Sustainability Can Mean Profitability

In the past, renters have been influenced to choose a particular property due to considerations such as price, location, aesthetics, and noise levels. While that criteria is still important, over the past several years, renters have added another requirement to their list: they are now seeking housing with a lower carbon footprint.

In a recent survey by AMLI Residential’s 2020 Sustainable Living Index, 4,891 AMLI apartment residents were asked how much sustainability influenced their choice on where to live. Almost half of all respondents, 47 percent, said that green features played a role. Developers and real estate investors have taken notice of this trend, and have responded by incorporating smart technology and green amenities. Elements that were once only reserved for single family homes are now appearing in multi-family properties.

According to a report by The National Association of Home Builders’ (NAHB) authoritative, multifamily builders and remodelers said operating efficiency and long-term utility cost savings are the reasons customers are convinced to invest in green construction of homes. Customer awareness on factors such as environmental impacts, sustainability, and long-term cost savings is driving the growth of the multifamily residential green building market.

There is still a hurdle to incentivize builders to implement certain types of expenses, such as solar panels, when the developer foots the expense while the tenant reaps the benefit of lower energy costs. But ultimately, incorporating elements of sustainability in a property can drive up asking rents, especially if a unit has energy efficient appliances such as dishwashers, refrigerators, or ceiling fans. Additionally, at properties where residents pay a flat rate for their water usage, installing low-flow showers and toilets is a way for the property owners to save money.

If new appliances are cost prohibitive, less expensive upgrades such as caulking and insulating exterior windows and doors will cut down on energy costs. With temperatures becoming more extreme, that insulation can help stave off wear and tear on the property. Some types of insulation can also substantially reduce sound transfer between spaces.

While most property owners are content to incorporate a few elements of sustainability, other developers have opted to make green building a major priority. This is especially evident with LEED certified commercial real estate. LEED stands for Leadership in Energy and Environmental Design and it’s the most widely used rating system of green building. It’s a standard used for almost all types of buildings and provides a framework for reduced carbon footprint construction. For the past three years, LEED assets have outperformed their non-LEED counterparts, commanding a 21.4 percent higher average market sales price per square foot over their non-LEED counterparts. According to research by commercial real estate services firm Cushman & Wakefield, since 2015, rents for LEED-certified buildings have averaged 11 percent higher than those of non-LEED properties. It’s clearly a sign that sustainability can also equal profitability.


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