners

The growing value of commercial real estate with green building certifications does not only benefit investors, but also owners and occupiers of green-certified buildings.

Obtaining a green building certificate is directly related to improving the energy efficiency of a building which ultimately lowers operating costs. According to the Institute for Building Efficiency, operating expenses for buildings with Energy Star certifications in the US were 30% lower compared to those without it. LEED-certified buildings, on the other hand, were shown to create healthier indoor environments for people and enhance their quality of life, providing better ventilation, lighting, and temperature.

Nowadays, commercial tenants are constantly pushing for cleaner and heathier workplaces for their employees. Sustainability and wellbeing are some of the most important factors that occupiers consider. By holding a green building certification and offering assurances of sustainable practices, owners will gain a competitive advantage over their counterparts without it.

Final words

Transforming commercial real estate into an industry with less environmental impact through tools such as green building certifications is becoming increasingly important worldwide. While having a certification is not yet mandatory, it is a big step towards a positive change. By becoming green certified, buildings are becoming future proof to withstand economic and environmental uncertainty. Certification brings many benefits to both investors and owners and is a great way to reduce the overall impact on the environment.

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