Business Specialties
Development
Aug 04, 2009
By: Barbra Murray, Contributing Editor
Though the intensity of the economic crisis may be in the process of diminishing, it continues to have a vice-like grip on countries around the world. Yet for the commercial real estate industry, investment in sustainability remains a priority--although not necessarily for the most altruistic reasons. According to the second quarterly RICS-CPE Global Commercial Property Sustainability Survey, despite financial challenges, real estate industry players remain willing to pay money to go green today, particularly with regard to energy consumption, in order to benefit from cost savings tomorrow.
Among the real estate professionals who participated in the survey, the percentage asserting that sustainability concerns are either important or very important for their own firms, as well as those of their clients, increased over the last quarter. Although the world is well ensconced in economic turmoil, 40 percent of the respondents contended that sustainability has become more significant over the last 12 months.
RICS defines sustainability as "the goal of balancing economic, environmental and social objectives at global, national and local levels in order to meet the needs of today without compromising the ability of future generations to meet their needs." However, the survey participants' foremost concern is more concentrated. "The most important sustainability issue for clients is energy efficiency," Simon Rubinsohn, RICS chief economist, told CPE. "More people are more focused on sustainability since the economic crisis, and energy has become the main driver; it has to do with the bottom line."
Transportation issues and waste management followed energy in importance, taking the number 2 and 3 spots, while biodiversity loss brought up the rear on the list of 10 concerns. "People are willing to pay if they feel they will save, if they feel they're cutting costs," Rubinsohn said. Certainly, the numbers tell the story. Thirty-five percent of respondents pointed to "business bottom line" as the primary driver of the sustainability agenda within firms, while a mere 7 percent cited the natural environment and 5 percent pointed to ethical/moral reasons. "That seems to be the only big change since the previous quarter; sustainability seems to be an even bigger issue because in an economic crisis, people are looking to cut costs," he noted. "What's driving the increase--from a broad perspective--is a focus on cost savings or a need for good PR, rather than the environment."
While on average, sustainability remains a priority across the globe, some countries are more dedicated to the cause than others. On a scale of 1 to 5, with 5 representing "very important "and 1 being "not important, not a single respondent from Germany rated the issue at 1 or 2. At the opposite end of the spectrum, 50 percent in Russia rated the issue a 1 or 2 in level of importance. "I wouldn't say the responses were predictable, but countries where environmental issues are favored responded more strongly," Rubinsohn said. "I would imagine Germany would have a strong reading, and the weakest ones are the ones you would expect, like Russia. One respondent from Russia said, 'Our concerns are with economic survival, not with the niceties of sustainability.' So there's a certain degree of predictability in the survey; the more developed countries tend to have a strong reading, but it's not entirely predictable. The U.S., for example, was not as positive as I thought, and Japan was a bit more surprising." Thirty-three percent of U.S. respondents ranked the issue a 1 or 2 on the scale of importance, and 55 percent of Japan's respondents rated the issue a 1 or 2. "It's quite a mixed-bag so it's hard to draw that many inferences."
We'll all have to wait to see where the issue of sustainability will stand in the eyes of the commercial real estate community once an economic turnaround is well within sight. However, Rubinsohn speculated, "there's a possibility that the focus will broaden beyond cost savings, but what is going to drive the broadening of the issue is the need to demonstrate some sort of cost savings to shareholders."
By: Barbra Murray, Contributing Editor
Though the intensity of the economic crisis may be in the process of diminishing, it continues to have a vice-like grip on countries around the world. Yet for the commercial real estate industry, investment in sustainability remains a priority--although not necessarily for the most altruistic reasons. According to the second quarterly RICS-CPE Global Commercial Property Sustainability Survey, despite financial challenges, real estate industry players remain willing to pay money to go green today, particularly with regard to energy consumption, in order to benefit from cost savings tomorrow.
Among the real estate professionals who participated in the survey, the percentage asserting that sustainability concerns are either important or very important for their own firms, as well as those of their clients, increased over the last quarter. Although the world is well ensconced in economic turmoil, 40 percent of the respondents contended that sustainability has become more significant over the last 12 months.
RICS defines sustainability as "the goal of balancing economic, environmental and social objectives at global, national and local levels in order to meet the needs of today without compromising the ability of future generations to meet their needs." However, the survey participants' foremost concern is more concentrated. "The most important sustainability issue for clients is energy efficiency," Simon Rubinsohn, RICS chief economist, told CPE. "More people are more focused on sustainability since the economic crisis, and energy has become the main driver; it has to do with the bottom line."
Transportation issues and waste management followed energy in importance, taking the number 2 and 3 spots, while biodiversity loss brought up the rear on the list of 10 concerns. "People are willing to pay if they feel they will save, if they feel they're cutting costs," Rubinsohn said. Certainly, the numbers tell the story. Thirty-five percent of respondents pointed to "business bottom line" as the primary driver of the sustainability agenda within firms, while a mere 7 percent cited the natural environment and 5 percent pointed to ethical/moral reasons. "That seems to be the only big change since the previous quarter; sustainability seems to be an even bigger issue because in an economic crisis, people are looking to cut costs," he noted. "What's driving the increase--from a broad perspective--is a focus on cost savings or a need for good PR, rather than the environment."
While on average, sustainability remains a priority across the globe, some countries are more dedicated to the cause than others. On a scale of 1 to 5, with 5 representing "very important "and 1 being "not important, not a single respondent from Germany rated the issue at 1 or 2. At the opposite end of the spectrum, 50 percent in Russia rated the issue a 1 or 2 in level of importance. "I wouldn't say the responses were predictable, but countries where environmental issues are favored responded more strongly," Rubinsohn said. "I would imagine Germany would have a strong reading, and the weakest ones are the ones you would expect, like Russia. One respondent from Russia said, 'Our concerns are with economic survival, not with the niceties of sustainability.' So there's a certain degree of predictability in the survey; the more developed countries tend to have a strong reading, but it's not entirely predictable. The U.S., for example, was not as positive as I thought, and Japan was a bit more surprising." Thirty-three percent of U.S. respondents ranked the issue a 1 or 2 on the scale of importance, and 55 percent of Japan's respondents rated the issue a 1 or 2. "It's quite a mixed-bag so it's hard to draw that many inferences."
We'll all have to wait to see where the issue of sustainability will stand in the eyes of the commercial real estate community once an economic turnaround is well within sight. However, Rubinsohn speculated, "there's a possibility that the focus will broaden beyond cost savings, but what is going to drive the broadening of the issue is the need to demonstrate some sort of cost savings to shareholders."
For more on the survey findings, click here for a discussion with Simon Rubinsohn on CPN Radio.
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