This article was previously published in Mexico by Inmobiliare as "Predicting the Future: How Sustainability will Reshape Real Estate Development and Investment in Mexico by 2020." Read the original article in Spanish.
With increasing market penetration over the last four years, sustainability has been a strong and growing trend in real estate investment in Mexico. This rate of change and adoption of sustainability means that even bigger changes are ahead for commercial real estate developers and investors.
By the year 2020, Mexico’s real estate market will have
- More green and third party-certified properties.
- More investors looking closely at metrics that identify best industry practices.
- More citizens, corporations and governments seeking solutions for the impacts of climate change.
It’s a bold forecast based on some rapidly maturing trends.
More green building
More than 10 years ago, leading real estate companies in Mexico embraced the concept of delivering third party-certified green buildings with one or more LEED ratings. Mexico has consistently shown strong year-over-year growth to become the seventh largest market for LEED projects globally, with more than 14.5 million square meters of LEED-certified space. This growth continues unabated with Dodge Data and Analytics reporting that Mexican firms are anticipating 60 percent of future projects will be green.
Driven by tenant demand for buildings that demonstrate superior energy and water efficiency and higher performance for occupants, the global market for green building continues to expand. Energy efficiency and sustainability in the built environment have emerged as important economic signals to many of the largest property investors around the globe. Institutional investors, such as pension funds, endowments and insurance companies, realize that a building’s sustainable attributes directly affect the risk profile and financial performance of their real estate investment portfolios. Investors are turning to GRESB assessments and benchmarks as a way to identify sustainability-based risks and opportunities within their real estate portfolios.
GRESB is an industry-driven organization committed to assessing the ESG (environmental, social, and governance) performance of real assets globally, including real estate portfolios and infrastructure assets. GRESB uses a quantitative tool that benchmarks a property company or fund’s sustainability performance at the portfolio level to include management policies and practices that result in implementation of energy and water efficiency techniques alongside a series of best business practices.
In 2015, 707 property companies and funds participated in GRESB, reporting their sustainability performance while benchmarking against peers in similar property sectors and regions. Jointly, these participating companies represent $2.3 trillion in property value, with equity ownership positions in approximately 61,000 assets spanning more than 50 countries. The 2016 assessment period begins in April.
Stronger demand for action
Awareness of the risks of climate change and the need for resiliency and mitigation efforts are high in Mexico. From the Mexican national legislature to the Mexico City government and spanning global corporations to family-owned enterprises, there is strong agreement that climate change poses considerable threats to the economy and to society, and there is a growing urgency around mitigating risk.
As GRESB CEO Nils Kok recently pointed out, “The real estate sector is responsible for 81 percent of electricity consumption in North America. Energy and electricity are inputs for economic production—the energy is used to run buildings and appliances, in the same way that manufacturing facilities use energy to produce widgets."
If buildings are a part of the emissions problem, it follows that the built environment must be part of the solution. Countries want a strong and thriving economy that maximizes inputs while minimizing waste, which provides the foundation for businesses to respond in a real way to address climate change.
By 2020 these things will be a reality—and the market rewards for early adoption and leadership will have long since been received. Help bring Mexico forward as a global leader in sustainability.