Tenants’ increasing preference for sustainable building features and a willingness to pay a premium for them is a reason for facilities managers and property owners to align investments with sustainability goals, according to a report by CBRE, the Rocky Mountain Institute and Urban Land Institute.
The commercial real estate industry has been talking about energy efficiency and decarbonization for years, but the benefits of these initiatives have often been calculated separate from other property goals, according to Brett Bridgeland, senior director of sustainability advisory at CBRE, who co-authored the report.
“We're realizing that there are limitations to how much you can accomplish if you put [decarbonization] in its own silo,” Bridgeland said in an interview.
Facilities teams that work toward both asset management and decarbonization goals should manage these aims together, he said.
By embedding decarbonization planning into asset and capital investment decision-making, organizations can shift to proactive property maintenance and upgrades while unlocking operational savings, minimizing financial risk and advancing sustainability goals, the report says.
“Collectively, we're realizing that there's more that can be accomplished if we integrate sustainability into the way we asset manage and the way we facility manage, as opposed to relegating it to its own separate initiative [and] budget,” Bridgeland said.
Owners see decarbonization as a way to create asset value, but there’s been a disconnect between this strategic goal and implementation, report co-author Tamara George, manager of building decarbonization finance at RMI, said in the interview.
“Facilities managers are obviously there on the front lines,” she said. “You have the strategy teams setting high level visions, but when it trickles down to the actual implementation, there's a lot of disconnect there.”
Thinking about decarbonization separate from day-to-day management of the facility stands in the way of making progress on both of those goals, Bridgeland said. When sustainability and asset management sit separately from each other, oftentimes in a mode of reaction maintenance, its “the hardest way to do decarbonization,” he said.
From a market standpoint, tenants favoring higher-tier spaces with sustainability and wellness features means owners and facility managers must join together to employ strategic decarbonization planning strategies, the report says.
A CBRE sentiment survey last year found nearly 70% of occupants would either reject or reduce what they were willing to pay if a building didn’t have sustainable features and operations.
Meanwhile, CBRE’s most recent sustainability index shows that phasing in major energy upgrades results not only in emissions reduction but also rent premiums and improved tenant satisfaction. These energy-efficient properties financially outperformed less efficient comparable properties by 5% since 2021.
Data showing the value of decarbonization can help when managers need budget resources for facility repairs and upgrades. “Look at it in terms of incremental economics,” Bridgeland said, not “just the gross cost of the heat pump project. That’s where we can start to see some breakthroughs.”
The report lists several principles of strategic decarbonization planning designed to work together so that asset management and decarbonization are combined into a single strategy. The principles include managing energy demand; implementing life-cycle-based expense planning; deploying an integrated design approach; aligning upgrades to trigger events; integrating risk overlays; and phasing in cost-effective quick wins.
“Together, these strategies reduce energy use, phase out on-site fossil fuel systems in favor of all-electric alternatives, and incorporate renewable energy sources to increase asset value and reduce their carbon footprint,” the report says.
On the operations side, facility managers should think about adding smart controls and participating in demand response programs. They can also implement energy storage programs and make sure they’re right-sizing their building equipment. Many fossil-fuel based systems are commonly oversized and can be right-sized to help avoid added capital cost and demand charges of oversized systems, the report says.
“The goals of the FM should be married to the goals of decarbonization,” Bridgeland said.
