Electric Vehicle Charging Station Investments
One of Biden’s climate initiatives is a massive infrastructure bill with an emphasis on electric cars. The transportation sector is the largest contributor of carbon dioxide emissions in the U.S., and with electric car sales claiming only 1.8% of the market share in 2020, there is plenty of room for growth. In fact, automakers expect 50% of new car sales will be electric within 10 years. Biden’s infrastructure bill will help fuel demand by funding 500,000 electric vehicle chargers, as well as offer buyer grants and tax incentives, among other things. What this means for the office sector is that it will likely lead to a soaring appetite for EV charging stations at buildings, which could be a huge selling point for tenant retention and new negotiations.
Access to Funding
Getting a sustainable and renewable energy project underway hasn’t always been an easy feat, and historically commercial real estate operators often encountered barriers for project approval and financing. Biden aims to reduce U.S. building carbon dioxide emission by 50% by 2035, which should help loosen up coffers and give commercial real estate greater access to financing and initiatives such as Property Assessed Clean Energy loans, renewable energy purchasing incentives and green tax credits.
As more dollars are allocated to eco-friendly projects, the leap for certification programs will likely follow. Currently, there are several programs that either certify or offer guidance for “healthy and sustainable buildings”, of which Leadership in Energy and Environmental Design (LEED) and ENERGY STAR certifications are considered key benchmarks. Since the onset of the pandemic, several new certification programs have been developed to adapt to a post-pandemic world, including a WELL Health-Safety Rating from the International WELL Building Institute; a new Fitwel Viral Safety Module from the Center for Active Design; and Safety First pilot credits from LEED. Under Biden’s climate plan we expect to eventually see the creation of new building energy performance standards, regulations and certifications for non-residential real estate.
Tenant Sustainability Initiatives
According to the Urban Land Institute (ULI), commercial tenants consume 40-60% of the total energy used in buildings. And up until recently, “going green” tended to fall primarily on the property owner/operator. That is slowly changing. More tenants are making health, wellness and sustainability an integral part of their corporate social responsibility strategies. Several programs have been developed to encourage tenant energy conservation and carbon footprint reduction, including the ULI’s Tenant Energy Optimization Program; ENERGY STAR Tenant Space, and the U.S. Department of Energy’s Green Lease Leaders. This trend should continue to gain traction as reflected by a study that showed 62% of executives considered a sustainability strategy necessary to be competitive today, and another 22% thought it will be in the future. Earning that “healthy building” title will become a collaborative effort between property owners and tenants.
The affordability to buy, generate and maintain solar power has made this energy option a very sustainable solution for commercial real estate operators. With increased support from local and state agencies, solar installations are projected to grow by 95% year-over-year. Couple that with the Biden Administration’s recent goal to cut the cost of solar energy by 60% over the next decade, and the adoption of sun-generated power in the office space should accelerate rapidly.
Space Design and Smart Technology Integration
On the property level, more operators are incorporating sustainable concepts to maximize office space, optimize employee wellness, increase employee engagement and ultimately drive higher performance. Communal green and open space rank high on wish lists, as well as flexible and transformative space that encourage social equity. And natural lighting. There never seems to be a shortage in demand for natural lighting. New technologies and processes targeting tenant health and building efficiencies are also on track to become standard practice, especially amid an ongoing pandemic. Think high-tech ventilation and moisture controls; touchless technologies to minimize human interaction; smart systems to monitor building operations and energy usage; and sophisticated amenity and facilities technologies to maintain safe tenant interactions and occupancy.
Politics aside, successful sustainability and health/wellness programs can help commercial real estate companies become more efficient, relevant and profitable. From an operational perspective, the U.S. Green Building Council (USGBC) estimates that going green can increase a property’s value by approximately four percent—a substantial amount when you consider some trophy office assets can easily fetch nine figures. On the tenant health and wellness side, prioritizing a safe working environment is critical in restoring worker confidence and return to office, which will drive future office occupancy.
Want to learn more? Click here to learn how sustainability is moving the Net Operating Income (NOI) needle in commercial real estate.