Commercial Investment Real Estate January/February 2017 | Page 17

REIT managers with the opportunity to increase the value of both individual buildings and entire portfolios. Since energy costs are a major operating expense for existing buildings — accounting for between 20 to 30 percent of operat- ing budgets — energy use reductions save money to the bottom line. More efficient equipment and operations deliver cost savings and provide a direct boost to a building’s net operating income. In addition, the full value proposition of sustainable building performance is often overlooked. To capture value and avoid falling behind competitors, REIT managers may leverage rating and cer- tification systems such as U.S. Green Building Council’s LEED and Energy Star. Receiving these certifications demonstrates the quality of their buildings to current and prospective tenants. U.S. commercial buildings are estimated to have at least $11 billion of latent value and are ripe for investment. This estimate is based on the $70 billion in untapped U.S. commercial build- ing energy retrofits identified by a 2012 Rockefeller Founda- tion study and analysis based on SNL Financial, NAREIT, and CoStar data. The Rockefeller study shows REITs account for about 15 percent of the U.S. commercial building stock. This latent value will also grow as building systems age, and REITs expand their reach into commercial properties. Saving Energy For investors, energy performance provides a proxy for sound REIT management. Investments in portfolio-wide energy retrofits are an effective approach to mitigate investment per- formance risks across different market conditions. REIT man- agers who prioritize energy retrofit investments become more trustworthy stewards of investors’ funds. They demonstrate deeper understanding of the full spectrum of value-creation opportunities. Also, investors value REIT managers that prioritize energy retrofit investments over time to capture strong, predictable returns. These investors will share in the latent multi-billion- dollar prize. The GRESB annual survey offers guidance for what attributes to seek in REIT managers. The pace of new solutions is accelerating the transition to high- performance buildings. REITs investors should ask themselves a simple question: Is the goal to lead the pack or simply hang on at the back as the pace quickens? Iain Campbell is managing director at Rocky Mountain Institute and a participant in Ironman competitions. Contact him at [email protected]. BigBoysBlast is now a CCIM affiliate partner BigBoys Blast is a commercial real estate marketing tool that helps brokers and property owners market their commercial & investment property to over 10,500 investors and over 126,000 real estate professionals across the USA, Canada and abroad. Get $30 off any email blast using the CCIM discount code Visit www.BigBoysBlast.com CCIM.COM January | February 2017 15