Who’s in your Top Ten? – LP demands push decile rankings
Deciles and quartile …
As the United States and China, the two largest carbon dioxide producing nations, agree to curb their emissions, global attention refocuses on reductions in greenhouse gases. Sustainability certifications and regulations for real estate development and retrofit will play a significant role in this change. But for many real estate owners, the choice to “go green” isn’t just a moral or regulatory imperative, but a financial factor.
In the last few years, energy efficiency has become a hot topic for the real estate market. In New York City, Mayor Bill de Blasio rolled out a plan to reduce greenhouse gas emissions from public and private buildings to 80% of 2005 levels by 2050, projecting $1.4 billion annual energy cost savings by 2025. Research indicates there is significant value in maintaining sustainable building certifications like LEED, BREEAM, Green Star, or Green Mark. According to a research summary recently released by the World Green Building Council, sustainability certifications can attract tenants and help to command higher rental rates while efficiencies reduce operating costs. Higher rent and lower expenses lead to bigger operating margins and ultimately a more marketable property at time of disposition. Additionally, properties without a sustainability certification may suffer a resale discount. Collectively, these studies indicate that not all certifications produce all the same benefits. In some cases, a certification may actually yield a lower resale price based on the certification program, certification level, and regional perceptions.
So, is green the new black in real estate investment? With hundreds of sustainability certification studies leading to wide ranging conclusions, how should firms investing in real estate analyze and leverage this information when evaluating the risks and returns of an investment opportunity?
The first step for many firms should be to centralize the research process around a common repository that is easily accessible. This important initiative can help overcome the historical challenges of sharing intelligence obtained by a few researchers, enlisting the entire team in building a persistent body of institutional knowledge, and minimizing the effects of staffing changes. Research management systems facilitate the collection and cataloging of information, making it easy to retain, reuse, and expand an institutional knowledge bank over time.
The days of relying on one superstar team member are over. Capturing research in a collaborative environment is key to maximizing the potential of your entire team, thus maximizing your firm’s potential. The incorporation of socialized collaboration tools into research systems empower teams to share analysis & insights, build on key ideas, and collectively reach more informed conclusions.
Research and analysis isn’t valuable for its own sake; the value of knowledge is measured in the context to which it is applied. When tied together in one system, research findings and historical investment performance data can be used again and again when evaluating similar properties. Connecting research and analysis to property data adds context to the information and helps teams draw better conclusions during the due diligence process. This is one of many ways centralizing research into one location, collaboratively analyzing it, and applying it in the context of investment data can improve your firm’s investment decisions.
There is no single, simple answer when it comes to assessing the investment impact of hot trends like sustainable development. Instead, there is a plethora of research data available for evaluating the risks and returns of property investments. It can be an overwhelming task for individuals to investigate and analyze this research deal by deal. Research management and collaboration tools not only help centralize and socialize your firm’s collective intelligence, they also help teams turn flat research into contextual knowledge when incorporated into an investment management system.
In today’s dynamic, data-driven economy, employing technology to support research management, collaboration, and due diligence can be a key factor in making sound investment decisions, particularly when evaluating trends like sustainability in and its effects on real estate investing.