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Sustainability in Real Estate – The Road Ahead in 2012

This past year has been marked by corporate and commercial real estate leaders who have increasingly embraced the principles of sustainability to reduce operating expenses, enhance enterprise value and align real estate/facility portfolios with their organization’s goals of financial performance and environmental excellence.

In 2011, the challenge for executives did not come from their inability to succeed and lead but from limited capital expenditure resources in the face of the risk and uncertainty of an expanding yet fragile world economy.

2012 will bring its own set of risk and uncertainty but real estate professionals seem more motivated to develop and implement portfolio-wide sustainability strategies with the confidence that an organized commitment to corporate sustainability better aligns them with top management, investors, customers, talent and regulators. And, that sustainability is a better way to organize and motivate geographically dispersed, functionally divided staff.

In the coming year, leading real estate executives must recognize that individual sustainability initiatives, no matter how successful, are unlikely to be acknowledged at a board or investor level. Conversely, real estate leaders that aggregate multiple successful sustainability initiatives with immediate payback paired with initiatives that have a longer-term internal rates of return can organize and animate the drive to higher performance throughout a large real estate portfolio that will justify Board, investor and top customer recognition and support.

The key to sustainable real estate strategy success in 2012 will rely on:

  • Leading companies who recognize sustainability as a megatrend that presents strategic imperatives for senior executives, where real estate plays a prominent and sometimes guiding role in enterprise wide sustainability.
  • A more comprehensive, internally branded “sustainability strategy” can be better resourced by the C-suite and the Board, rewarded by investors, supported by employees and lead to higher scores on the rapidly emerging number of indexes that measure sustainability.
  • Energy efficiency and cost savings will remain the core of real estate sustainability strategy, but a growing number of corporate users will see the value of enhanced employee health, well-being, and productivity within workplace environments.
  • Leading real estate executives will establish a compelling long-term vision of sustainable real estate with a strong business case and create effective policies and management structures to institutionalize sustainability.
  • Real estate executives will be identified as “Committed”, “Advanced” or “Leaders” depending on the maturity of their strategy. It will be critical to evaluate and identify improvements through the use of assessment tools such as the two-tiered qualitative “Sustainability Performance Assessment” (SPA), developed by the Sustainability Roundtable, Inc. (SR, Inc.)
  • The SPA reveals that leading companies will invest broadly in portfolio sustainability strategies but most companies still do not adequately invest in the areas of governance or results.

Will you be among the committed, advanced real estate leaders to achieve sustainability success in the coming year and move the needle on the dial?

Dare to be a pioneer and become the catalyst for change that will drive your company to greater sustainability in 2012.

Larry Simpson is executive vice president, advisory services at Sustainability Roundtable Inc. He has been a leading consultant and business development executive at the intersection of finance, technology and corporate real estate for more than two decades. He has led a national architectural/engineering firm’s business development efforts, served as a senior manager of Ernst & Young’s Real Estate Advisory Services, served as VP of North American Operations for a leading information software provider to real estate and directed the industry leadership best practices sharing service created by one of the world’s foremost private software developers for real estate. If you would like to learn more about SR Inc.’s “Strategic Performance Assessment” or how its subscription-based research and management best practice advisory services can help you drive your organization closer to sustainability, visit us at www.sustainround.com or contact SR Inc.’s Larry Simpson, Executive Vice President – Advisory Services at larrysimpson@sustainround.com.

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2 thoughts on “Sustainability in Real Estate – The Road Ahead in 2012

  1. Larry, I think a lot of CRE leaders “get it”. It’s often the C-suite leaders who haven’t made the connection between their carbon reduction goals and the occupied portfolio that is responsible for the majority of their carbon emissions. So companies that might spend millions on carbon offsets that produce no cost savings to the company won’t spend and equal amount on solar installations or energy retrofits that pay for themselves in 5 to 7 years followed by 20 years of cost savings, plus carbon emissions. Companies that spend millions making sure their people have the right technology to make them more productive won’t spend a fraction of that on green workplaces shown to make workers more productive. The exceptions–and I could name a dozen–are companies where the CRE department is seen as a strategic business driver rather than a cost center.

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