McKinsey&Company
Greening real estate
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Greener buildings, stronger portfolios. The idea that people are willing to pay more for sustainable buildings has often been debated. But according to a 2018 study, rental and sales prices included a 6.0% and 7.6% premium, respectively, for green-certified buildings. Moreover, 63% of leading investors agree that greening strategies can lead to higher occupancy, rents, and overall value. Consequently, more leaders are considering how the financial risks of inaction might affect future portfolio values. Vivid Economics, a McKinsey company, estimates it will cost $5.2 trillion over the next decade to decarbonize the built environment. [WEF] |
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Turn down the lights. In Asia, solutions for decarbonizing the industry are emerging from both the public and private sectors. In Hong Kong and mainland China, for example, one real-estate company is offering tenants free energy audits as a way to understand energy consumption better. In addition, one Asian country has launched a fund that provides businesses with incentives to make their industrial facilities more energy efficient, covering up to half of the qualifying costs. Such cross-stakeholder efforts could be key to helping the industry reach net zero. [Fortune] |
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Reassessing value. Real estate drives approximately 39% of global emissions, largely from the manufacturing of materials used in construction (such as steel and cement) and the energy consumed by buildings. That carbon footprint, along with other factors—like the physical threats of storms, floods, fires, and extreme heat—has led to a reckoning on asset valuations. Several major real-estate companies have conducted internal analyses and found that potential losses for some debt portfolios could double over the next several years. |
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Reenergizing real estate. Decarbonizing existing buildings to meet new regulations can be costly. For example, it could take up to $24.3 billion to retrofit the 50,000 buildings covered by New York City’s decarbonization law. However, there’s an opportunity for real-estate leaders to both revalue and future-proof their portfolios while creating new sources of value—like outfitting buildings with solar arrays and batteries so properties can double as local sources of energy generation and storage. See three actions real-estate leaders can take to thrive during the climate transition. |
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| — Edited by Andrew Simon |
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