Getting your properties ready for sustainability certifications is not just about appealing to investors and tenants anymore. Talking to clients, we’re seeing that there’s momentum building for sensible ESG strategies. And one of the reasons is that doing well on your certifications now means tangible benefits for your business – especially when rolled out across your portfolio.
I spend a large part of my day talking to ESG, Asset and Fund managers, with most of my clients in the top tier of ESG focused companies. And what I’ve started to notice more often in talking to those companies is that there’s an increased interest in sensible ESG strategies. Working on sustainability certifications in real estate used to be mostly about investor demands (think of pension funds with a reputation for sustainability) and then – increasingly – appealing to potential new tenants. With more and more information available about the tangible benefits of sustainability certifications, that’s changing.
Recently, I spoke with an ESG manager of a large privately owned real estate company. While their Dutch team is very advanced in taking measures to improve sustainability scores (like rolling out the Smartvatten service for their entire portfolio), the German management team didn’t see sustainability as a companywide priority. Until recently. Eyes are opening now that more information is becoming available about what a good sustainability score can do for a building financially.
Because of this, higher management is more keen to approve our services on their entire European portfolio. That’s also in line with the increased momentum we see within Smartvatten for larger rollouts of our service for entire portfolios. My Scandinavian colleagues have recently signed a rollout for a portfolio of +800 buildings, for example.
Benefiting from Scoring High on Sustainability
Talking to our clients, their experience now is that doing well on your sustainability certifications is really paying off in more concrete ways. It’s a reflection of how you do business, of your performance as an asset manager. Apart from the more obvious savings on operational costs when investing in sustainability, like expenses for energy and water consumption, there are other financial reasons to work toward that higher score.
With BREEAM sustainability certifications, for example, your sustainability is judged on a property-by-property basis. In a market research report created by BCG for Smartvatten, key stakeholders in the market estimated that on average:
- Asset Value Goes Up – Real estate is valued higher with a higher BREEAM score. Properties are valued +0,25% higher when their sustainability is certified.
- Mortgage Rates Go Down – When it comes to taking out mortgages for new developments, scoring high on sustainability can save you 0,01% on your interest rates. Properties are considered to be more future oriented and less high risk when they’re focused on sustainability. Monitoring your water consumption and leaks, for example, means water damage is less likely, and costs will be lower for clients. They’re a safer bet when it comes to making their mortgage payments in the future.
- Rental Premiums Increase – Your sustainability label improves the way you look to potential tenants. Sustainability is increasingly important to today’s generations, and more and more tenants are willing to pay for it. That enables you to charge a rental premium, increasing your rental income with 0,5%.
These findings are confirmed in market research our client CBRE recently published, stating that certified office buildings have impressive premiums on average rents (‘a 5Y average rent premium of between 13% and 29%’) and significantly lower vacancy rates. CBRE talks about Paris as an example, where the vacancy rate of certified buildings is 1,5%, as opposed to 6,7% on a market level.
Getting Certified Portfolio-Wide
And you can benefit from this even further when you improve and expand those scores across your portfolio. With sustainability increasingly important to all stakeholders, companies with fully certified portfolios stand out in comparison to those with only a selection of sustainable buildings, and stand to gain more income. At Smartvatten, we’ve been working on large-scale rollouts for some time now, and are truly becoming long-term partners for our clients on the way to total water efficiency.
When working with our clients to expand their sustainability certifications, we continuously work on making the process as user-friendly and scalable as possible. With our quick scan based on our Smartvatten Water Efficiency Index benchmark, we can help you figure out exactly which properties should be prioritized when it comes to getting ready for their sustainability assessment, and where you’ll get the most results.
And improving your score doesn’t necessarily require a complete overhaul of your building. You can start with some easy wins. Implementing our service to buildings that aren’t digitally monitored for water consumption, immediately scores you 4 points for BREEAM – and 2 more if you monitor individual units. Already have digital water meters? We can easily integrate your existing data into our system. And because our service comes with a leak detection service, you can tick off that box, too, for another 4 points.
Want to know more about how we can help improve and expand your sustainability certifications? We’re here to discuss the best custom solution for your portfolio. I look forward to talking to you!
Global Key Account Manager