ACROSS | The European Retail Real Estate Magazine

Opinion

Sustainability on the rise

Carlos González, Managing Director Neinver. Image: Neinver

Sustainability has earned an important role in the retail property sector in recent years and sustainability goals are now a pillar of outlet centers’ strategies.

By Carlos González

Driven by global and European sustainability legislation (like EU directives on the Energy Performance of Buildings and on Energy Efficiency), property companies’ original focus on risk reduction has, in fact, turned into a competitive advantage.

Investors and tenants alike increasingly value retail properties with environmental certifications. For investors, economic benefits are diverse. Besides increasing the assets’ market value, it also boosts tenants’ satisfaction, which naturally translates into higher occupancy rates. For tenants, higher energy efficiency and more recycling options mean lower operating costs.

We have thus seen a rise in the number of sustainability certificates in the sector, especially ISO 50001 for Energy Management and 14001 for Environmental Management standards, introduced by the International Organization for Standardization (ISO) in 2011 and 2015, respectively. In this context, some retail property owners and managers have been taking the lead in the movement towards sustainability. At the 2017 BREEAM Awards, three out of the eight winners of the BREEAM and GRESB joint award for corporate sustainable investment were companies specialized in shopping centers or outlets.

In line with this growing investment in sustainability, the International Council of Shopping Centers (ICSC) established a property efficiency scorecard in 2013 to help retail landlords compare property efficiency among their portfolios in terms of costs and green practices. This enables owners to understand how their portfolio performs compared to an industry standard and helps them to improve performance and capture cost savings.

It is important, however, to implement sustainable criteria in all phases of the property cycle—from pre-development and design phases, including measures such as the initial environmental study of the location or project, to establishing technical designs in compliance with companies’ environmental requirements, to the introduction of “green clauses” for projects’ contractors regarding construction materials or the implementation of systems to increase energy efficiency and reduce energy and water consumption.

All these are necessary and, therefore, increasingly common. Management must also take environmental issues into account in ongoing employee training and in offering services, such as electric vehicle charging stations and ease of access by public transport.

In addition, there are ways for operators to help tenants achieve common goals. These include sharing best practices in energy efficiency, establishing water optimization procedures and waste-management policies, and encouraging the use of certified materials in designing the stores. It is also increasingly frequent to see the establishment of “green leases,” which secure a few critical commitments for both the landlord and the tenant, align financial incentives, and improve environmental data reporting.

Sustainability has become a long-term, comprehensive perspective for companies involved in the shopping center and outlet sector. As a result, we are seeing the language of sustainability become a fundamental part of the industry’s vocabulary, with terms such as environmental footprint and responsible property investment increasingly present in strategic retail property plans. Looking to the future, we will see intensified sustainability criteria in all phases of the retail property cycle. In this context, aligning sustainable development and management will be vital.

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