Real estate executives are continuously challenged to keep up with the evolving landscape of sustainability. In a session on this continuously evolving landscape at the 2016 NMHC Annual Meeting, moderator Deborah Cloutier, principal with JDM Associates, led a discussion with expert speakers on taking advantage of trends while mitigating risk and increasing the value of investments.
Speakers at this session included Jeff Brodsky, vice chairman with Related Companies; Mark Delisi, senior director of corporate responsibility with AvalonBay Communities; David Woodward, managing partner and head of multifamily for Brookfield Property Group; and Michael Zatz, chief of the market sectors group for the ENERGY STAR Commercial and Industrial Branch with the U.S. Environmental Protection Agency (EPA).
Overall, the panel focused on emerging topics and offered some noteworthy tips on sustainability.
Tip 1: Why and How to Become More Sustainable
According to Zatz, sustainability at AvalonBay began as the result of passionate people. “What happened is that it was taking up more and more of our time,” he said. “That’s because it was becoming more valuable to our external and internal stakeholders.”
Woodward added that there are usually new people in an organization “who are really passionate about sustainability and they need to be engaged.” Cloutier also emphasized that sustainability needs to get “baked into” senior management’s day-to-day practices.
For Brodsky, it was initially about finding out where Related Companies stood in comparison to competitors. “We have been benchmarking for several years and, frankly, it’s not just to avoid embarrassment, which could be the case if you had high profile assets,” he said. At the time, Brodsky noted, they found that it doesn’t have to be class A and it doesn’t have to be new construction - which was eye opening for them.
Tip 2: How to Stay Sustainable
AvalonBay made the decision to move forward with ENERGY STAR certification. “This particular topic, benchmarking, is one we’re still wrestling with and it’s not easy,” said Delisi. “But this whole area of benchmarking and drive toward getting more data is challenging people to pick and choose what they aspire to-and I think it’s a real challenge.”
“From my perspective, benchmarking is the ground floor for how to do it, then you can put plans in place,” said Cloutier. “When you’re not benchmarking, you don’t know what your base is. There’s a problem we have in the multifamily industry and that’s access to data because many residents pay their utility bills directly.”
Tip 3: How Best to Benchmark and Retrofit
“There are dozens of local or regionally based multifamily green certifications,” said Cloutier. “A new one came out last October, certified sustainability, that’s for properties that will never be candidates for LEED.” She emphasized that LEED often requires outside consultations and a lot of work, with a traditional LEED certification ranging in price from $20,000 to $60,000-but she added that there are some other certifications that can be just $800.
Woodward noted that at Brookfield Property Group they are seeing results with retrofits. “In New York City, we are embarking on an $18 million retrofit project,” he said. “There are a lot of local utility rebates and opportunities available, but it takes both research and time.”
Cloutier agreed and recommended that multifamily firms get to know their utility representatives in the areas where they have properties. “They often have rebates and we’ve seen a number of organizations hire someone to do this full time, or as part of another role - and the return rate has been four to five times beyond what that person was being paid.”
Tip 4: Blue May Be the New Green
According to Cloutier, some are saying that blue may be the new green, and Delisi pointed out that there’s a lot of benefit to this strategy. “There’s this thing called water shaming going on-all of a sudden, on your company’s Facebook page, you might see a resident post a leak and all sorts of people start attacking it” from an environmental perspective.
“A lot of our price increases in water and sewage is large cities going through a restructuring process,” said Brodsky. “The conversation for us is retrofitting toilets-always retrofitting for water reductions. Now there’s a leak prevention effort that we’re working to make significant progress on.”
The EPA has seen water on the horizon for a while, according to Zatz. “With ENERGY STAR we don’t have comparative metrics for water, but we are partnering with the WaterSense program,” he said. “They want to get more into the commercial and multifamily space and we’re working on that.” Zatz added that if the agency is successful, they will have a water score, and eventually a water certification, that will include multifamily.
Tip 5: Will Renters Value Sustainability
Cloutier pointed out that there has been a wide debate as to what matters to renters. Are they willing to pay more for an energy efficient apartment?
Brodsky said that Related Companies provides many reasons for renting-from amenities to energy savings. “It’s very difficult to separate out the value of sustainability, but I don’t have any doubt that they value it.” However, he added that they don’t know, or have specific data, on how much that translates into the value proposition itself for renters.
According to Woodward, “All things being equal, there’s a little bit of a nudge of residents towards LEED and ENERGY STAR.”