Sustainability: the property investor's biggest asset?

Sustainability: the property investor’s biggest asset?

Written by Maddy Tickner

Sustainability is becoming more and more relevant, particularly when it comes to real estate, an industry responsible for around 30% of global GHG emissions.

Urban areas have experienced the most severe impacts of the pandemic but despite this, their population is likely to grow, putting significant pressure on already limited resources. This signals an urgent need to shift towards smarter and more sustainable urban spaces, opening the door to new opportunities for progressive investors quick enough to take advantage of them. 

So property investors, here’s what you need to know.

Sustainable properties = Higher return on investment (ROI)

Increasingly, properties that follow sustainability guidelines, including energy certification, water conservation and GHG reduction, receive higher rental incomes. According to a report by the Morgan Stanley Institute for Sustainable Investing, green buildings can see a 20% faster lease-up rate when compared to traditional options. 

On top of that, installing greener energy solutions in properties greatly reduces operating costs, which also contribute to higher rents and enhanced ROI. And according to the World Economic Forum, buildings that meet green standards tend to have operating costs up to 14% lower, as well as occupancy rates up to 9% higher.

Long story short, sustainability isn’t just a choice of conscience for landlords, as tenants are more likely to pay more for properties that are in line with their environmental values and ambition to live sustainably. So, investors with portfolios that perform well in terms of sustainability will generally attract more tenants and keep them for longer, significantly reducing vacancy rates while at the same time gaining higher rental returns.

Get ahead of the game 

One thing’s for certain, sustainability will only become more of a priority for government and the real estate sector will continue to be a key focus of policy. So, if you’re a property investor, this provides you with a unique opportunity to get ahead of the game, future-proof, and make sure you stay on the right side of government legislation in the future.

According to Deloitte’s report, Breakthrough for Sustainability in Commercial Real Estate, property investors who integrate sustainability into their business strategy can differentiate themselves from the competition and improve the overall performance of their portfolio. 

Social and environmental change due to climate breakdown is inevitable in the long-term, so investing proactively in sustainable solutions now could mean considerable savings today, and going forward.

How can I make my portfolio more sustainable?

The earlier you start, the better! When investing in new constructions, you’ll have a greater level of flexibility to focus on aspects such as waste management, supply chain, high-efficiency insulation and much more. This makes your efforts to ensure the sustainability of your properties more effective, and leads to an increase in profitability. 

Alternatively, if you want to make your existing properties more sustainable, consider retrofits and renovations. Think about improving your property’s insulation and use sustainable building features like smart HVAC systems. Trends show that the cost of integrating ESG standards into properties is becoming more affordable year on year.

Finally, it’s important to make sure that your ESG objectives are clear and measurable.

Feeling motivated to get started?

A crucial element in all of this is ensuring you select the right property managers that understand the value of sustainability in enhancing the ROI of your property portfolio. 

At City Relay, winners of the AltoVita 2020 Award for Best Sustainability and CSR Initiatives, we’re on a mission to become carbon neutral and have invested in a number of sustainability initiatives to make this happen, including providing eco-friendly products in our partners’ properties. 

If you’re interested in finding out more about our property management services or would like advice on making your investment properties more sustainable, contact us and our team will be happy to help.

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