Landlords and retailers are expanding their sustainability programs

Federal Realty Investment Trust’s sustainability report recounts about a partnership with Up Top Acres, a Washington, D.C.–based rooftop farming concern. The team-up turns 7,000 square feet of rooftop space at Bethesda (Md.) Row into yearly produce yields of some 10,000 pounds. Carrots, salad greens, herbs and other produce then find their way to the center’s renters, including chef José Andrés’ Jaleo restaurant, a mere few flights below. This venture significantly speeds the farm-to-table cycle, Federal Realty says, and it is one that “better connects the local community with the built environment.”

In the same vein, Federal Realty is renting parking space to a group that retrofits 40-foot shipping containers with hydroponic farming equipment that can help yield an acre’s worth of produce in a fraction of the space. Boston-based Freight Farms, which calls its containers “leafy green machines,” in turn sells its fresh yields to local food merchants as well. Among the first Federal Realty properties to house these container farms are Perring Plaza, in Baltimore, and Governor Plaza, in nearby Glen Burnie, Md.

Retail REITS are also turning to a broadening field of environmental certifiers: BREEAM, CDP, LEED, GRESB, GRI — the industry has never before tried to square itself to such a range of sustainable standards and metrics. But one thing is true across the retail real estate field: Sustainability has ceased to be a one-off and is evolved instead into a core element of the industry ethic. “We believe it is important to continually evaluate the impact of our actions on the community, business operations and the environment, because all are critical to long-term success,” said Will Teichman, senior director of strategic operations at Kimco Realty Corp. Sustainability has emerged as a major focus for many larger owners, public REITs in particular, he says. “They face scrutiny from institutional investors who now screen for sustainability performance in their holdings.”

The theory behind such sustainability screens, Teichman notes, is that real estate owners scrupulous about prioritizing environmental, social and governance concerns are likely to be strong, conscientious fiscal performers too. Kimco focuses on such things as employee health and wellness and corporate transparency. “A robust sustainability program includes more than environmental performance,” Teichman said. “It incorporates social and governance aspects as well.” To wit, the industry’s annual reports on corporate sustainability and corporate social responsibility (called CSRs) have become one and the same for most public companies, regardless of name.

REIT sustainability research and reporting tends to produce illuminating findings. A joint Simon-Deloitte study found that online retail purchases utilize more energy output on average than brick-and-mortar purchases do. The materials, fuels and other energy sources needed to transport online purchases create an environmental impact that is roughly 7 percent greater than conventional shopping. This is partly because mall patrons tend to shop in pairs or groups rather than individually, as an online shopper would, translating into lower energy use per person, according to Mona Benisi, Simon’s senior director of sustainability. Simon achieved CDP (formerly called Carbon Disclosure Project) recognition for its 2016 performance and earned a Global Real Estate Sustainability Benchmark (GRESB) Green Star rating — the organization’s highest — from 2014 to 2016. Simon has also been included in the CDP Climate Disclosure Leadership index seven times.

At Westfield Stratford City, in London, the Waitrose supermarket, which operates completely off the grid through the mall’s energy center, earned the highest Building Research Establishment Environmental Assessment Method (BREEAM) score for retail ever. The center itself earned a BREEAM Excellent score, among other sustainability designations, according to Westfield’s 2017 sustainability report — which also covers such social-responsibility issues as diversity, employee well-being, and corporate culture and governance. Among its 2016 achievements were the diversion of 100 percent of solid waste from landfills, 13 percent lower electricity usage and 20 percent lower water usage — the latter aided by waterless urinals at Westfield London and Stratford City.

Kimco has achieved a cumulative 18 percent reduction in same-site energy consumption since 2011, thanks in part to investments in performance-data collection, an aggressive retrofit of LED lighting and more-efficient lighting systems. Kimco was listed on the Dow Jones Sustainability North America index and in Newsweek’s Top Green Companies in the U.S., in addition to its earning a GRESB Green Star.

Investors in public companies are still struggling to determine which sustainability metrics provide apples-to-apples comparisons and are the most relevant, according to Teichman. That makes it harder for investors to incorporate sustainability into their business valuation models, he says, and this is one reason Kimco aligns its sustainability reporting with the internationally recognized Global Reporting Initiative (GRI) standard.

Sunil A. (Sunny) Misser, CEO of New York City–based AccountAbility, which assists businesses with their sustainability and social-impact reporting, told NAREIT’s REIT.com that the present glut of green standards will probably consolidate into only a few broad-based platforms and industry-specific guidance standards over the next few years. Roughly 95 percent of Global Fortune 250 and about 50 percent of Fortune 1000 companies report on sustainability in their annual reports, according to Misser.

Taubman Centers says in its latest report that it is committed to reducing energy consumption and greenhouse gas emissions by some 20 percent by 2025 and to reducing water consumption by about 10 percent by 2020. “Since 2008 we have reduced our controllable electrical consumption by 32 percent,” said spokeswoman Lana Bilovus. Sustainability has grown into both a core business principle and a long-term vision for Taubman, she says.

Roughly 30 percent of Federal Realty’s portfolio has earned green recognition, including 19 Leadership in Energy and Environmental Design (LEED) awards and three California Green Building Standards Code (CALGreen) certifications. The company says it has invested some $50 million in the development and operation of photovoltaics solar systems and put about $1.5 billion into community revitalization projects over the past five years, including brownfield, grayfield and urban-infill projects.

While U.S. REITs and other public companies are required to disclose such issues as climate-change risks or the use of environmentally sensitive materials, there are no national regulatory CSR-reporting requirements for sustainability. By contrast, a 2014 European Union directive requires many public companies to disclose policies on environmental and social impact, human rights, diversity, anticorruption and bribery, starting with 2018 reports on 2017 company activities.

Forest City Realty Trust, among the industry’s first to declare sustainability a core company value, reports that it achieved a slightly less than 10 percent reduction in energy consumption and a 5.3 percent reduction in water consumption across its portfolio last year. Forest City earned a GRESB Green Star designation in only its second year of program participation.

Weingarten Realty’s second annual corporate responsibility report, released in August, notes that it was named a 2016 (REME) Real Estate Management Excellence finalist for sustainability and a 2016 Green Lease Leader at the U.S. Energy Department’s Better Buildings Summit. The firm has also boosted its GRESB score by 17 percent and its landfill diversion rate by 30 percent, besides raising its energy savings to some 3.4 million kilowatt-hours.

Regency Centers has participated in the GRESB system for five years and earned Green Star designation for the past two. Among the firm’s stated goals is the reduction of both same-store energy consumption and same-store greenhouse gas emissions by roughly 20 percent by 2021, and of same-store waste diversion and water consumption by about 10 percent by 2025.

Over the past few years, DDR Corp. has been replacing first-generation lighting systems with advanced, third-generation systems that last nearly four times as long. The firm has put in wireless controls to customize the lighting schedules to tenant needs. To save water, DDR installed evapotranspiration irrigation controllers and drip-delivery systems in its centers in the driest climates; the firm has also introduced native plants and hardscaping into these properties, all of which has cut water consumption by some 30 to 40 percent in those particular locations.

Perhaps Teichman speaks for everyone in summarizing: “We have a long-term mindset and believe these issues are and will continue to be relevant for the decades to come.”

While U.S. REITs and other public companies are required to disclose such issues as climate-change risks or the use of environmentally sensitive materials, there are no national regulatory CSR-reporting requirements for sustainability. By contrast, a 2014 European Union directive requires many public companies to disclose policies on environmental and social impact, human rights, diversity, anticorruption and bribery, starting with 2018 reports on 2017 company activities.

Forest City Realty Trust, among the industry’s first to declare sustainability a core company value, reports that it achieved a slightly less than 10 percent reduction in energy consumption and a 5.3 percent reduction in water consumption across its portfolio last year. Forest City earned a GRESB Green Star designation in only its second year of program participation.

Weingarten Realty’s second annual corporate responsibility report, released in August, notes that it was named a 2016 (REME) Real Estate Management Excellence finalist for sustainability and a 2016 Green Lease Leader at the U.S. Energy Department’s Better Buildings Summit. The firm has also boosted its GRESB score by 17 percent and its landfill diversion rate by 30 percent, besides raising its energy savings to some 3.4 million kilowatt-hours.

Regency Centers has participated in the GRESB system for five years and earned Green Star designation for the past two. Among the firm’s stated goals is the reduction of both same-store energy consumption and same-store greenhouse gas emissions by roughly 20 percent by 2021, and of same-store waste diversion and water consumption by about 10 percent by 2025.

Over the past few years, DDR Corp. has been replacing first-generation lighting systems with advanced, third-generation systems that last nearly four times as long. The firm has put in wireless controls to customize the lighting schedules to tenant needs. To save water, DDR installed evapotranspiration irrigation controllers and drip-delivery systems in its centers in the driest climates; the firm has also introduced native plants and hardscaping into these properties, all of which has cut water consumption by some 30 to 40 percent in those particular locations.

Perhaps Teichman speaks for everyone in summarizing: “We have a long-term mindset and believe these issues are and will continue to be relevant for the decades to come.”