The ripple effect of ESG on the future of our buildings

In a joint survey by PwC and the Urban Land Institute, an outlook on real estate throughout Europe for 2024 and beyond has been given, from the burden of inflationary pressures and European economic growth concerns to blighting construction costs. But the most influential for both now and the future of our currently often empty buildings is the prioritisation of quality spaces by occupiers. 

There is food for thought behind the fact that 9 in 10 commercial property investors (Source: Emerging Trends Europe survey 2024) think running an environmentally and socially sustainable business is the most important factor for a successful organisational transformation within the real estate industry by 2050. With each passing year, the importance of environmental, social and governance (ESG) matters grows throughout the real estate industry. 

In the top 5 themes which will drive real estate investment decisions and strategic planning, we can find ESG and the change in occupier demand and preferences in the top two. Decarbonisation, gracing the 5th position in the top 5, could and should be a near-automatic manifestation of the latter. 

Recognising the importance of Environmental, Social and Governance factors

As our society evolves and becomes more conscious of its impact on the environment and social well-being, commercial property investors increasingly recognise the importance of environmental, social, and governance (ESG) factors in their investment decisions. 

ESG considerations go beyond financial performance; they encompass environmental sustainability, social responsibility, and good governance practices. Incorporating ESG factors into the decision-making process for commercial property investors can lead to long-term success while addressing societal challenges such as the empty floors in Grade-A buildings many of us face.

ESG integration and environmental sustainability

Commercial properties have a significant environmental impact throughout their lifecycle – from construction to operation and eventual demolition. Investing in environmentally sustainable buildings or retrofitting existing ones can reduce carbon emissions, minimise resource consumption, and contribute to a greener future.

This isn’t just important to reach our net-zero target and keep our buildings occupied. The growing demand for green buildings and sustainable communities presents significant investment opportunities. By embracing ESG principles, we can tap into this market demand and generate long-term value while contributing to a more sustainable future.

Prioritising ESG considerations creates a ripple effect that leads to not only a tool for reputation management and marketing but, most importantly, to attracting quality tenants and commanding higher rental rates – all the while minimising the cost of making our buildings work for us. Enabling ourselves to demonstrate our commitment to the ESG principles and their integration allows us to communicate our efforts to our tenants, attracting stakeholders and tenants who align with these values – creating space for a community-based approach toward a net-zero target, which is more important now than it has ever been in the past.

The future of ESG in commercial property 

The importance of ESG factors in commercial property investments is only expected to grow. Incorporating sustainability measures can lead to energy cost savings, increased tenant retention rates, and improved asset value over time. As society becomes more focused on sustainability, we have an important role in balancing profit with the future needs of a fast-changing corporate landscape. 

Incorporating ESG factors into our decision-making processes, we can drive financial success and contribute to environmental sustainability, social well-being, and good governance practices. Embracing ESG principles is not just a moral imperative; it is a strategic move that aligns with the evolving expectations of stakeholders and the long-term interests of both the planet and businesses.