Multifamily Real Estate’s Mandate for Climate Change
Environmental efforts have historically taken a backseat during recessions. But real estate’s significant contributions to the carbon footprint necessitate a change in thinking regardless of the economic climate.
Editorial Director Suzann D. Silverman
Climate change has reached a critical juncture, with the United Nations’ climate panel recently warning that global warming is advancing much faster than anticipated. With real estate a significant contributor—the International Energy Agency estimates that buildings are responsible for 37 percent of global energy-related carbon dioxide emissions, with about three-quarters of that from operations and the remainder from creation of building materials—growing interest in the environment as part of a three-pronged ESG strategy could have a real impact.
Real estate owners and developers have taken positive steps. On the multifamily side, UDR and Essex Property Trust recently marked Earth Day with the announcement of a new ESG fund with goals of making apartments more energy efficient and climate friendly as well as more affordable, healthy and safe.
But with all the progress being made, there’s a new challenge on the horizon: rising interest rates and the anticipated recession. While the extent and timing of the next downturn have yet to be seen, historically recessions have tended to refocus businesses away from sustainability goals in favor of more immediate priorities—in the case of apartment owners, the likes of cutting costs, increasing renewals and making necessary repairs.
However, real estate’s environmental impact makes it critical that investors and developers keep environmental concerns at the top of their list. Architecture 2030 has determined that the built environment must reduce global emissions 65 percent in just eight years to prevent global climate change from becoming irreversible. That’s a big responsibility, and it will require retrofits of existing buildings as well as carbon-friendly incorporation in designs for new projects.
In fact, for those building from the ground up, it’s now imperative to incorporate environmental consciousness from the planning stages, as senior associate editor IvyLee Rosario discusses in this month’s feature story, “How Multifamily Design Is Going Evergreen.” That’s because emissions released before a building is used have not been addressed as strongly as operational improvements such as incorporation of LED lighting, efficient HVAC and Energy Star appliances. By 2050, this upfront carbon will comprise half of the entire carbon footprint of new construction, according to the World Green Building Council, and once it’s built, there’s no going back. “The lifetime emissions are all going toward that embodied carbon upfront, which can’t be changed once it is built,” Marta Schantz, senior vice president of the ULI Greenprint Center for Building Performance, told Rosario.
It’s time to address the more integrated aspects of real estate sustainability—regardless of the economy’s performance.
