The Road Ahead in 2012 for the Real Estate Industry in the Drive to Greater Sustainability

December 18, 2011

This past year has been marked by corporate and commercial real estate leaders who have increasingly embrace the principles of sustainability to reduce operating expenses, enhance enterprise value and align real estate/facility portfolios with their organization’s goals of financial performance and environmental excellence.

In 2011, the challenge for executives did not come from their inability to succeed and lead but, from limited capital expenditure resources in the face of the risk and uncertainty of an expanding yet fragile world economy.

2012 will bring its own set of risk and uncertainty but, real estate professionals seem more motivated to develop and implement portfolio-wide sustainability strategies with the confidence that an organized commitment to corporate sustainability better aligns them with top management, investors, customers, talent and regulators. And, that sustainability is a better way to organize and motivate geographically dispersed, functionally divided staff.

In the coming year, leading real estate executives must recognize that individual sustainability initiatives, no matter how successful, are unlikely to be acknowledged at a Board or investor level. Conversely, real estate leaders that aggregate multiple successful sustainability initiatives with immediate payback paired with initiatives that have a longer-term internal rates of return can organize and animate the drive to higher performance throughout a large real estate portfolio that will justify Board, investor and top customer recognition and support.

The key to sustainable real estate strategy success in 2012 will rely on:

  • Leading companies who recognize sustainability as a megatrend that presents strategic imperatives for senior executives, where real estate plays a prominent and sometimes guiding role in enterprise wide sustainability.
  • A more comprehensive, internally branded “sustainability strategy” can be better resourced by the C-suite and the Board, rewarded by investors, supported by employees and lead to higher scores on the rapidly emerging number of indexes that measure sustainability.
  • Energy efficiency and cost savings will remain the core of real estate sustainability strategy, but a growing number of corporate users will see the value of enhanced employee health, well-being, and productivity within workplace environments.
  • Leading real estate executives will establish a compelling long-term vision of sustainable real estate with a strong business case and create effective policies and management structures to institutionalize sustainability.
  • Real estate executives will be identified as “Committed”, “Advanced” or “Leaders” depending on the maturity of their strategy. It will be critical to evaluate and identify improvements through the use of assessment tools such as the two-tiered qualitative “Sustainability Performance Assessment” (SPA), developed by the Sustainability Roundtable, Inc. (SR, Inc.)
  • The SPA reveals that leading companies will invest broadly in portfolio sustainability strategies but most companies still do not adequately invest in the areas of governance or results.

Will you be among the committed, advanced real estate leaders to achieve sustainability success in the coming year and ‘move the needle on the dial’?

Dare to be a pioneer and become the catalyst for change that will drive your company to greater sustainability in 2012.

If you would like to learn more about SR Inc.’s “Strategic Performance Assessment” or how its subscription-based research and management best practice advisory services can help you drive your organization closer to sustainability, visit us at www.sustainround.com or contact SR Inc.’s Larry Simpson, Executive Vice President – Advisory Services at larrysimpson@sustainround.com.

(The author is Larry Simpson, Executive Vice President, Advisory Services, Sustainability Roundtable, Inc. Additional posts can be found in SR Inc.’s Forum found at http://www.sustainround.com/aboutst/blog/)

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SR Inc. to Convene Corporate/Commercial Real Estate Executives and Drive an Industry Closer to Greater Sustainability

November 12, 2011

The Sustainability Roundtable, Inc. (SR Inc.), the for-profit, shared cost research and consulting firm will bring together corporate/commercial real estate executives and sustainability professionals who represent over 60 member-client organizations at SR Inc.’s Third Annual Summit entitled, “The Change Driving Sustainability” on November 30th and December 1st at the St. Regis Hotel in Washington D.C.

This invitation only two-day event will feature: sustainability excellence award winners; presentations and case studies of SR Inc.’s 2011 Research Program; panel discussions with Federal agency representatives; and, facilitated sessions to develop SR Inc.’s 2012 Research Program.

Management Best Practice Sessions will include:

Portfolio-wide Sustainability Strategies: What strategies do Real Estate Executives use to resource and create sustainable value. (Includes Innovative Finance for Energy Efficiency)

Benchmarking Sustainability: What sustainability KPIs should Leaders adopt and what are the relevant performance benchmarks.

Sustainable Leased Space: How Leaders move to more sustainable leased space? How Tenants and Landlords systematically implement green leases and what provisions in RFPs, LOIs and Leases are used.

Alternative Workplace Strategies: What AWS strategies are successfully adopted to increase productivity and how can landlord’s best respond.

Working with the Federal Government: What are the best sustainability resources available within the Federal Government and how can Real Estate Executives partner with them.

The collaboration of SR Inc.’s member-clients supported by SR Inc.’s analysts, researchers, consultants and advisors is rapidly driving the real estate industry toward greater sustainability with breakthrough management best practices about ‘what works’ to apply the principles of sustainable real estate strategies across a portfolio that reduce operating expenses/occupancy costs; enhance enterprise/asset value; and align with organizations’ commitment to the environment.

If you would like to learn more about SR Inc.’s Annual Summit III or how SR Inc.’s resources and implementation guidance could help you drive your organization closer to sustainability, contact SR Inc.’s Larry Simpson, Executive Vice President – Advisory Services at larrysimpson@sustainround.com.

(The author is Larry Simpson, Executive Vice President, Advisory Services, Sustainability Roundtable, Inc. Additional posts can be found in SR Inc.’s Forum found at http://www.sustainround.com/aboutst/blog/)

 


It’s not Rocket Science or Brain Surgery, its Corporate Real Estate Budgeting for Greater Sustainable Outcomes

August 22, 2011

Summertime, right? Time for vacation with family and to regroup before the blur of activity in the post-Labor Day fourth quarter? Wrong.

For most of you, the month of August is about hungering down in a conference room converted, “war room” with co-workers crunching numbers to prepare your real estate budget for departmental and corporate approval.

As you know, the budgeting season can be a tedious process to track down information, project internal charge-back costs to offset expenses, calculate macro interest rates, collect data from various systems and sources, and project/reconcile budget-to-actuals.

But, you don’t have to go visit a rocket scientist or ask a brain surgeon to know we are still amidst difficult financial times for most companies and budgeting is getting more and more difficult. The challenges you face are how to reduce operating expenses and enhance asset/enterprise value. But, now you’re being asked more and more to align the real estate portfolio with corporate environmental goals while achieving an acceptable rate of return.

How are you going to do find monies in your budget to create a sustainability strategy with so much less? The Sustainability Roundtable, Inc. (SR Inc.) and their most recent research just might have some of the answers.

SR Inc., in their report, “Allocating Resources for Sustainable Outcomes” found that:

  • Sustainability upgrades can have a substantial impact on the enterprise bottom-line to reduce operating and maintenance costs, mitigate carbon impact, improve employee productivity and increase asset value.
  • Capital allocations to improve indoor environmental quality can be more cost-effective and create greater enterprise value than energy conservation and efficiency investments.
  • Determining the relevant metrics and qualifying some sustainability key performance indicators (KPI) is difficult but methods are emerging measure intangible benefits.
  • Base financial models such as simple payback and ROI are inadequate to assess the real costs and benefits of most sustainability projects.
  • Energy performance can be benchmarked, monitored and evaluated, and therefore energy efficiency upgrades are high-priority for innovative finance programs.

But, you don’t own all of your facilities and have little control on the pass through expenses from your landlords in your current lease. SR Inc. has conducted some breakthrough research in a report entitled, “More Sustainable Leased Space,” where the adoption of ‘green lease’ language and other measures can help you achieve greater sustainability and reduce occupancy expenses. The research found:

  • To overcome conflicting priorities and the barriers that hinder the move to more sustainable leased space, leading companies develop a strong business case aligned with corporate goals, conduct total lifecycle accounting, adopt “green” leases, and gather data for sustainability KPIs to benchmark internally and externally.
  • Many corporate tenants pursue LEED-CI or BREEAM interiors to reinforce credibility, provide brand recognition and engage employees/clients. To avoid administrative burdens of formal certification but still obtain the benefits, some choose to ‘design to LEED-CI’ but not certify.
  • To achieve cost-effective sustainable leased space and certification, CRE leaders give preference to those buildings that are ENERGY STAR rated or whose landlord has demonstrated a commitment to sustainability.

SR Inc.’s Vice President of Research and Consulting, Irina Mladenova claims, “overestimating certification costs and setting unrealistically high hurdle rates based on a simple payback analysis are typically the biggest barriers in the move towards more sustainable leased space. When real estate executives hire consultants to lower the documentation and filing cost but do not overpay them and when a life-cycle cost analysis rather than a simple payback analysis is used to establish hurdle rates, the additional costs to achieving green building certification is in fact far less (0-2%) than many real estate professionals assume. And, there is an increasing recognition that green buildings result in significant, yet hard to quantify, health and productivity benefits.”

The challenge to find monies in your budget for sustainable real estate is no longer a cost benefit trade-off. The budgeting process may be arduous but, there is clear evidence that you can achieve a more sustainable real estate portfolio by allocating resources where they will have the greatest impact and implement initiatives that are more about changing behavior than being capital intensive. And, besides, budgeting for sustainable outcomes is a heck of lot easier than rocket science and brain surgery.

If you would like to learn more about how you can create a budget with greater sustainable outcomes you can download SR Inc.’s research: “More Sustainable Leased Space,” (http://sustainround.com/research/leasedSpace.php);  and for a copy of “Allocating Resources for Sustainable Outcomes” please contact Larry Simpson, EVP of Advisory Services at larrysimpson@sustainround.com.

(The author is Larry Simpson, Executive Vice President, Sustainability Roundtable, Inc.  who can be reached at larrysimpson@sustainround.com. Additional posts can be found in SR Inc.’s Forum found at http://www.sustainround.com/forum/ )


Benchmarking Corporate Real Estate Data to Drive Sustainability Excellence: “You Can’t Manage What You Can’t Measure”

February 24, 2011

Benchmarking is essential to create a real estate strategy that ultimately can drive sustainability excellence…to get where you want to go, you have to know where you are starting from.

The primary purpose of benchmarking corporate real estate data is to discover areas of underperformance (both relative to relative to leased and owned assets within your portfolio as well as relative to industry standard by building type, industry, and geography), investigate the reasons for this, set goals, and develop improvement initiatives to achieve those goals.

Benchmarking is not usually a one-time exercise. Regular benchmarking on an annual basis is key to achieving goals and continuous improvement.

Throughout the benchmarking process you have to keep in mind the axiom, “you can’t manage what you can’t measure,” and that the purpose is not measurement for it’s own sake, but measurement to manage for greater sustainability.

In a monthly webinar by the Sustainability Roundtable, Inc. (SR Inc.) in October 2010 entitled, “KPIs and Benchmarking Portfolio-wide” we cited sustainability key performance indicators (KPIs) in the most common categories, include:

Operations (energy, water, waste, and space utilization)

Financial (capital investments, savings generated, operational investment of savings, return requirements/criteria)

Environment (indoor air quality, GHG emissions, and land use)

People (sustainability expertise, occupant engagement, alternative workplace options & utilization and occupant absenteeism)

The fundamental barrier to benchmarking is the difficulty to obtain reliable data, both for the assets to be benchmarked and for the benchmarks to be used. The critical steps to start an effective benchmarking program for real estate sustainability are:

Establish KPIs, or review them if these exist already, to evaluate whether or not you’re making progress across key impact areas. If not, select the appropriate common KPIs relevant to the company’s specific business model, product, and needs.

Determine whether the data for these KPIs exist within the enterprise, and if not, implement a longitudinal measurement and collection program to gather and track data.

Create a data repository (not spreadsheets) to collect and analyze the data, determine its completeness and reliability, and assure data quality.

Select the set(s) of external benchmarking data you will use, and ensure that these will be updated and available in the future.

Analyze the data and compare them to the benchmark set.

Publish the results to the teams responsible for data collection, and for facility and asset management. This establishes a baseline.

Set meaningful short, medium and long-term improvement goals, to position your assets and your portfolio where you want them to be.

Some of the more commonly used metrics are:

Energy use (all types, gigajoules per square foot per year)

Water use (gallons per square foot per year)

Waste to landfill (pounds per square foot per year)

Carbon dioxide equivalent, CO2e (pounds per square foot per year)

Air quality (particulates and other pollutants, parts per million)

Some available resources for benchmarking information can be found at:

BOMA’s Experience Exchange Report (EER) service – $279 Per Year

CoreNet Global Real Estate Benchmarking (REB) Portal – $175-275/Building

ENERGY STAR Portfolio Manager – FREE

Climate Disclosure Project – Cost Varies by Level of Inquiry

Corporate Global Reporting Initiative (GRI) Reports – FREE

Michael Gresty, SR Inc.’s Executive Vice President of Research and Consulting, notes that, “each one of the benchmarking steps are essential to create a process that empowers executives and staff with actionable information to support decision-making. Doing this is difficult—if it were easy, everyone would have done it already—but essential to the effective management of real estate assets for greater sustainability. Benchmarking is not an end in itself, but without it, it is impossible for managers to set robust goals to measure progress.”

Corporate real estate professionals who are serious about creating sustainable enterprise value from real estate assets ensure that they have a meaningful benchmarking program in place, and are committed to it long-term because, “you can’t manage what you can’t measure.”

Larry Simpson

Executive Vice President

Sustainability Roundtable, Inc.

larrysimpson@sustainround.com

 

(The post was originally published in the Sustainability Roundtable’s blog found at http://www.sustainround.com/forum/SOR/ and was republished with permission by the author, Larry Simpson, Executive Vice President, Sustainability Roundtable, Inc.)


Looking Back at the Top CRE3 Forum Posts in 2010

December 20, 2010

As 2010 draws to a close we want to provide a list of CRE3 Forum’s Top Posts of the year based on page views of our readers.

As you will see they fall into a few key themes of:

  • The impact corporate real estate has on company financial performance
  • Move to sustainability being integrated into CRE strategy
  • Role information systems play to support CRE department objectives

We hope you will take a look at the past posts and use some of the highlighted “best practices” as you prepare your department to support your organization in 2011 and beyond.

The Impact of Real Estate on Corporate Assets and Financial Performance

“The More Things Change in the CRE Industry…” Evolving Trends in the Coming Decade

“GREEN is the New BLACK”…Sustainability Comes to Corporate Real Estate

The Convergence in Corporate Real Estate

How Corporate Real Estate Can Boost Your Company’s Share Price

Solutions to Manage an International Corporate Real Estate Portfolio

Leased corporate real estate portfolios to be overhauled by new accounting standards

Tomorrow’s ‘Workplace of the future’ Impact on Today’s CRE Strategy

Budgeting Season Fodder – Preparing Your CRE Portfolio and Your Department for Performance Measurement in 2011

2010 Midterm Election Results Impact on the Economy and Corporate Real Estate

“You Don’t Pay For What You Don’t Use” — Strategies to address the efficiency, economics and environmental sustainability of your real estate portfolio

Corporate Real Estate Benchmarking White Paper NOW AVAILABLE

Are You Ready? The Role of Information Systems to Develop a CRE Strategy and Support Your Organization

“CRE Information System Tools are Cool but Data Integrity and Business Processes Rule”

Best wishes for a joyous holiday season and the hope for a personally and professionally prosperous New Year!!!


“The More Things Change in the CRE Industry…” Evolving Trends in the Coming Decade

December 9, 2010

As the first decade in the 21st century draws to a close the “CRE3 Forum” offers some insight on trends and changes the corporate real estate industry might anticipate in the coming decade.

While it is likely many of the cited dynamics will occur, some may not and others will emerge but, the most important thing to consider for you as a CRE professional is that change in our industry will happen and it’s your job and responsibility to find out how it will affect your organization. It is more likely there will be a convergence of trends creating complex issues that will impact your role to deliver efficient facilities in the right place at the right time at the right cost.

The companies of which you are employed are counting on you to be the subject matter expert on corporate real estate ready to anticipate and act on the inevitable changes associated with occupancy costs, sustainability and technology among others that are coming in the next few years. Read the rest of this entry »


“GREEN is the New BLACK”…Sustainability Comes to Corporate Real Estate

December 2, 2010

The facts are irrefutable that America’s companies have embraced sustainable business practices that are translating into corporate real estate strategies.

According to the recent UN Global Compact-Accenture CEO Study1, “93% of CEOs believe that sustainability issues will be critical to the future of their business and 96% of CEOs believe that sustainability issues should be fully integrated into the strategy and operations of a company.”

The role of corporate real estate to adhere to the C-suite’s commitment to sustainability results from:

A)   Real estate is a significant component of a company’s Plant, Property and Equipment net value and often comprise 20-50%+ of corporate assets on the balance sheet (see CRE3 Forum post, “Impact of Real Estate on Corporate Assets and Financial Performance”2)

B)   Buildings and facilities account for 70% of electricity consumption and 40% of greenhouse gas (GHC) emissions

C)   Owned and leased CRE portfolios house a company’s most precious resource – their staff. And, enable operations therefore, it is critical that they be managed in the most efficient manner possible.

But, the most important underlying reason for the movement to sustainability beyond social responsibility, environmental stewardship and its relationship to alternative workplace strategies is that it makes good business sense by accelerating near and long-term value creation. Read the rest of this entry »