GLOBAL - Investors must place sustainability at the top of their agenda, because it is likely to have a significant impact on commercial real estate and even improve returns, according to Watson Wyatt.
Recent research by the global consulting firm claims sustainable buildings could prove highly competitive in the future, by trading at a rental premium and achieving greater capital values, and could experience shorter vacant periods and slower depreciation.
Jane Goodland, investment consultant at Watson Wyatt, said: "We believe sustainability will have more influence on investment returns in future, impacting rental values, vacancy periods, capital expenditure and capital values."
"We therefore encourage long-term investors to assess the sustainability performance of their real estate portfolios and incorporate sustainability considerations into decisions about acquisition, management and sale of real estate assets."
The current financial crisis and economic uncertainty has possibly made sustainability less of a priority for the industry in the short-term, but Watson Wyatt believes new regulations and changes in occupier demand are likely to raise the profile of sustainability issues.
The current financial crisis and economic uncertainty has threatened to overshadow the importance of developing and refitting real estate to sustainable principles.
But Watson Wyatt believes new regulation and changes in occupier demand will continue to raise the profile of sustainability issues.
"Current conditions are leading to a greater focus on investment risk, including those stemming from sustainability goals," said Goodland.
According to Watson Wyatt, the property industry has already made considerable efforts to understand and measure the potential impact that sustainability will have on returns.
In order to improve long-term investment returns and help manage risk, Watson Wyatt is encouraging real estate asset managers to identify buildings in their portfolios that may be in breach of current or future legal requirements and to take actions to upgrade sustainability performances of properties.
Asset managers must set targets and timescales as part of their maintenance and refurbishment programmes, and should consider sustainability when carrying out real estate acquisition, development, management and disposal decision-making, the consultancy said.