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Navigating the Green Shift | Commercial Real Estate’s Role in a Sustainable Future

In Commercial Real Estate (CRE), sustainability initiatives and eco-friendly properties are not simply trending – they represent an essential step toward future-proofing the industry. Moving away from conventional notions of larger and better properties towards properties with sustainable features marks an incredible shift within CRE ethos. It underscores our urgent need to combat climate change, reduce carbon emissions and optimize energy use to create more eco-friendly properties in order to sustain our world for longer.

The Interconnection of Sustainable Solutions and CRE

Sustainable solutions and commercial real estate (CRE) share an intimate connection. According to the World Green Building Council, commercial properties account for an astounding 39% of global carbon emissions, underscoring CRE’s essential role in combatting climate change. No matter who invests or rents within large buildings – investor, tenant of such properties themselves or construction company leader- each person plays an essential part in creating sustainability solutions for future generations alike.

Advantages of Embracing Sustainability in CRE

Adopting sustainable practices in CRE can not only be ethically rewarding but can be financially strategic as well. By investing in energy-saving systems like LED lights, which lower electricity expenses while lengthening product lifespan and window tinting that lowers HVAC usage needs – sustainability truly has its rewards!

LED Lighting: A Bright Idea for Sustainability

LED lighting stands out as both cost-effective and eco-friendly, boasting long lifespans of over 70,000 hours compared to fluorescent tubes, which may only last 34,000. Plus, their lower energy use could result in major carbon emission reductions as well as energy cost savings.

Window Tinting: Cooling Costs Down

Window tinting in commercial properties is an efficient yet straightforward method of increasing energy efficiency. By reflecting sunlight away, window tinting reduces interior temperatures in buildings as well as air conditioning usage – cutting operational costs and carbon emissions simultaneously.

Tackling Climate Risk Through Energy-Efficient Infrastructure

Integrating energy-efficient systems into commercial properties has never been more critical, given climate change’s physical impacts and extreme weather events that drive operational costs up. By investing in resilient properties that use less energy than necessary to run efficiently and thereby help build sustainable futures for generations yet unborn, real estate firms can reduce risks while making contributions towards creating a lasting sustainability legacy for future generations.

Looking Ahead: The Future of Sustainable CRE

Over the coming decades, CRE will witness an increasing emphasis on sustainable development; meeting market demands greener properties while reporting carbon reductions transparently and adopting innovative technologies to further sustainability. Furthermore, as this sector evolves its attention will not solely focus on building sustainable properties but retrofitting existing buildings to comply with environmental standards as well.

Sustainability in commercial real estate (CRE) demands collaboration, innovation, and an unyielding dedication to change. By adopting sustainable practices, CRE can contribute significantly to climate change mitigation while simultaneously positioning themselves to thrive in an eco-conscious society. Now is the time for CRE industry players to recognize this imperative by taking small yet consistent actions towards making CRE more eco-friendly – creating positive impacts not just today but for generations yet to come!

Check out my video for more insight.

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Commercial Rent Trends in Canada: What to Expect for the Balance of 2023

Staying updated with real estate market happenings isn’t an easy task, especially at a time when things are changing day to day. Similar to the residential market, the commercial market is currently going through major shifts that will impact the rest of the year.

For your convenience, we’ve rounded up some of the most important commercial and retail rent trends in 2023.

Changing prices

In the wild world of commercial real estate, a major trend has emerged that has left both buyers and sellers scratching their heads: pricing discrepancies. Owners are demanding top dollar for their properties, while buyers and tenants are hesitant to pay the steep prices. This trend is particularly pronounced in sales, but it’s also affecting leasing.

The trend is due to many factors, including interest rate increases, high inflation, and global geopolitical uncertainty. This uncertainty is causing everyone to be cautious, prolonging the process of determining the true value of a property.

Not all segments of commercial real estate are experiencing the same pricing problem, however. Industrial properties remain hot commodities, with near-zero vacancy rates driving up competition and prices in Toronto and Vancouver. Meanwhile, office properties are still in flux as companies struggle to determine their post-pandemic office needs. As a result, there has been an uptick in office subleases hitting the market.

Earlier (in December), Shopify caused a stir when it announced that it wouldn’t be using its new 348,000-square-foot office space in downtown Toronto and would instead be subleasing it. This could be a trend we expect to see more of in the future, although its prevalence will vary across industries. Despite this, some large companies like Deloitte and Google have recently expanded their Canadian office space.

On the retail front, the segment has made significant strides since pandemic measures have eased and in-store shopping has resumed. However, investors are still trying to find ways to compete with the rise of e-commerce and entice shoppers back to physical stores.

Which areas are affected the most?

According to CBRE’s Canada Retail Rent Survey, rent prices in the Western provinces saw the most extensive increase, as all cities located west of Winnipeg reported at least two rent hikes. The cities of Saskatoon and Vancouver were the most affected, with six of their key urban areas experiencing a rise in rental rates.

Demand for high-tech properties

Another trend we can currently see in the commercial property market is a shift towards high-tech features, such as property technology, that prioritize environmental sustainability, social responsibility, and cybersecurity. In the realm of office spaces, companies are looking for setups that can cater to remote workers and accommodate desk hoteling.

Staying competitive in this fast-changing landscape requires adapting to evolving market conditions and client needs, but rather than being intimidated by the idea of constant change, you should approach it as an opportunity for growth. In fact, times of uncertainty often provide the best lessons and potential opportunities.

Differences between investors

In the market, we now see a clear divide between those who have ample capital and those who don’t. While some investors are strategically waiting for the right opportunity, others are struggling to move their projects forward due to rising interest rates and tighter borrowing requirements.

However, financial hurdles, such as mounting construction and labour costs, are posing a challenge for all developers. This is something that should be taken into account for the rest of the year.

But don’t let this discourage you. To overcome these obstacles, it’s important to think outside the box and get creative with your financing and project costs. This could mean offering more free rent, providing more tenant inducements, or even lowering rent escalations to entice tenants. In short, those who can adapt and be inventive will be the ones who succeed in the real estate industry, as history has shown.

Although Canada is still facing economic challenges, the retail industry and its members are optimistic as they head into the new year – this is another key finding of the Canada Retail Rent Survey.

2023 – a promising year for the multi-suite residential rental sector

At the beginning of the year, Morguard released its Canadian Economic Outlook and Market Fundamentals report for 2023. According to it, things are looking optimistic for the multi-suite residential rental sector. That doesn’t come as a surprise since the market remained steadfastly confident throughout 2021 and 2022, despite the heightened risks.

Richard Crenian

Founder & President, ReDev Properties

Richard Crenian is the Founder and President of ReDev Properties. Ltd, a private real estate asset management company with its head office in Toronto. ReDev Properties is engaged in the development, acquisition, ownership and management of retail and mixed-use income properties predominantly located in Western Canada and Ontario. To learn more about Richard please visit www.richardcrenian.ca