Sustainable investment will only be successful if it ensures that the interests of all stakeholders are properly aligned, with tenant engagement being key, says Lisa Coca

On a daily basis, the media is populated with reports on the European Union, its member states, and their efforts to implement policies that will drive reduced emissions and positively affect climate change.

Buildings are at the forefront of this debate. According to the World Business Council of Sustainable Development: "Worldwide [buildings] account for a surprisingly high 40% of global energy consumption, and the resulting carbon footprint significantly exceeds those of all transportation combined."* Buildings are a significant part of the problem and must, therefore, also be part of the solution.

Unfortunately, legislation, and the broader market, too often overlooks a key stakeholder in the debate on buildings and emissions - tenants. Tenants are the ultimate consumers and their consumption patterns must be directly targeted and addressed. More importantly, there is growing evidence that commercial office tenants want ‘green'. In a recent survey conducted by GE Capital Real Estate across more than 2,220 office tenants in the US, Canada, France, Germany, Sweden, the UK, Spain and Japan, an average of 50% of those polled said that green building initiatives are a high priority, with energy efficiency topping the list.

However, the answer is not as simple as it seems. Predominant lease structures create a mis-alignment of incentives between landlords and tenants: it is investors who commit the capital to sustainable upgrades while tenants accrue the benefits of energy saving. Clearly legislators, investors and landlords need to work together to better address this divide. To achieve meaningful and lasting reductions in the environmental footprint of the commercial office sector, tenant engagement is key.
In general, engagement programmes should seek to:

• Provide tenants with greater line of sight into energy consumption;
• Empower tenants to reduce occupancy costs, and to improve productivity and comfort;
• Educate tenants on environmental and economic benefits of sustainability.

Investors should encourage commitment of both capital and resources to programmes dedicated to all of the above and more. Engaging with tenants on the issue of sustainability can create competitive advantages by improving tenant satisfaction, retention and leasing, not to mention long-term asset value.

We have a number of programmes underway and in development to engage with tenants and align the interests of all stakeholders.

Information: Sustained reductions in energy consumption and reduced emissions are heavily dependent upon behavioural change. Behavioural change, in turn, is dependent upon information. To quote Lord Kelvin: "If you cannot measure it, you cannot manage it."

As part of our sustainability programme, we are developing on a country-by-country basis a detailed road map to roll-out programmes and tools that will enable us to measure and track energy consumption in our office assets. This information will be used to develop operational strategies to improve the energy consumption profile of the common areas, and common building systems, which are under our control. However, in most office buildings the areas we control will account for less than 20% of the building's total footprint. In the coming months, we will launch a number of programmes to engage with tenants and provide them with greater insight into their own energy consumption. Not surprisingly, the same programmes and tools we are developing for our internal use can be shared with our tenants to help them affect the same in their individual spaces.

Technology: Technology is a powerful tool to drive reduced consumption and lower costs of occupancy. In some instances, even in the absence of behavioural change, meaningful reductions can be achieved. One simple technology that is leading to impressive reductions is the installation of smart meters and automated meter reading. By installing and using this low-cost technology to review half-hourly energy profiles, and then identifying with our property managers unnecessary out-of-hours consumption, we are usually able to reduce operational energy consumption by 10-20%, and in some cases by much more.

In addition, the rate of innovation in technology applications for commercial buildings has increased dramatically in recent years. We are piloting new technologies while improving the operational efficiency of its buildings. As we test and validate emerging concepts, we attempt to quantify both the economic and environmental benefits, as well as develop a communication plan to share and educate our tenants.

One example of this is our recent investment in the pilot installation of GE's Habiteq system in our buildings. Habiteq links heating, ventilating, and air conditioning (HVAC) and lighting to smart switches and sensors to offer tenants greater visibility and control over energy expenditures in their individual spaces via a user-friendly console. Tenants can control HVAC and lighting at any time of the day or night.

In another pilot, we have partnered with Scientific Conservation Inc, an ecomagination challenge winner, to deploy SCIwatch™. SCIwatch™ interfaces remotely with building automation systems to analyse energy consumption in commercial buildings and to deliver automated fault detection and predictive maintenance techniques. Benefits include reduced energy usage and lower maintenance costs; the benefits of which accrue to tenants.

Green leases: At a minimum, green leases provide a framework to promote co-operation between landlords and tenants. Typically seen in a multi-tenanted building, green leases encourage landlords and tenants to operate their buildings and their respectively controlled areas more efficiently, and seek out cost-effective ways to improve environmental performance in terms of energy, water, and waste. We are helping to develop a standard UK approach through the Better Buildings Partnership, in collaboration with the UK property industry and government.

Sustainability is an increasing value driver for all stakeholders in commercial real estate. Tenant engagement on this issue offers commercial property investors a unique value proposition in the face of a strengthening regulatory landscape and heightened occupier awareness.

Partnering with tenants is a valuable strategy to reduce the cost of regulatory compliance and mitigate risk of asset obsolescence, while it also improves tenant satisfaction and increases the likelihood of lease renewal. Controlling operating costs in an environment where energy costs are likely to continue rising will drive occupancy, and create value for all stakeholders.

Footnote:
* World Business Council of Sustainable Development, Energy Efficiency in Buildings: Transforming the Market, August 2009

Lisa Coca is managing director and global sustainability leader at GE Capital Real Estate