In Europe you have a strong central government that can come in and work with the private sector to deliver something locally. Here it’s up to the municipalities to figure out how to use those public-private partnerships at the local level to deliver the types of benefits that Edith was talking about.

Generally, cities are very good at talking to each other. Mayors talk to mayors. City officials talk to city officials. The lessons that are starting to really take root are that there’s safety in numbers.

We’ve also gravitated toward the idea that economic development is really the result of creating a city where people want to live. It’s the attraction of human capital. If you can attract highly educated people from other parts of the country and keep your own best and brightest, chances are the job creators are going to be successful. And people no longer chase jobs. Jobs chase people.

At a time when some technologists talk about telecommuting, what makes you so sure that cities will continue to grow at the kind of pace that we’re talking about? Hoornweg: Well, people want to be with other people. Entrepreneurs want to be with other entrepreneurs. The idea that they could live anywhere is very much available to them. But they’re not choosing to.Ascher: It’s not just on a neighborhood level. It’s also on a business level. You want to interact with your business counterparts face to face. The physicality of a city is still so important.

What kind of people are going to live in these cities that will be growing so quickly the next couple decades? Will retirees want to be in them? Families? Or will they have to flee because they won’t be able to afford them? Hoornweg: All of the above. With good city management, a city is attractive to everybody. There are really interesting studies coming out of the Santa Fe institution that basically say that if there were no externalities for traffic or whatever, the human population would like to live in one city, because we really like being with each other.

  6 Institutional real estate is in the midst o a major downturn

growing awareness among investorsthat environmental and social analysis canenhance their ability to assess building andportolio perormance over the long term.

Energyuseingreenbuildingis29to50 percent less than non-green counterparts. •Greenbuildingsuseanestimated40 percent less water. •Carbondioxideemissionsingreen buildings are reduced by 33 to 39percent. •Solidwasteattributabletogreenbuildings is reduced by 70 percent

In practice, these issues havebeen treated as vital by many investors – RPIoers a means to bring them together into acoherent ramework

SmartGrowth

SocialEquityandCommunity Development

UrbanRevitalization

size o the US commercial real estate marketat $5 trillion, with approximately $2.5 trillionin assets owned by institutional investors.

EnergyConservation

EnvironmentalProtection

WorkerWell-Being

HealthandSafety

LocalCitizenship

CorporateCitizenship

Figure 2: “Market standard” fund performance characteristics

The increased global and 2.2  Impacts o Sustainability on Institutional Real Estate Table 1: Sustainability Impacts on Real Estate social awareness about sustainability ingeneral has sharply impacted institutional realestate in several interrelated ways,

Global Reporting Initiativeand Principles or Responsible Investing

Ideally, a unied approach could also be takento visualizing, analyzing, and managing thedata obtained or individual metrics, buildingupon the action items mentioned aboveto create a dashboard or monitoring andimproving portolio perormance in the contexto RPI and investor and stakeholder interests.

The eld o RPI lacks a powerul, standardizedset o portolio-level metrics which isrecognized and used by investors andmanagers across the real estate industry,thereby dening and giving credibility to thepractice o RPI

The scope o RPI is broad. It includes, orexample, “deep green” projects that ocuson poor communities or environmentallyragile areas, energy ecient buildings thatoer clear nancial advantages throughreduced operating costs, aordable housingprojects that draw upon local tax credits,and now carbon reduction projects thathedge risk and result in renewable energycerticates.

we have developed a seto 26 quantitative metrics that can helpinvestors to nd, create and articulate valuethrough improving the economic, social, andenvironmental prole o their investments.

Thesemetrics were selected or their ability to allowreal estate proessionals to better addressrisks and identiy opportunities or long-termvalue creation.

Table 2: Proposed RPI Metrics

Measuring the walkscore or a property isa simple as putting in the address into thewalkscore calculator (www.walkscore.com)

the premiums suggesthigher rents, occupancy and general marketdemand or walkable properties.

By trackingthe ability o properties to create jobs andprovide services or underserved areas,investors can lower risks associated withregulation and community opposition as wellas setting an example o social sustainability

Buildings – even green buildings – oten lacka close connection to their surrounding areaand community. Developing CommunityEngagement plans on a site-by-site basisallows projects to be sensitive to the needso the citizens and areas in which they areconstructed

ensures that negative impacts and publicopposition to projects will be minimized.

These plans should also include provisionsor the public use o private space, which haswell-documented success in San Franciscoand other cities. Across a portolio, investingin projects that positively contribute to thecommunity in which they are anchoredcreates a positive image, minimizes, risk, andimproves social sustainability

Table 3: Portfolio Characterization

Several categories contain RPI metricswhich investment managers could directlytie to value either through their indication o decreased operating expenses or indirectlyaid in obtaining higher rents, lower vacancy orselling the property at a higher price. Othercategories do not link directly to asset value,rather allow the investor to property determinethe correct ESG measures which must bein place in order to achieve maximum RPIbenets

Prudent portolio managers will look toenter into portolio wide contracts orcommissioning, eciency, renewables, andother measures to improve perormance,and use RPI metrics to track the value o improvements portolio wide

Environmental metrics are perceived as havingmore direct links to value, however socialmetrics are seen as helpul in characterizingprogress on advancing the social agenda o the und, while maintaining nancial returns

Environmental metrics are more malleablethan social metrics—in other words, mostenvironmental metrics can be improved overtime across the portolio, whereas socialmetrics are oten determined at the point o acquisition, and remain static (walkability, CBDproperties, etc.)

To ensure ease o collection and interpretationo the additional data, systems should be putinto place to ensure the metrics are trackedat each property and easily aggregated to theportolio level.

Portolio managers, property managers,and stakeholders will be able to engage ina dialogue regarding value created acrossthe triple bottom line through responsibleinvestment practices

CBRE Standardso Sustainability

There are many useul sotware tools on themarket- rom EnergyStar Portolio Manager(mentioned previously) to proprietary systemssuch as Tririga (www.tririga.com). Tririgacombines portolio management tools withportal views or property managers, andacilities management unctionality. Thishelps to integrate goals and establishcommon metrics rom asset to asset

In a changing and volatileinvestment environment, there is a uniqueand urgent need to better understandthe benets o making a commitment toresponsible property investing. The potentialor improvements at the portolio level isgreat, with benets accruing to investors,the industry, and society as a whole, and thepotential or these considerations to improvethe industry as a whole is even greater.

•Long-termvaluecreationthrough increases in assessed value o property •Greatlyreducedoperatingcostsbydriving environmental metrics •Minimizationofriskinseveralkeyareas during acquisition •Improvedpublicimageandinvestor condence •Improvedrelationshipbetweeninvestors and asset managers •Increasedvisibilityandtransparency•Demonstrationofvaluesinpractice

  26  The benets o committing to RPI arepotentially signicant, but a lack o uniormmetrics which can be adopted industry-wide has hindered the potential impact o RPI on the real estate sector.