Finding suitability
No single certification is right for every REIT. Fortunately, companies have several options to choose from. For example, because of the triple net lease structure in its shopping centers, Kimco Realty Corporation (NYSE: KIM) VP of ESG Tamara Chernomordik says sustainable activities are primarily focused on common areas and parking lots.
In 2023, the REIT decided to pursue the Institute of Real Estate Management’s (IREM) Certified Sustainable Property (CSP) volume program, which considers a property’s operations and management practices across energy, water, health, recycling, and procurement activities. Specifically for retail, CSP requires that a property be at least 25,000 square feet and 75% occupancy to qualify, among other conditions. Kimco certified 19 of its 569 properties last year.
“CSP is a great way to gain third-party approval to demonstrate our commitment to sustainability and efficiency,” says Chernomordik. “It’s cost-effective, comprehensive, and allows us to focus on what we have control over.”
REITs are also adopting initiatives focused on health and wellness, offered by organizations such as Fitwel and the International Well Building Institute.
In 2023, Sunrise Senior Living, a partner of the Healthcare and Senior Housing REIT Ventas, Inc. (NYSE: VTR) earned the WELL Health Safety Rating across its portfolio of 270 communities in North America. The rating recognizes leadership in health, wellness and safety demonstrated by cleanliness and sanitation, emergency preparedness, health resources and other categories.
Meanwhile, Healthpeak Properties, Inc. (NYSE: DOC), the owner and operator of more than 50 million square feet of lab and outpatient medical buildings, as well as 7,088 continuing care retirement community units, recently achieved Fitwel certification at its 670,000-square-foot lab campus in Cambridge, Mass. The REIT evaluates all of its new lab developments for the Fitwel rating.
HealthPeak launched its first energy reduction initiative in 2007, says Leanne Mester, vice president of communications, marketing and sustainability. As part of that strategy, HealthPeak targets LEED Gold or Silver ratings for its new developments and pursues renewable energy projects and other green efforts within its portfolio, she says. By Dec. 31, 2023, about 6 million square feet of its space will have achieved LEED certification.
“Aligning with sustainability frameworks and certifications can increase a building’s sustainability, reduce operating costs and improve marketability,” says Mester.
mitigate risk
The growing focus on GHG emissions is changing the sustainability game for real estate landlords. Buildings are considered both contributors to climate change and potential victims of it. And while estimates vary in different cities, buildings emit 42% of all global carbon emissions, according to Architecture 2030, a nonprofit focused on transforming the built environment. Meanwhile, rising sea levels and potential threats from extreme weather events like hurricanes, wildfires, and floods pose financial dangers to landlords, according to organizations like the United Nations.
These risks also pose a threat to humans, says Joanna Frank, president and CEO of the Center for Active Design, which operates Fitwel. So, in addition to limiting emissions, the built environment must adapt to reduce those risks, she says, and Fitwel recently updated its standards to reflect that goal.
Fitwel examines 150 building characteristics, including location and proximity to green spaces, design, air quality, and roofing materials, and then leverages data from 7,000 peer-reviewed studies to assess their impact on health and quality of life. In 2023, Fitwel experienced a 113% year-over-year increase in multifamily certification applications, including senior housing and student housing. She says this is the largest increase ever in that category.
“We see certification and benchmarking as tools to inform your asset roadmap and track continuous improvement based on both health outcomes and financial metrics. We can now certify the impact our buildings are having on people and the impact people are having on asset value,” says Frank.
