Cleaning Our Air, One Building at a Time
A Structured Approach to True Decarbonization in Multifamily Real Estate
Lauren Winkler, Senior Director, ESG
THE CHALLENGE & THE OPPORTUNITY
It’s difficult to open a media article, newsletter, blog, or conference agenda today without seeing some form of the words “net zero” or “decarbonization.” Climate change – regardless of one’s view of its severity – is one of the seminal and defining topics of our age. In the real estate sector, the relevance and imperative are even more heightened. Widely, our sector understands it is responsible for between 40-50% of global CO2 emissions[i], a figure made even more staggering when we add in the potential resulting impacts of climate change on cities by 2050[ii]:
- 1.6 billion people living in more than 970 cities regularly exposed to high temperatures
- 800 million vulnerable to coastal flooding
- 650 million, in over 500 cities, at risk of water shortages
- 2.5 billion people with threatened national food supplies
- 470 million people with power supply vulnerable to sea-level rise
As intense as these statistics are, the wave of market and investor pushback to prevent such dire ends is even more remarkable. In Europe, some predict that the difference in exit values for a sustainable building versus “brown buildings” in 10 years could be over 20%, with that regarded as “being towards the lower end of how large brown discounts could get.”[iii] In the U.S., it is estimated that LEED-certified office buildings have achieved consistently higher rents than non-LEED counterparts, averaging over 11%.[iv] Specific to the multifamily market, we see similar trends, with rent analyses showing a 9% premium for LEED-certified apartment buildings.[v]
At its root, this data is driven by an unstoppable shift in generational expectations. 61% of renters say they would pay more in monthly rent for an eco-friendly apartment.[vi] And, tenant surveys have revealed renters willing to pay more for apartment buildings with energy-saving appliances and health and wellness-centered amenities, as well as in more sustainable neighborhoods with walkable access to goods and services.[vii]
[i] Global Alliance for Building and Construction / Architecture 2030, September 2019.
[ii] Urban Climate Change Research Network, 2018.
[iii] Fidelity International, “How big a threat is the ‘brown discount’?,” July 2021.
[iv] Cushman & Wakefield, “Green is Good: Sustainable Office Outperforms in Class A Urban Markets,” 2021.
[v] Bond, Shaun Alexander and Devine, Avis, “Certification Matters: Is Green Talk Cheap Talk?,” August 2014.
[vi] Apartmentdata.com, February 2021.
[vii] National Multifamily Housing Council, February 2016.