When it comes to sustainable commercial real estate (CRE) initiatives, the heat is on. Not only was 2023 officially the warmest year on record — with global temperatures continuing to increase at an escalated rate — economic losses from natural disasters worldwide topped $380B. In the U.S. alone, damages from a record number of extreme weather and climate events have exceeded $92.9B. Added to that, insurers continued their retreat from liability coverage, in some instances eliminating building coverage in specific geographic locations.
Offsetting these statistics, funding for climate-focused start-ups continues to climb, with investments in the climate tech ecosystem increasing 45X in combined value in the past decade. CRE has been the fastest-growing climate tech vertical, with $5B invested in 2023 alone.
Increasing frequency of extreme weather events — together with pending Climate Disclosure Rules from the U.S. Securities and Exchange Commission (SEC) that would enhance and standardize climate-related disclosures by public companies and in public offerings — are increasing CRE’s sustainability efforts.
While challenges from U.S. states, non-governmental organizations (NGOs), and climate advocates have resulted in a stay of the SEC Rules’ implementation for now — changes are inevitable.
That’s why many CRE portfolios are prioritizing environment, social and governance (ESG) issues — as well as certification — to help them achieve their sustainability goals and pave the way to net zero. It’s a positive approach that’s lead to increased occupancy and revenue as tenants seek operators that showcase a desire to implement eco-friendly strategies that support tenant and community well-being.
KBS, for instance, has furthered its commitment to being an industry ESG leader by setting the goal of achieving a 5% greenhouse gas emissions reduction by 2025. This includes emissions under the company’s direct control and on-site emissions generated by tenants in the properties that KBS manages.
CRE sustainability goals can be achieved through a mix of building design, low-carbon construction techniques and eco-friendly construction materials. Additionally, advancements in HVAC, insulation, water conservation and waste management are not only lowering carbon emissions but moving sustainable alternatives into the mainstream. Solar, wind, hydropower and geothermal energy options may provide alternative power options depending on building location and budget. And sustainable design elements such as vertical gardens may improve indoor air quality while helping to allay ambient noise.
LEEDing the Way Through Certification
Certifications such as those awarded by LEED (Leadership in Energy and Environmental Design) are gaining momentum. More than 6,000 LEED-certified commercial projects, representing 1.36B GSF, were achieved in 2023 alone — a new record.
LEED is the major building certification program in the United States. Run by the United States Green Building Council (USGBC), LEED is the most widely used green building rating system. A commercial building certified by LEED demonstrates how high-rise and high-use facilities can integrate a range of sustainable real estate initiatives to profound effect.
With a number of LEED properties in its portfolio, KBS understands that the advantages of LEED certifications in CRE sustainability are significant. Designing and constructing buildings that support the well-being of their occupants — not to mention, the economy and environment — is crucial to a better future and to tenants’ standard of living.
KBS strives to be diligent about quality, green initiatives and energy efficiency, focused on reducing consumption while continuing to provide the services tenants expect. And today, tenants expect that their place of business will not only benefit them — but also the greater good.
Not only does LEED-certified buildings cost less to maintain, produce less waste and lower exposures to toxins, the expenses incurred to attain sustainable certifications are usually offset by increased capital values.
Sustainability and GRESB
With companies like KBS committed to office well-being efforts as well as furthering industry leadership through ESG, receiving validation though organizations such as the Global ESG Benchmark for Real Assets (GRESB) is essential. In fact, KBS has been recognized for sustainability, having received Green Star designation in the GRESB 2023 Real Estate Assessment.
GRESB places focus on what investors and other industry stakeholders consider to be the key issues for sustainability performance for real estate investments. In 2021, the organization provided assessments to more than 1,500 property companies, REITs, funds and developers. Those assets — totaling almost 117,000 in 66 countries – represented $5.7 trillion in assets under management.
With plans to participate annually in the GRESB assessment, KBS is demonstrating its continuing commitment to ESG transparency and improved performance.
“KBS views sustainability among its top values as a real estate owner and operator. The ranking from GRESB validates our initiatives over the past several years,” said Marc DeLuca, CEO and Eastern regional president of KBS. “Our firm is honored to be recognized among some of the world’s largest real estate companies.”
Given current climate conditions, sustainability must take a lead role in CRE operations and new construction planning. The increasing array of clean and green tech options, are helping take the heat off as CRE investors identify the most financially sound and longest-lasting sustainability initiatives. Certification will help communicate those leaders in the CRE industry.
Learn more by visiting KBS.com/Insights.
