Where you show up, shows leadership. Choosing a building that aligns with a company’s ESG principles and goals isn’t just an option for businesses anymore; it’s a necessity.
As leaders embrace sustainability and wellness, in lock step with social value and responsible governance, the thoughtful selection of a building to own or occupy becomes a strategic imperative.
Reinforcing public commitments that have been or will be made, ESG-aligned site selection and procurement help attract and retain talent, manage risk, and ensure regulatory and ESG reporting readiness.
Fortunately, for more than two decades ‘green buildings’ have been rapidly gaining momentum. The range of certifications and quality assurance tools also align with many strategic ESG priorities for the real estate industry.
With third-party quality assurance, certified ‘green buildings’ offer compelling advantages. In fact, according to a report by the World Green Building Council, the green building market is expected to grow to $234 billion by 2030.
“The best green building is one that already exists, especially when we account for embodied carbon,” says Brandy Burdeniuk, Director of ESG for North America at Avison Young.
What is a green building?
Green buildings are designed and constructed to reduce or eliminate negative impacts on the environment, while also improving occupant health and comfort. This can mean reducing water and energy use, as well as reducing waste and emissions.
Third-party certification adds validation and credibility to green buildings for both owners and occupiers. Options like LEED, WELL and the Zero Carbon Building Standard, provide comprehensive guides and frameworks to mitigate risk and future-proof buildings while delivering financial benefits. Making certification a significant building attribute worth prioritizing as an occupier and as an owner during site selection.
“While new builds can be more energy and water efficient, many of the buildings that we use today will still exist in 2050 - a key milestone as many of us work to hit our zero carbon goals on or before 2050. This means we need to prioritize retrofitting and repositioning the buildings we have, instead of demolishing them. Valuing their embodied carbon, while making them more efficient to reduce operational emissions, to retain and attract great tenants,” she adds.
Avison Young is partnering with clients across all sectors integrating ESG expertise and AVANT by Avison Young data to help guide decision-making at every stage of the real estate lifecycle – from asset/location selection, to project management, green financing, leasing strategy, net zero strategy and ongoing property and facility management - helping clients navigate the rapidly changing regulatory landscape, mitigate risks and penalties as well as leverage relevant government incentives.
Alongside mitigating risks associated with the climate crisis, tenant demand is influencing the shift towards greener real estate choices. As more and more companies set targets for and measure progress towards net zero operations – the space they occupy becomes an important procurement and leasing decision.
Owners and property managers are responding to the increasing importance of ESG alignment when it comes to site selection, and we are closing in on a tipping point where net zero will become table stakes in many markets. While most recognize that it’s time to get ready for the next wave of tenants, current economic headwinds are standing in the way of major investments and retrofit work.
“Even if you can’t spend money today, landlords should be investing time into understanding and measuring the performance of their assets, looking for the quick wins and preparing to invest when the market turns to stay ahead of the next lease cycle,” says Brandy.
“Navigating the landscape of green building standards, certifications and lease clauses can be intimidating, and there’s a lot of noise in this space. But a great starting point is to look beyond the financial and environmental benefits and focus on the impact these buildings have on people’s lives,” she adds.
Location, location, location is no longer the major decision-making factor for tenants. The flight to quality is a real opportunity for tenants to select spaces that align with what their employees want and need as well as their ESG priorities and commitments.
The post-pandemic work style has evolved into a new normal, and companies are constantly adapting to create the right environment for their people. During the ‘work-from-home’ phase, workers became accustomed to being in complete control of their work environment – from temperature to lighting and noise levels. As we return to the office, and create environments that people want to come back to, it’s becoming clear that many ESG attributes align perfectly with improved performance. The health of any business is naturally linked to the health and wellbeing of its staff. Extensive research, from academia and industry sources, supports the undeniable link between ESG-aligned healthy buildings, organizational wellbeing, and business success.
This growing body of knowledge highlights the substantial returns on investment in health for both buildings and organizations. Both tenants and landlords should see thoughtful site selection and leasing as key to ensuring people reach their highest potential and thrive.
That’s where green lease clauses and green leases come in.
Green leases not only drive energy efficiency, they also foster stronger owner-occupier relationships. By adopting green lease language, a foundation of aligned expectations, trust and familiarity is established, opening up new opportunities for collaboration.
These green lease efforts can go beyond energy savings and extend to ambitious goals such as achieving netzero carbon emissions or integrating the use of smart submetering for data collection and reporting requirements.
With green leases, landlords and tenants become partners in sustainability, working towards a shared vision, aligning their interests and aspirations, while creating spaces that save energy and promote health, wellness, social value, and environmental excellence.
The concept of green leases might be new to some, and that’s OK. By embracing green leases, we can transform the landlord-tenant relationship into a powerful force for positive change.
Some of the areas where ‘green’ lease clauses are gaining popularity are:
“It is important to recognize that no one is perfect. Sharing lessons learned and imperfections can actually be a meaningful step towards positive change. We are proud to be collaborative partners to our clients as we navigate the constantly evolving ESG reporting requirements,” Brandy highlights.
“You are not alone. Together we will achieve net zero by 2050, and hopefully, we’ll have a little fun working together along the way,” she adds.
