Environmental Factors Drive Long-Term Real Estate Demand, LaSalle Finds
CHICAGO (August 07, 2017) — A broad array of environmental factors are expected to significantly contribute to the financial performance of real estate portfolios over the coming years, according to LaSalle Investment Management (“LaSalle”). The analysis, published in a recent whitepaper by LaSalle, suggests that an increased focus on a ‘green premium’ will yield higher returns.
To download the full report, please visit: http://bit.ly/LaSalle-Whitepaper-Sustainability
The report reveals that environmental factors are closely linked to the secular, long-term drivers of real estate demand such as demographics, technology and urbanization (DTU). In recognition of the presumed impact of environmental factors, LaSalle has added a fourth “environmental” pillar to the DTU, renewing its secular pillars to be abbreviated as “DTU+E.” As it relates to environmental sustainability initiatives in North America, the report identifies the following:
- The U.S. is both a leader and laggard in incorporating environmental sustainability into real estate investment.
- The U.S. approach to sustainability emphasizes discretionary participation, focuses on building level measurement and improvement and allows market forces to drive behavior rather than regulation.
- Canada’s real estate investors rank amongst the world’s leaders with respect to environmental sustainability.
- Institutional investors continue to drive the Canadian agenda within its real estate sector, along with noticeable support from smaller property owners and participants.
Eric Duchon, LaSalle’s Global Head of Sustainability, said: “A wide and growing range of environmental factors have been on our radar screens and part of our asset management best practices for over a decade. Our working hypothesis is that these secular drivers have the power to shape real estate markets in ways that supersede and outlast the shorter-term property cycles. Most importantly, our review of the available research suggests that environmental factors are already influencing the financial performance of buildings in multiple ways. LaSalle expects that this trend will continue and grow over time as the broader investment market also recognizes that environmental factors matter in numerous ways.”
The report notes that few investors are willing to sacrifice return or to increase risk for the sake of improving their sustainability credentials. Nonetheless, the report finds that a growing pool of investors are asking fund managers and REIT executives to report on their progress toward establishing and meeting environmental and sustainability goals. LaSalle’s participation in the UN PRI Assessment is a direct reflection of this trend, and the firm recently achieved an A+ rating in Strategy & Governance, accompanied by an A rating in Listed Equity-Incorporation, and an A the Property category.
The whitepaper findings illustrate investors are also gaining an awareness of the published evidence that shows that, in many situations, investments in sustainability improve asset-level and portfolio-level financial performance.
Richard Kleinman, LaSalle’s Head of U.S. Research & Strategy, said: “The drivers for sustainability vary considerably by country and by market. In the US, market forces are often more powerful than regulatory ones. In other countries, like Canada, the re-shuffling of national or provincial priorities places a greater emphasis on regulatory change and on voluntary participation in sustainability initiatives. Despite many common concerns at the global level, our analysis shows that the regulatory responses to the environmental factors vary greatly by country, by metro and by municipality. Overall, while the recent national policy environment may keep the U.S. from becoming a global leader in environmental sustainability, significant progress and innovation will still be found at the municipal level, or through changing occupier preferences, and in privately financed projects.”
About LaSalle Investment Management
LaSalle Investment Management, Inc. (together with its global investment advisory affiliates, “LaSalle”) is one of the world’s leading real estate investment managers. LaSalle on a global basis manages approximately $60.5 billion as of Q3 2018 of private and public equity and private debt investments. LaSalle’s diverse client base includes public and private pension funds, insurance companies, governments, corporations, endowments and private individuals from across the globe. LaSalle sponsors a complete range of investment vehicles including separate accounts, open- and closed-end funds, public securities and entity-level investments. LaSalle Investment Management, Inc. is a wholly-owned, operationally independent subsidiary of Jones Lang LaSalle Incorporated (NYSE: JLL), one of the world’s largest real estate companies. For more information please visit www.lasalle.com.
This information is based on the market analysis and expectations of LaSalle and should not be relied upon by the reader as research or investment advice regarding LaSalle funds or any issuer or security in particular. The information presented herein is for illustrative and educational purposes and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy in any jurisdiction where prohibited by law or where contrary to local law or regulation. Any such offer to invest, if made, will only be made by means of a private placement memorandum. Past performance is not indicative of future results.