As world leaders focussed on the imminent threat of climate change in COP28, close to home in India, the devastation caused by cyclone Michaung in Chennai gave an eye-opening glimpse of this looming threat. It reinforces the fact that anyone, from film stars and politicians to the common man, cannot be immune when it comes to mother natures’ fury. Blame it on the gaps in infrastructure, lake encroachments, record-breaking torrential rainfall, or merely climate change; we as a nation can no longer offer mere lip service when it comes to embracing sustainability.
Speaking of sustainability, it is pertinent to note the fact that 39% of global CO2 emissions are a result of buildings and the construction sector. An average building in India emits approximately 300 tons of CO2 per year. If you look at the economic impact, India loses an estimated INR 1.7 trillion annually due to energy inefficiency in buildings, a number worth noting as we inch towards becoming the 3rd largest economy by the end of the decade. How ‘sustainable’ can embracing sustainability be in Commercial Real Estate?
It is a known fact that we have limited real estate, and new supply of commercial properties alone, will not be able to cater to the growing demand for office spaces. The only way out of this conundrum is reimagining older properties and bringing them back to life to meet the new age needs. Research from ReQube showed that with an investment of INR 500 per Sq.ft. we could easily revamp an old property, create modern amenities and provisions for multi tenancy, enhance floor efficiency, increase energy savings, reduce freshwater consumption, enhance air quality, and create abundant natural lighting. Results have shown that this investment in renovation improves the rentals by at least 15% and the occupancy by around 20% resulting in a payback period between 2-3 years. Its surely a commercial win for the landlord over long term with an added benefit of enhanced tenant experience. If it’s a win-win for everyone then what’s the catch ?
For the developer and the landlord community of mid-sized commercial buildings, sustainability has often been a pipe dream and a cost centre. The benefits accrued over long term, while the capital requirement was immediate. Landlord had to invest the capex while tenants enjoyed all the benefits. On top of this, a single renovation project needs support from multiple stakeholders including architects, structural experts, interior designers, MEP specialists, vendors for landscaping, Rainwater Harvesting, Sewage Treatment Plants and rooftop solar panels among several others. It’s a mammoth task for a landlord to pull this off all by himself.
This is where a new model of “Sustainability as a Service” becomes eminent. A model where landlord has a single partner who specialises in renovation and upgradation of old properties. This SaaS partner takes end to end ownership of the project right from design to development and maintenance and in certain cases also shares the capex required for renovation in return for an assured Opex of managing the property. As climate change hits close to home and companies start asking about the “Sustainability Quotient” of their office space, embracing sustainability is no more a question of if, but a question of how soon.
