Green buildings. Wellness. Green roofs and urban farms. Biophilic design. Solar technology. Net zero. We’ve written about sustainability in commercial buildings on a myriad of topics.
Once an enticing buzzword and brand positioning, green is now mainstream. Ratings are no longer the be-all and end-all. Green roofs and solar are now mandatory per NYC Local Laws 92 and 94, which require all new buildings and those undergoing major roof renovations to install a green roof, solar or a combination of both. Biophilic design, which encompasses views, daylight, natural textures and materials, water features and greenery designed to bring nature inside, has taken hold.
What is new in 2020? There are advances in solar technologies; more specialized technologies for comfort, health and productivity from individually-controlled lighting and temperatures; the growth of restful, quiet indoor spaces and decreases in drywall separations in offices to promote community and productivity.
As an appraiser who values commercial real estate on behalf of financial institutions, investors and owners, I believe that a company’s commitment to Environmental, Social and Governance (ESG) — sustainability and its societal effect — has become a factor in investment decisions.
Rating a company’s ESG is relatively new, although forward-thinking financial institutions’ due diligence has long factored in the value of green facilities, have sound environmental practices such as incorporating LED lighting, solar energy, green roofs, etc. Because of profitability concerns, it’s taken the industry a while to get to a seminal point. But today’s ESG, for which there are ratings agencies and consultants, is a far cry from the early days of creating environmental policies because companies felt they should, not because it would contribute to the bottom line.
Climate change, the need for diversity and making a positive difference in communities have also become factors in planning sustainable corporate business strategies and tactics. ESG ratings can have a negative impact on access to capital if there are little to no environmental and sustainability goals and practices in place.
With that brief overview of who is doing what, the question is: for whom? The answer is younger generations: entrepreneurs, startups, the boom for TAMI (technology, advertising, media and information) space and competition to attract the brightest talent.
Young people are looking for space and companies that are committed to sustainability best practices and are making a positive difference not only in their employees’ health and well-being, but in the local community and the global environment.
According to a Nielsen survey, millennials and Gen Z are the first generations willing to pay more for sustainability. A young person making a purchase decision won’t choose a drugstore or luxury brand, but wants to know if the product is tested on animals, the ingredients — if it is in sync with their values and lifestyle. It’s part of the food trend of farm-to-table, fair trade coffee and knowing whether a shirt is manufactured in a sweatshop or hand-made of locally-sourced organic cotton. Simply put, decisions are made based on whether a product hurts or helps an environment and its people.
Youth-oriented technology and creative sectors are fueling office market growth. According to a Cushman & Wakefield report, TAMI companies leased 74.3% more space in Manhattan by 2019’s second quarter than the previous year. These companies’ needs are different. Rather than traditional large spaces in prime markets favored by law firms and financial institutions, they are much more likely to seek small to mid-size spaces in Midtown South or downtown. Now take that mindset and think about the intense competition among companies to attract, motivate and retain young talent. What will they need to offer in its company policies, buildings and offices?
As baby boomers retire, the workplace will compete for younger workers whose career goals include salaries and growth potential, as well as their sense of well-being, how in sync companies are with their values and lifestyles and the company’s contributions to communities and global environments.
An entirely new generation of innovators, workers and consumers have begun to rule the world. Only companies with a death wish will ignore their clarion call.
Steven J. Schleider, MAI, FRICS, LEED-AP BD+C
Metropolitan Valuation Services
44 E 32nd St, New York, NY 10016
sschleider@mvsappraisal.com
mvsappraisal.com
(212) 213-8650
