The impact of ESG criteria on real estate decisions

The ability to cycle to work or arrive by train is an important criterion.

There is much talk in current times of ‘ESG’ or Environmental, Social and Governance’ criteria and the way this is affecting company behavior. Real estate advisor CBRE has now analysed how these considerations are impacting on the real estate strategies of companies and organizations. The survey examines responses collected in the autumn of 2022 from more than 500 commercial real estate professionals worldwide.

CBRE starts by saying that overall, more than two thirds of respondents said their companies’ focus on ESG intensified in 2022 and that their primary ESG consideration for their real estate is to reduce energy consumption and carbon emissions. Companies are favouring (ESG factors more heavily in their decisions on which buildings to lease or buy, with many prioritizing green-building certifications and features that reduce energy consumption or generate renewable energy. In fact, 84% of respondents said they specifically look for energy-reducing features- and almost half would either seek a discount or walk away from a deal if a building lacked these.

Premium

As companies face rising energy costs and government regulations, they are showing themselves willing to pay a premium for spaces with features like on-site renewable energy generation (58% of respondents) or smart technology to monitor and adjust energy use (53%) to help reduce energy consumption and carbon emissions., CBRE finds. Another major ESG influence is green building certification, such as the Leadership in Energy and Environmental Design (LEED) rating system or several administered by the Green Building Council. Some 45% of respondents would pay a premium to lease or buy a certified building, and a third would either seek a discount from or outright reject a building that lacked certification.

Giovanni Litti, CBRE BeLux ESG-Sustainability Manager comments: “The voice of our clients on this topic is clear. Reducing emissions is at the forefront for our clients, and they see ESG goals impacting all aspects of real estate decision making. That can include providing spaces that improve employee health and well-being, reducing resource use in building operations, or investing in renewables or efficiency. We anticipate the most highly sought-after real estate will help companies in achieving their stated environmental and social goals.”

Well-being

Tolerance for long commute times has decreased considerably among employees in recent years, and companies have taken notice of this. As a result, 82% of respondents named convenient access to public transportation as the social feature that most affects their interest in a given building, because easier commutes are associated with better employee well-being.
Companies are also placing a higher value on buildings that support their employees’ mental and physical health. For example, respondents said buildings that make it easier for employees to ride their bike or walk (66%) and have an inclusive design to meet the needs of all employees (58%) are more attractive than those with an absence of those features.