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Feb. 22, 2013

Special Report: How Data Collection Could Influence Investment in Sustainability

Photo by Jessica Fiur.

By Jessica Fiur, News Editor

New York—For real estate investors, it is becoming more and more difficult to ignore the fact that not only is it better for the environment to have a sustainable community, but that renters are actively seeking out these types of buildings—and the data proves it. At the recent Third Annual Conference on Sustainable Real Estate in New York, during a panel called “Can Better Information Make Responsible Investment the Next Big Thing,” moderator Ursula Hartenberger, global head of responsibility, Royal Institution of Chartered Surveyors, and panelists John J. Gilbert, III, executive vice president and CEO, Rudin Management Co. Inc.; David Lorenz, professor, Karlsruhe Institute of Technology; Peter J. Miscovich, managing director of corporate solutions, Jones Lang LaSalle; David L. Pogue, global director of sustainability, CBRE Inc.; and Peter Steil, CEO, NCEEIF, discussed how having access to data could change how investors view sustainable properties.

The key to a sound investment is actively gathering and analyzing a lot of information.

“Once the building is built and stabilized, we realize we’re in the information management business,” Gilbert said. “It’s not only our job to collect data, but to express it and to use it to manage that building.”

Often times, however, owners and investors have to dig deeper to find out what they really should be asking about the buildings.

“Our analysis of data has to be proactive,” Gilbert said. “We believe in the concept of mining our data. Operating systems exist for everything else, so why shouldn’t it for a building.”

Steil agreed that investors might not always be given crucial information about a building, particularly about how green it is.

“We ourselves have not begun to get property data beyond the basics,” Steil said of his company’s properties. “Our first efforts will be in this coming quarter to find out with properties that are Energy Star or LEED certified.”

Of course, knowing if the building is Energy Star rated isn’t the be all, end all, but rather, a good starting place.

“If we’re only measuring consumption, then you have to understand what that means,” Gilbert said. “You have to drill down and understand what LEED and Energy Star are measuring. They are one metric, but not all metrics.”

Many owners, however, aren’t interested in the environmental impact of a building until it affects their bottom line.

“Most of our owners are only interested in energy efficiency if it matches up in their profile,” Pogue said. “They are less concerned because in the end the occupant pays the money for it [with their utility bills].”

This is where the importance of data comes in. For example, Gilbert explained that a lot of energy usage takes place in a building when people are asleep or not even there, because appliances such as computers are left plugged in. “When your house is asleep, it’s not really asleep unless you make sure it is,” he said.

Once people are aware of these facts, changes in consumption behavior can then be modified accordingly.

“You can’t evaluate until you measure it,” Steil said.

And sustainability isn’t just important to save money, but also to attract residents. “There isn’t a sophisticated investor today who isn’t aware of sustainable impact,” Steil said. “They want to buy buildings that are attractive to tenants, and tenants are saying they will only live in a sustainable building.”

Additionally, Millennials and younger renters have a completely different perspective than previous generations when it comes to apartments.

“Lifestyle matters more today than it did years ago,” Miscovich said. “The next generation is looking for lifestyle considerations. So the building space of the past is being disrupted by lifestyle choices.”

This change in renter mentality is affecting the entire industry.

“For us, value is not ‘how much can I flip this building for?’” Gilbert said. “We’re in the game of keeping our buildings full and our tenants happy.”

The resident desire to live in an eco-friendly community is forcing owners and investors to think differently about their strategies. But the change is coming about slowly. “It’s an industry that isn’t known for innovation,” Steil admitted. “There are people who are embracing it in principle but aren’t ready to act on it. The whole industry has been slow to change, and it’s been a struggle.”

This brings back the importance of gathering data about energy output in a building.

“It’s not just about collecting data, it’s expressing it in a form that is useful so people can modify their behavior,” Gilbert said. “When you can use that data to influence, then you’ve got something.”

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