These days, consumers care more than ever about sustainability — in what they wear, what they eat, and even where they live. That’s why now, more than ever before, sustainable real estate is on the rise and it’s become increasingly more imperative for GPs to ensure a reduced environmental impact for each commercial real estate investment in order to attract investors and tenants alike.
The effects of climate change are hard to deny, and recent legislation has attempted to mitigate some of those challenges. In 2022, the Inflation Reduction Act (IRA) was enacted, one of the nation’s largest investments in a greener economy. Through the IRA, the government enacted various tax incentives in order to spur greater investment in clean energy while reducing greenhouse gas emissions. As a result, there has been more of a market for renewable energy across various sectors, including commercial real estate.
GPs need to understand that sustainable real estate is not just a trend — it’s here to stay. But what, exactly, does sustainable real estate entail? It involves reducing the environmental impact of existing real estate through a variety of initiatives, including retrofits, as well as ensuring that new buildings are built with sustainable features and practices in mind. Let’s explore what this means further.
The Way of the Future: Sustainable Real Estate Practices
Residential real estate is aging and about half of U.S. homes are at least 40 years old. Commercial buildings are aging right alongside them, so it’s important to retrofit, or modernize, these buildings to create more sustainable practices. Typically, retrofitting a building involves upgrading lighting and energy features to run more efficiently. For instance, when retrofitting a commercial building, GPs might consider LED light bulbs instead of fluorescent lights, or adding solar panels to the roof. It might also entail replacing windows or doors, adding insulation, or upgrading the HVAC system. While similar to a renovation, a retrofit is specifically designed to improve a building’s functionality and sustainability features.
Sustainable real estate is also important in new construction as well. This can include utilizing more eco-friendly materials, including recycled materials, using locally sourced materials or suppliers, and focusing on improved energy efficiency.
Climate change plays a key role in the commercial real estate choices GPs make. For instance, they must seriously consider location when conducting due diligence before finalizing a transaction. If the building they are considering is in a location that is frequently targeted by hurricanes or other natural disasters that have been exacerbated by climate change, GPs might need to reconsider the transaction.
The Effects of Sustainable Real Estate
Besides attracting eco-conscientious investors and tenants, sustainability in commercial real estate can provide many benefits. For instance, retrofits can actually reduce energy usage by 58 to 79%, resulting in lower utility bills as well. GPs can also enjoy lower maintenance costs as well, since LED light bulbs are designed to last longer than fluorescent ones, reducing the need for replacements.
Green labels, like ENERGY STAR and LEED, are highly sought after in sustainable real estate. This means that more sustainable commercial buildings appeal to both LPs and tenants who want to reduce their environmental impact, leading to an increase in the building’s value and a greater ROI for you.
Be Strategic with Your Sustainable CRE Tool
Leverage the opportunities that sustainable real estate provides and invest in a CRE tool that will streamline your operations while you work towards a greener portfolio. It’s important to find a tool that is paperless and seamless. Find an investor portal that can allow you greater communication and transparency with your LPs, while keeping documents secure.
Investment database management is essential in your CRE tool as you’ll need to interact with different vendors and investors as you work towards more sustainable transactions. Get a full picture of your investors, while also allowing them to access portfolio performance and holdings.
Eliminate extra steps and unnecessary paperwork with an integrated banking platform that will allow you to transfer money quickly and efficiently, while also earning a high-yield APY. Track your assets, enable distribution payments, and create a more sustainable paperless system with a CRE tool that will save you time and improve your organization.
Trust Covercy to Help You Move Towards a Greener Future
Covercy is designed to streamline your commercial real estate operations. Creating a more sustainable world is important, but it can be time consuming and overwhelming. Let Covercy eliminate unnecessary stress by saving you time on managing your investors. In addition to a valuable integrated banking platform, Covercy allows you to fundraise capital calls, share secure documents among investors, conduct cross-border transactions, and much more.
To streamline your next sustainable real estate transaction, turn to the experts at Covercy. Book a demo to see how we can help you.