“Sustainability” moving centre-stage in commercial real estate

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The StarGate office building on the Place de l'Etoile LuxembourgAs we move into 2012, it’s important to be aware not only of the major economic pressures that are having an enormous impact on the way we do business, such as the current squeeze on bank finance and the uncertain future of the Euro (indeed, who could fail to be aware of these?), but also to note the underlying trends that accompany them.

Several of our posts in 2011 addressed environmental protection and energy efficiency, which have become much more important in recent years. RealCorp proactively called attention to this (indeed, our first post on this blog a year ago was on this very theme: Go green profitably in Luxembourg).

A year later, we can see that this trend is definitely not a fad, and not restricted to the Luxembourg market, as Tehdi Babigeon reported after his recent trip to SIMI in Paris.

RealCorp is marketing the One on One building at 1 route d'Esch, LuxembourgOccupants, like owners, now look for quality labels. There are different degrees and different labels, which have different requirements (four of the major ones are discussed in the post Luxembourg commercial real estate initiatives 2011), but, in general, people seek verifiable evidence of sustainable building. This is due not only to environmental concern, but also to an interest in improving financial reporting.

RealCorp’s MD, Michael Chidiac, explains it thus:

Buildings that are more responsible, more energy-efficient, reduce operating expenses.

Of course, it costs extra time and energy to build environmentally friendly buildings. It also costs more money. However, these costs must be viewed in light of green buildings’ other purpose: the maintenance of their intrinsic value. In the life cycle of a property, sustainability is an important criterion. It’s no longer just a question of the sale price, but of how the property will succeed in maintaining its value through time.

In other words, savings in operating costs are only one aspect of sustainability. A good building, which costs little to maintain and occupy, will also reduce the turnover of tenants. Staying longer, they stabilize the readability of your investment.

There is a domino effect in this system: investors, seeing the good results of the first “responsible” buildings, begin to look for similar projects. This becomes a means of differentiation vis-à-vis the competition, and provides more value to the investment. Whereas, previously, ecological buildings were “nice-to-have”, the evolution and maturation of the market is transforming them into necessary assets, as evidenced by direct demand from clients.

If you are looking to own or occupy cutting-edge office space that makes financial sense in Luxembourg in 2012, we urge you to consider some of the green buildings we represent on this site’s Innovative Projects page.

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