Occupier responses to sustainable real estate: what’s next?

Abstract

Purpose-The purpose of this paper is twofold. Primarily, it examines the relationship between sustainable buildings and occupiers, by summarising the key extant literature. Secondarily, the paper proposes avenues for future research relating to the impact of sustainability on corporate real estate strategy. Design/methodology/approach-The paper reviews over ninety relevant publications related to sustainability, real estate market responses and corporate real estate, focussing on the role and response of occupiers. The approach concentrates on occupier strategies, specifically considering influences such as corporate social responsibility (CSR), landlord tenant relationships, the changing occupier role and the 'circle of blame'. Findings-In recent years, literature has increasingly begun to reflect nuances in occupier responses to sustainable, prime, office real estate, with some conflicting findings as to the importance of sustainability. Location remains the dominant consideration in decision making for occupiers, but sustainability is key to CSR and 'value-add' in certain sectors. More effective use of sustainable buildings requires improved communication between landlord and tenant. Our review demonstrates that challenges still remain in relation to the 'circle of blame'. More research needs to be done in relation to the emergence of sustainability in the non-prime and retail sectors. Originality / value-Through collating key literature in this topical research area, the paper provides a critical review of occupier responses to sustainable real estate, and therefore a fuller understanding of emerging market practices. Additionally, it suggests future research directions.

The Involvement of Real Estate Companies in Sustainable Development—An Analysis from the SDGs Reporting Perspective

“…Among the private topics of sustainability, we observe the concern of real estate entities about the environmental issues, especially climate change, carbon emissions and energy consumption, which are actually the issues that most concern the academic, political and professional representatives [60,66]. Even though the literature "makes reference to the holistic nature of the sustainability concept" ( [60], (p. 746)), there is "a market tendency to consider buildings with high ratings for environmental performance as sustainable" ( [67], (p. 6)). Because the market recognises sustainability as a competitive factor that adds value to a property, real estate companies create new strategies and investment fields based on sustainable principles in order to ensure positive financial outcomes (lower operating costs, higher lease rates, higher occupancy rates and lower tenant fluctuation).…”

A Review of the Impact of Green Building Certification on the Cash Flows and Values of Commercial Properties

“…The possibility to achieve higher rents encourages investors to develop green buildings, even if there might be a cost premium associated with the development of those buildings (e.g., [55]). Tenants' willingness to pay higher rents in certified buildings is associated with improved productivity and other corporate-level benefits, as well as lower operating costs, if they are responsible for the operating expenses of leased premises [55,72,73]. The consideration of lease structures and inclusion of operating expenses affect the results of rent premium analysis, which is discussed in more detail later in this section and in Section 4.2.…”

Exploring Green Office Building Choices by Corporate Tenants in Malaysia

“…A review of the occupiers' perspective on green buildings from the 'business case' has been outlined by Livingstone and Ferm [4] which highlighted occupiers' motivations fall primarily into three areas: (i) reduced operational costs (property level driver); (ii) enhanced productivity and employee well-being (corporate level driver) and (iii) reputation and brand strategy (corporate level driver). Thus, it has been said that tenants have exhibited their willingness to pay for individual green features [12].…”

“…However, it has been shown that location can be a major influence on office occupation [2,3]. In another study, the other factors that pose an influence include real estate location, availability of sustainable buildings, and accessibility which remain to be of paramount importance [4].…”