Sustainable Real Estate is the new Standard
When the developer Lendlease opens its $600 million residential and office complex in Los Angeles, expected in 2025, the site will have the typical hallmarks of sustainable development: proximity to a light-rail stop, an all-electric residential tower, solar panels, and a pedestrian plaza. But those features are considered commonplace these days. What makes this development more striking is how sustainability isn't simply an amenity or signifier of corporate responsibility, but a core feature of its financing plan. The project is part of a larger movement of investors steering money toward sustainable real estate, thanks to new technology and tougher standards that allow for better tracking of a development's ability to reduce its carbon footprint.
Sustainable real estate isn't a new idea. The Green Building Council has promoted more efficient development for nearly three decades through LEED, its standard for building sustainability. What has changed in recent years is the perception of risk associated with climate change, prompting investors to steer money toward safer, higher-performing green assets. New measurement tools and standards are empowering them to raise the bar for environmental and economic performance.
Lendlease's Los Angeles project is part of a string of new mixed-use developments that the developer is building in North America, including 1 Java Street in Brooklyn. The company is betting that sustainable development means attracting better tenants and getting ahead of regulations to create a more valuable asset, which Older buildings that don't lower their carbon footprint are likely to suffer a "Brown Haircut" and depreciate in value in as soon as five years, said Oliver Light, commercial director for Carbon Intelligence, a London firm advising firms that manage $111 billion in assets. Not investing with sustainability in mind now means higher costs in the long run.draws more investors. Developers are seeing an increasing hunger for investing that focuses on three areas - environmental, social and governance - a trend that is channeling significant capital.