Throughout the commercial real estate industry, there’s a growing emphasis on environmental sustainability and green initiatives. This is especially true in California. This state has often been a change-maker when it comes to environmental and consumer protections. So, it’s no surprise that the environmental rules and regulations are a bit stricter in this part of the country.
It’s not just about harmful chemicals in our products and recycling requirements, however. More and more commercial tenants are looking for ways to reduce their carbon footprint and run their businesses with environmental sensitivity in mind. They know their customers are looking for it.
Going green and investing in sustainability is a robust investment strategy that commercial property owners cannot afford to overlook. The push for green buildings comes not only from a growing environmental consciousness but also from the clear economic benefits and competitive advantages green initiatives offer.
At Bell Properties Commercial Real Estate, we’re helping Los Angeles investors explore the integration of sustainability into their portfolios. Whether your focus is office buildings, retail spaces, or mixed-use developments, understanding how sustainable practices can enhance your investment's value, reduce operational costs, and attract premium tenants is crucial.
Why Sustainability Makes Economic Sense for Southern California Commercial Investments
If you’re feeling skeptical of green investments and sustainable initiatives because of the perceived high upfront costs, that’s understandable. An investment will need to be made when you’re making your properties more environmentally sustainable. However, a deeper dive into the economic implications reveals the economic benefits that you’ll actually achieve.
Sustainable buildings promise significant savings on utility costs. You can also take advantage of government programs to offset some of those costs. There are tax incentives, too, at the federal and state level. More importantly, as demand for green buildings grows among tenants and end-users, these properties enjoy higher occupancy rates and, consequently, higher returns on investment.
Here’s how you can expect to both earn more and spend less when you invest in energy efficiency and sustainability.
Reduced Operational Costs
One of the most immediate benefits of investing in green initiatives is the reduction in your operational costs as a real estate investor. Energy-efficient systems, updated lighting, water-saving plumbing, and solar power installations can drastically decrease the energy and water expenses of a building. For instance, the U.S. Green Building Council notes that LEED-certified buildings report almost 20% lower operational costs than their conventional counterparts. This is a notable savings.
For Southern California commercial property owners, integrating sustainability and green initiatives into existing buildings is not just a nod to environmental responsibility—it's a smart financial move. If your tenants are responsible for the utilities that they use, they’ll be easier to attract and retain because they know your efficient building will use less energy and therefore cost less to operate. If you’re paying the utilities yourself, you’re saving real money in the line items of your accounting and financial reports.
By installing energy-efficient lighting, updating your HVAC systems, and implementing water-saving fixtures, you’ll have a lot less waste to worry about and lower operational bills. You’ll also be prioritizing things that your commercial tenants and their customers find important, such as waste reduction, recycling, and conservation.
The environment and the planet benefit from your sustainability initiatives. And so do you. There’s more money to be made when you go green, and that’s why it needs to be an important part of your business plan.
Increased Property Value
Sustainability also plays a significant role in appreciating property values. Modern well-maintained real estate assets are always more valuable than those who are old, deteriorating, and in desperate need of upgrades and improvements. Environmental upgrades and energy-efficient updates will drive up your rental values and your property value.
A study published in the Journal of Portfolio Management found that green buildings command higher rental rates; up to 23% more in rents, and they also have greater market value than those without sustainable features. These investment properties are described as future-proof, meaning they are more resilient to changing regulations, more prepared for the demand of the future, and far more appealing to a broader market.
The impact of sustainable practices on property values is about more than just higher rents and higher sales prices when you’re ready to list that building or property. When your commercial investment has green certifications, such as LEED (Leadership in Energy and Environmental Design) or an ENERGY STAR rating, not only does that property present a more attractive space to potential tenants, it also increases your earnings in the short and long term.
Studies have shown that buildings with such certifications can see a premium in value, attributed to the growing demand among renters and buyers for environmentally friendly working and business spaces. This has been a significant factor in the residential market, and it’s also becoming more of a benefit within the commercial sector.
Your energy-efficient commercial property will benefit from reduced vacancy rates due to its appeal to a broad demographic concerned with sustainability and wellbeing. This trend indicates that the market recognizes and rewards the value added by green initiatives, making the case for commercial property owners to invest in sustainable practices.
Attracting Tenants
Today's commercial tenants in Los Angeles are not just looking for space; they're seeking environments that align with their business and civic values. Companies, in particular, are under increasing pressure from employees, customers, and stakeholders to demonstrate environmental stewardship. A green-certified property stands out in the competitive CRE market, drawing in tenants willing to pay a premium for healthier, more sustainable workspaces.
In addition to these measurable financial benefits, adopting green building practices also enhances the work environment for the tenants you’re trying to attract, potentially leading to higher satisfaction and retention rates. For example, improved indoor air quality, smart lighting, and temperature controls contribute to a healthier and more comfortable workspace, which can boost employee productivity and well-being. This not only improves the appeal of a property to prospective tenants but also supports businesses in their efforts to prioritize employee health, aiding in their overall corporate sustainability goals.
How to Begin Investing in Greener Commercial Real Estate in Southern California
If you’re looking for a way to get started with sustainability initiatives in your Southern California commercial properties, Bell Properties recommends that you start with a few incremental changes that are easy for you to absorb cost-wise and in terms of logistics. Making these updates and improvements requires a strategic approach.
You’ll find there are several basic changes you can make that require minimal investment, but offer significant impacts.
An energy audit is an important first step. With a thorough audit of your current energy usage and environmental footprint, you can identify areas where energy efficiency can be improved. This could involve upgrading to LED lighting, which consumes less energy and has a longer lifespan than traditional fluorescent lighting.
Another quick update is investing in smart thermostats and energy management systems to better control heating, cooling, and electricity usage. Commercial property owners might also consider water conservation measures, such as installing low-flow faucets and toilets, which can dramatically reduce water consumption and lower utility bills.
For long-term sustainability goals, it’s crucial to explore renewable energy sources, such as solar panels, to decrease reliance on fossil fuels and reduce carbon footprints. Prioritizing these initiatives sets the foundation for a sustainable property, aligning with environmental goals and financial benefits.
Navigating Green Building Certifications
We have mentioned the benefits that green building certifications can bring to your property. You might want to consider taking this step, because adopting sustainability measures is one thing; validating them with a recognized certification is another.
Certifications like LEED (Leadership in Energy and Environmental Design), BREEAM (Building Research Establishment Environmental Assessment Method), and ENERGY STAR act as benchmarks of a property's environmental performance. Achieving such certifications not only enhances a property's marketability but also simplifies the process of marketing it to potential tenants and buyers who prioritize sustainability. It’s a desirable designation to have, especially when you want to set yourself apart in a competitive Los Angeles commercial real estate market.
Challenges and Opportunities in Sustainable Southern California Real Estate
Bell Properties understands that for a lot of property owners, the shift towards sustainability in commercial real estate presents challenges. The largest one, of course, is often budgeting for the initial costs of those upgrades. There are often regulatory issues to navigate. But, it also opens up a lot of new opportunities for innovation and establishes a competitive advantage. By approaching sustainability as both an ethical responsibility and a strategic asset, LA commercial property owners can secure their investments' future and contribute to the global move towards a more sustainable, environmentally friendly real estate industry.
As Los Angeles property managers specializing in commercial real estate, Bell Properties believes the march towards green buildings is not just a temporary trend but a foundational shift in how properties are developed, marketed, and managed.
Smart real estate investors have begun to notice that sustainability pays. Investing in green initiatives not only aligns with global efforts to combat climate change but also offers tangible financial benefits, making it a win-win scenario for commercial real estate investors, their tenants, and the communities that are served.
If you’d like to talk about your commercial property and the opportunities to make it a little bit greener, contact us at Bell Properties Commercial Real Estate.
