I am happy and proud to present this interview about Sustainability in the buildings from tenant’s perspective. Great points and conclusions have come up during our discussion with Lucie Makkonen, my former colleague and good friend from Finland times.
LUCIE MAKKONEN Real Estate professional in property management, facilities management and corporate real estate
Lucie, what are green buildings in your view?
“Green buildings” is a label that has been introduced to differentiate new property developments and their qualities, such as low energy consumption, environmentally-friendly materials, and other criteria that other buildings do not have.
The label helps to understand the quality of building or the space product.
Do you think green buildings create value for the building users?
They do create value because building with the label ultimately has some sort of a better quality, and thus it has value. However, the value can be very difficult to recognize for the user who is not familiar with the certification (labelling) process. Such user does not necessarily perceive the full value of a green building. Building users should be explained more what the term „green building“ means so that their value is understood.
Where does Sustainability stand when looking for a new office space?
In our process, sustainability of new office premises is one of criteria being rated in an evaluation matrix. In my opinion, only educated user, who already knows that there is some value in Sustainability, will give higher consideration to green label.
So, what are the main elements of this Evaluation Matrix when choosing the right building?
It’s always a combination of number of factors, but the number one is location. Other criteria considered: Is the building new or is it old? Is there potential to expand premises or not? Will in the future this area be attractive and support growth and innovation? What kind of connectivity (public transport) it has? These are examples of some criteria.
If in the same area there are few buildings and one of them has green label, this one is expected to have some better qualities than the other buildings, and thus it would be viewed as a more valuable one and would earn extra points in comparison with older building with no certificate.
Where does the decision for more Sustainability come from?
Decision for Sustainability come from the executive management level. Firstly, if there is a decision to move to a new site, then a certified building is a more favourable option because it better contributes to company‘s image. Secondly, certified building is expected to generate some savings in costs (e.g., operating costs). The real impact of these savings would be explored further in the decision-making process before taking up the space.
However, final decision is driven by total cost and operating costs make around 30-40% on top of rent. Therefore, property owner (seller) has to clearly explain what impact green features will have on the overall cost level for tenant. I haven’t met many professionals who would know how to explain this point clearly.
Are tenants willing to pay more for sustainable building?
The driver for corporate occupier is long-term cost. The occupier always seeks highest quality at the lowest reasonable cost . So, I don’t see any sort of desire to pay extra. If a building is of high quality and is more expensive, the occupier will try to lower the cost and bring it closer to market benchmark. It may end up paying more for green label in a compromise for a higher “brand”, that’s not a rule though.
What’s your message to the green building developers and owners?
I think, corporate users should be constantly educated about green building features that differentiate them from other stock. It should be done in an easy way for the corporate user to understand. Decision makers don’t have time to listen to hours long presentations. Even if they would have, often those presentations use specialist language. All that the user wants to hear is „What’s in it for me?” and „Why this building is better?”, explained in simple language, free of unknown abbreviations and technical terms.
I really promote simplicity in communicating green matters to make them understandable and attractive for the end user.
I see, it is highly important to make Building Sustainability simple and easy to understand for the users so that all parties speak the same Sustainability language.
Yes. I also suggest having these topics discussed on different platforms, and keep the conversation with the users going not only when site gets selected, but also proactively during the whole life of premises, at various occassions.
Sustainability is quite a new field, it is really unique and for many real estate professionals is to be still explored and better understood. In today’s world where customers demand added value for no or little additional cost, sustainable may create wrong price label by implying „It costs more money”. To avoid this, it should be explained that „There is extra cost, but the real difference is acceptable when overall cost level is considered”. Green building in selection process is assessed case by case.
Green building will always be compared to other non-green options, and thus it’s „green message” shall be made clear and bold.