Institutional Investors Spur Green Building’s Spread

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Wednesday, August 7th, 2013
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Around the world, large-scale institutional investors such as real estate investment trusts (REITs) are taking up pivotal roles in driving the adoption of green building practices in the construction industry.

Trepp managing director Susan Persin says REITs have emerged as some of the most influential advocates of green building, primarily due to the economic benefits conferred by sustainable construction.

She notes that green buildings are becoming increasingly prominent in REIT portfolios while REITs are also trending toward sustainable construction in new buildings.

Prologis, the world’s largest industrial REIT, has taken the lead with its Green Path program, which requires measures such as the installation of solar panels on its large-scale warehouse facilities.

REITs specialising in a variety of sub-sectors – including office, retail and healthcare – are all making their contribution to the promotion of green building.

Office REITs are at the forefront of incorporating sustainability measures into their properties, a phenomenon which results from both tenants seeking to reduce utility costs and owners seeking to derive savings for themselves via the frequent incorporation of expenses such as power and janitorial services in office leases.

REITs in the healthcare sector are also pursuing more efficient and sustainable buildings as part of efforts to reduce the often exorbitant costs of running medical treatment facilities.

Furthermore, claims about the economic benefits of sustainable construction have been vindicated by a number of academic studies.

In 2012, for instance, a University of Notre Dame study concluded that businesses perform better when they operate out of LEED-rated buildings.

Meanwhile, a study released in 2010 conducted by researchers from Maastricht University and the University of California, Berkeley titled The Economics of Green Buildings found that the number of EnergyStar and LEED certified properties increased significantly during the period from 2007 to 2009 despite the impact of the Global Financial Crisis as tenants and owners sought to cut their costs.

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