“Everything’s the same, only different.” That’s the call of commercial real estate professionals most any day of the year. This is an industry that redefines itself almost by the hour. An example of that is found with the new ESG initiative that has evolved in the real estate sector and is affecting those on the commercial side. So, what is it and what are some tips for navigating ESG as a commercial real estate professional?
What Exactly is ESG?
ESG stands for “Environmental, Social and Governance.” The idea behind ESG is for property owners (at least within the scope of our focus today) to recognize the effect of a real estate investment in broader terms. In other words, it’s not just about making money or securing a return on investment but also realizing the overall environmental, social and governance aspects of that particular investment. Sometimes this is referred to as a double, or even triple, bottom line.
What is the Purpose of ESG?
While it sounds new and very technical, the truth of the matter is that, as a concept, ESG has been around for a while. The concept has evolved because of a growing need to create or sustain properties that serve a community well beyond the matter of who owns, bought or sold the property. What does this mean for commercial property owners and managers?
Well, the quick answer is that it’s all about protecting one’s investment while also protecting the community. Examples of ESG would include building or renovating properties to be more energy efficient. Also, there’s the matter of using eco-friendly construction materials while building or renovating.
As for the social aspects, the aim on the commercial side is to create or allow for more affordable leases while also supporting or celebrating the immediate community and allowing for a more agreeable design or presentation of a commercial property before that community.
When it comes to governance, this is all about transparency and accountability. How do you run your commercial management business? Are you committed to ethical practices? Are you ASC 842 compliant? Due diligence and transparency are the rule these days and it’s a big part of the ESG concept.
How Can You Become a Part of the ESG Movement?
Take a close look at your commercial properties and consider how they impact your tenants, the immediate community and your actual business. Can you create a more energy-efficient workplace? Is your HVAC old and failing and costing too much to run or maintain? Are the windows and doors to your commercial property secure and air-tight? Are you using eco-friendly lighting such as LED lighting and/or programmable interior or exterior smart bulbs? Much of this can be addressed with the right FF&E software.
Are you able to present your property to the community with upgrades and exterior touches? Is your organization able to become a part of the immediate community by investing in nearby playgrounds or park spaces or contributing to outreach programs where available?
Are you ASC 842 compliant? Is your business rated well with consumer protection agencies such as the Better Business Bureau? If not, why not? Pay very close attention to how you and your business rank in all of these categories, especially when it comes to building your reputation as a responsible and successful commercial property manager or owner.
Being ESG compliant is a win across the board for your company, for your tenants and for your community. It might call for ‘going above and beyond’ at times and stretching your responsibilities beyond where you’d expect, but it can make a big difference in your bottom line and how well you are received in the commercial property marketplace. FF&E, ASC 842 and more can be aided with the right commercial real estate software. Schedule a free demo today to learn more.
