Responsible and responsive: Addressing 5 challenges in commercial real estate

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In today’s commercial real estate (CRE) market, which is heavily influenced by supply and demand cycles,  proactive and precise management by investors and managers is paramount. With 37% of carbon emissions from buildings, the sector needs effective strategies to quickly and efficiently navigate this changing landscape.

Responsible and responsive management practices, underpinned by advanced digital technologies, are key for steering properties towards high performance, sustainability, and resilience. These practices are essential for navigating regulatory and market challenges and helping ensure investments remain robust and relevant in the global real estate landscape.

Four driving forces changing the commercial real estate industry

1. Stringent environmental regulations: From New York’s Local Law 97 to the European Union’s Energy Performance for Building Directive (EPBD), global standards for energy efficiency, emissions, and sustainability reporting are escalating, necessitating compliance and forward-thinking building management.
2. Challenging market dynamics: The sector is contending with inflation, material shortages, and rising interest rates, which impose financial pressures and necessitate strategic adaptation in property development and asset management.
3. Evolving tenant demands: Modern tenants are not merely space-seekers; they want properties that embody their (ESG) values, complete with advanced amenities like flexible working spaces and electric vehicle (EV) charging stations, all while expecting cost efficiency.
4. Technological advancements: Digital technologies, like artificial intelligence (AI), machine learning (ML), and Proptech, are no longer optional but essential. These tools offer enhanced energy efficiency, improved building management, and enriched tenant experiences.

Responsible and responsive real estate practices offer a blueprint for asset managers to ensure sustainability and resilience in the face of these and future market challenges.

How responsible and responsive commercial real estate shapes our future

What exactly does it mean to be responsible and responsive? Understanding the nuances helps foster effective leadership and strategic foresight.

Responsible transcends compliance; it is the visionary stewardship of corporate environmental, societal, and governance (ESG) resources. It involves robust and ambitious benchmarks for transformative impacts on energy consumption, carbon emission reductions, and enhanced reporting transparency. Asset management strategies designed to meet and exceed these goals are setting new standards for the industry.

“Being responsible is something we can all understand and get on board with. Across real estate, there are common goals around driving down energy consumption, using less carbon, reporting better on what we do, and, with carefully curated data, justifying what we’re doing and, in turn, tackling commitments.”

Cormac Crossan

Responsive means anticipating and adapting to the evolving landscape. It entails developing resilient asset solutions to counter digital disruptions and electrical failures while adapting to regulatory shifts, occupancy dynamics, and economic volatility. By leveraging advanced digital technologies, real estate portfolios can thrive in the face of diverse challenges, helping ensure operational continuity and a strategic advantage.

“Responsive real estate is about achieving portfolios that respond to adverse environmental conditions. It’s also an aspect of resilience in the face of climate change and can include approaches to energy security or cybersecurity… We can do all this and more with digital technology to enable positive outcomes in real estate.”

Cormac Crossan

Integrating responsible and responsive strategies helps create real estate portfolios that are not only sustainable and resilient but also optimized for peak performance and tenant satisfaction. This approach redefines benchmarks of success in the market.

Key focus areas and impacts

The move towards responsible and responsive real estate already yields tangible benefits across five key areas:

1. Sustainability acceleration: Net zero is often synonymous with strong financial performance and investor appeal. An actionable decarbonization strategy, including clean and renewable energy sourcing, carbon offsets in some cases, and holistic data management and reporting for sustainability, helps achieve these outcomes. By adopting sustainable practices, we’ve noticed that companies we work with have achieved a 70% operational CO₂ reduction and 53% avoided emissions, alongside significant improvements in their Global Real Estate Sustainability Benchmark (GRESB) scores.
2. Energy impact: While also a key pillar of a sustainability strategy, efficient energy management handles tightening energy consumption regulations and volatile energy prices. This can include analyzing energy consumption and sourcing strategies to reduce costs [note: do not mix again Carbon emissions – this point is already covered under 1. Here, under 2. It’s about energy, not carbon. Otherwise, the message is super confusing], and implementing conservation measures. With this strategy, we’ve observed that companies we work with have reduced their energy consumption by up to 70% and saved more than US$10 million in five years.
3. Asset and operational performance impact: Balancing occupant productivity and satisfaction while also shrinking carbon footprint and energy usage is challenging. Technologies like digital access systems, streamlined booking processes, and efficient visitor registration are reshaping operations, with some companies realizing a 61% reduction in third-party labor while delivering superior tenant experiences.
4. User experience impact: A seamless and optimized user experience is essential for attracting and retaining tenants. With trusted, expert partners, some Real Estate companies have achieved a 65% reduction in comfort-related tenant complaints and a 16% increase in occupant net promoter scores. 
5. Portfolio impact: Understanding carbon risk profiles and identifying opportunities to optimize within portfolios through robust data sets available across assets is crucial for long-term viability. A strategic approach to portfolio management can lead to a 6% increase in rent, significant achievements in LEED and Smartscore certifications, and Carbon Risk Real Estate Monitor (CRREM) data collection.
   

Watch our customers speak on each of these impact topics at this year’s MIPIM event.

Partnering for responsive and responsible success

At Schneider Electric, our partnership approach elevates real estate portfolios by maximizing profitability and ensuring asset resilience. By integrating cutting-edge sustainability practices and operational efficiencies, we empower asset managers to exceed ESG expectations while enhancing tenant satisfaction and minimizing the risk of stranded assets. Our comprehensive suite of digital technologies and services transforms properties into high-performing assets that meet today’s demands and anticipate tomorrow’s challenges.

We harness our energy management, automation, and sustainability expertise to lead your journey towards low carbon emissions, ensuring continuous operation and energy efficiency across your entire portfolio. From design through to operation and beyond, our solutions are tailored to optimize every phase of the asset lifecycle, whether for new developments or retrofits, single properties, or expansive holdings.

Leveraging a global network of certified partners, Schneider Electric provides the highest deployment standards, helping ensure your properties operate at peak performance levels regardless of location. This strategic approach helps secure a sustainable future for your assets and drives their digital transformation and electrification, setting a new standard for responsible CRE management.

Join us on the journey to responsible and responsive real estate

Catch the replay of our 30-min LinkedIn live session to learn how to transform your real estate portfolio. We cover how we help maximize portfolio profitability, minimize the risk of stranded assets, and create compelling tenant experiences.