If you don't say it for yourself, someone else may say it for you
Increasingly owners are being required to disclose energy consumption data, but understanding buyer behaviors provides some insight and if your not telling your own story, someone will
In real estate, our leasing teams do a great job of understanding the market where their assets are located. They are plugged into social media reviews, have comps to compare rental rates against, and know how many properties have a pool, a gym, etc. They have to understand the buyer and the buyers’ behavior to lease the asset successfully in their role. Unfortunately, these assessments tend to have some market blinders on that result in our organizations focusing on the actual leased asset rather than taking a broader view.
You may be asking, how is that important? Our job is to develop, lease, and manage real estate. Collect the rent, ensure it provides what the tenants require, and keep the buildings full. This implies that we understand the buyer’s behavior and motivations; however, as we are seeing in 2022, the buyer is motivated by more than just the rent and the pool.
In a 2021 JLL Research Report, Decarbonizing the Built Environment, 53% of respondents replied that sustainability is increasingly important where they work and at those organizations important to their corporate strategy. Repeatedly this study found that climate risk is financial risk and that occupiers and investors alike see this decade as a critical phase – both an opportunity and a challenge – in reaching decarbonization.
Just as corporate tenants incorporate ESG into their purchasing decisions, consumers are as well. In March, Forbes reported, “nearly 90% of Gen X consumers said they would be willing to spend an extra 10% or more for sustainable products, compared to just over 34% two years ago.” While Generation X consumers are increasing their importance on sustainability, they are being outpaced by both Millennials and Generation Z in that viewpoint (link). Why is Generation Z important? By 2030, Gen Z will represent 27% of the world’s income and surpass Millennials by 2031 (link).
This is where there is a bit of a misalignment between what our marketing teams think is important and what consumers think is important. Ask the leasing team at nearly any property what is their most important attribute, and the answer often comes back as “brand.” Yet, the importance of the brand lags behind the importance of sustainability to consumers in purchasing decisions.
When having these conversations, I like to point out that there is a distinctive difference between Generation X and Millennials/Generation Z. While a Generation Xer may look back at their childhood with nostalgia, it is void of the access to data that subsequent generations grew up with. For both Millennials and Generation Zers, the internet and access to information were just a few keystrokes away. Similarly, Generation Zers differ from Millennials in that this data was in the palm of their hand, typically on a mobile device.
The bottom line is that these have been data-driven generations since their earliest days. They think nothing of picking up a mobile device and pulling up information before making a purchasing decision. The challenge I give is to ask a Generation Zer what they want to eat. Chances are, they are going to pull out a mobile device and start scrolling for anything from recipes to restaurant reviews to TikTok videos of what other people are eating.
These are the consumers we are, or soon will be, leasing to.
Now let’s consider the trend in public policy to require commercial and/or residential building owners to disclose their building’s energy consumption to prospective buyers, leasers, or lenders. There are currently at least 17 states with some form of disclosure rule or requirement requiring disclosure of energy consumption.
Take this a step further, and we see Local Law 33 in New York City – requiring that buildings post their Energy Star Scores at entrances. Chicago similarly requires posting of energy scores, but in the form of stars instead of a score, with four stars indicating the highest energy rating and one star a poor performer.
Now let’s put these concepts together….. you have potential tenants or residents who are more likely to rely on data before making a purchasing decision. You have cities and states passing laws that require energy consumption to be disclosed before the purchasing decision. In some cases, those scores must be publicly posted at building entrances.
If you are already tracking data, you may be in an advantageous position. You may already have information about the energy performance of your properties that you need to share with your leasing team.
The bottom line is there is an increasing appetite for data. Investors are asking for it, risk managers are asking for it, but don’t forget your tenants or residents are seeking it as well, and if you don’t make an effort to tell your story, they will hear it elsewhere. Do you really want to trust not having input into the data they are reviewing prior to making that decision?
You can help reduce the impact of the built environment by sharing this blog with your peers. Together we can impact the 39% of greenhouse gasses attributed to the built environment. It starts with awareness, and we succeed with teamwork.
Stay well!
Chris Laughman is the ThirtyNine Blog author, a blog dedicated to reducing the impact of the built environment. When not blogging, Chris is helping the real estate industry reduce energy and water impact as the Vice President of Sustainability for Conservice, the Utility Experts. Whether Multifamily, Single Family, Student Housing, Commercial, or Military, we simplify utility billing and expense management by doing it for you. Our insight into your utility consumption provides an opportunity to identify risks. Leveraging innovation and experience, we ignite solutions with real impacts and track performance to ensure the trendline stays laser-focused on the goal. At Conservice, we have developed a true bill-to-boardroom solution to help truly make a difference. We have before us a tremendous opportunity. Standing shoulder to shoulder, we will get this done. Contact me at claughman@conservice.com for more information.
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