Why Commercial Real Estate Needs to Go Green

If you own or manage commercial real estate or are looking to get into real estate investment then you are probably becoming aware of the need for offering green real estate solutions. Unless your property is let to a single occupier who have the responsibility to manage their own energy use your tenants will be looking to the building management company to be implementing energy efficiency measures for common services.

There are several main drivers for promoting energy efficiency in commercial real estate, environmental concerns, legal implications and economic considerations. Taking these in turn it is possible to apply each to an individual building to assess what measures are required, and which will be beneficial.

Environmental concerns

Whether you or your management company subscribe to the theory of global warming and the greenhouse effect, it is likely that your tenants, or potential tenants, or their investors will do. In the UK, all large public properties need to have a Display Energy Certificate and may also require an Energy Performance Certificate if it is newly constructed or refurbished. If a Display Energy Certificate is required then an advisory report is also required showing how savings can be made.

Whilst this regime does not apply to private buildings, it is a clear indication in the way that legislation is heading and how public perception is manifest.

Legal Implications

The legal implications have the most practical implications on Real Estate by way of changes to the Building Regulations and these effect both new build and refurbishments to existing commercial properties with more stringent regulations taking effect from 1 October 2010. Where there is a legal imperative on owners and property managers to make changes these of course must be observed although there are certain regulations that also allow for economic considerations to be taken into account, so that alterations only need be made where reasonable economically viable so to do.

Economic Considerations

With the cost of utilities and particularly electricity rising steadily any changes that can be made to improve energy efficiency will have an increasing and direct reduction on ongoing energy expenditure. Items such as passive infrared switching and heating and ventilating equipment with lower energy requirements or low water use appliances will have an ongoing financial benefit to the running cost of a building. In addition there may be grants available towards the capital costs of changing to better performing equipment.

The decision on whether individual improvements should be made needs to take into account all of the above, however it can be seen that there is pressure from a number of directions that means more and more real estate related decisions will have to be green orientated.