Gravel2Gavel Construction & Real Estate Law Blog
Sustainability has evolved from a passing trend or niche preference into an undeniable, growing driver of the real estate market. This is particularly true as millennials comprise an increasing proportion of the workforce, home-buying population, and individuals influencing the future of real estate development in the United States.
If anything illustrates the significance of younger generations’ increasing interest in sustainability, it is the Global Climate Strike that drew participation of many thousands of young people, with 2,500 events scheduled in over 150 countries. In New York City, 1.1 million public school students were excused from school to join the strike in an event planned to precede the UN Summit, which itself was intended to push countries toward a commitment to faster transition to renewable energy and stricter climate targets. While both policymakers and citizens of previous generations have been split on their willingness to address global climate change with urgency, younger generations are feeling a stronger sense of responsibility for curbing the world’s trajectory towards a climate catastrophe, which will be inherited by them and their children. This has manifested in action that promotes awareness of and political action with respect to these issues—such as the Global Climate Strike—as well as evolving habits and preferences in both consumer goods and real estate.
Greener Space
In recent years, real estate developers have recognized that there is a market for “greener” developments that reduce annual expenditures on buildings, whether it be through small spaces requiring less electricity and promoting energy efficiency, or through renewable energy options such as solar photovoltaic power. Some real estate developers have chosen to install these options themselves, while others seek out sustainable financing options to cover the costs of renewable energy. If installing renewable energy is too costly, real estate developers will seek out more cost-effective locations for their brick-and-mortar operations.
It is becoming increasingly clear that the growing preference for sustainability in real estate extends further than energy efficiency and renewables. Sustainability represents a multipronged shift in the quality and orientation of U.S. cities and the spaces people choose to occupy within them. Sustainability is as much about economic and social preferences as it is about environmental impacts, and public perception of sustainable spaces has broadened to consider economic and spatial efficiency.
An example of this growing preference for sustainable spaces is apparent in the housing market, where boomers have recently struggled to sell their large, multimillion-dollar, custom homes. After realizing that these high-maintenance homes would not suit their needs as they grow older, boomers have experienced difficulty selling their homes as millennials lean toward smaller, more affordable, modern homes within walking distance of retail and other resources. This has resulted in these large “dream homes” selling at a substantial loss, as the younger generation flocks to urban centers where they will not bear the burden of maintaining a large yard, paying costly electric bills, or tolerating a long commute. Smaller homes in denser areas require less energy, and their occupants travel fewer miles in automobiles because they live closer to where they work and have better access to their communities’ businesses and public transportation infrastructure.
A Communal Approach
A shift toward communal, shared workspaces—such as those offered by “coworking” companies—similarly reflects this preference for small, economical and accessible environments. These coworking spaces allow small companies, professionals and contractors to rent primarily communal workspaces—an efficient alternative to large, spacious floors of commercial office buildings, which often contain vacant offices and unused, energy-intensive space. Communal workspaces are particularly appealing in an age where many professionals work from home regularly.
Meanwhile, many offices have modernized their spaces by erecting glass walls between offices and hallway spaces, and by removing cubicles within offices in favor of shared space. In addition to those design choices promoting energy and spatial efficiency, communal design promotes collaboration and productivity. Studies have shown that coworkers occupying space in close proximity with one another (e.g., six feet) not only interact in person far more frequently than coworkers in far proximity (e.g., 60 feet); they also communicate digitally with far more frequency and complete projects significantly more quickly.
Maintaining the LEED
Finally, the growing market for Leadership in Energy and Environmental Design (LEED) certified real estate developments is perhaps the most significant sign that sustainability has been embraced. LEED certification looks at sustainability holistically with attention to every aspect of construction, including considerations such as site development, location, indoor air quality, greenhouse gas emissions, quality of building materials, and energy and water efficiency. As these considerations have become increasingly mainstream, purchasing LEED-certified real estate has become a more appealing investment, as renovating a building to adopt one or more of these “green” qualities can be complicated and costly initially, with cost savings and other benefits accruing over time. This makes LEED-certified buildings highly marketable.
Investing in spaces now to embody the growing value society places on sustainability is likely a worthwhile, long-term investment. Substantial costs can be saved by increasing energy and spatial efficiency, while sustainable design can make homes and businesses more appealing and profitable.