Sustainable Investing: The Role Of Green Buildings In Property Investment

With growing global warming and surging climate change across the world, the focus on sustainability is also increasing. One area where this trend is growing impressively is real estate.

Green buildings and sustainable investing have become buzzwords in property investment. Stats reveal that around 90% of the investors apply sustainability policies in their transactions.

This high number indicates the potential for growth in this area. This article includes some interesting insights into the role of green buildings in property investment.

What is a Green Building?

A green building is a construction that is built using resource-efficient or sustainable construction methods. It has comparatively less impact on the environment than traditionally constructed buildings and requires less cost of maintenance.

The sustainable construction method includes the overall design, construction, operation, and maintenance of the building. It also includes the renovation and demolition of the building. For example, if one of your investments includes a green building, you can expect to experience various benefits discussed in the next section.

The Role of Green Buildings in Property Investment

Sustainable investing in real estate refers to identifying and maximising the responsibility of the industry to achieve sustainability goals. Whether you are investing in UK property or seeking investment in any other part of the world, you might have heard about this idea.

Here is how green buildings help achieve sustainable property investment goals.

Low Operational Cost

Operational costs are those associated with running your property to keep it in operation. For example, a residential property investment in Liverpool will have lower operational costs than any commercial property in the same location as commercial property is usually larger and requires more spending to upkeep and operate in the building.

Green buildings offer even lower operational costs than traditional buildings as they require further reduced energy and consumption, along with lower maintenance costs. The main reason for the lower operational and maintenance cost is the energy-efficient design and features.

The direct impact of low cost is on improving profit margins or rental income for the investors.

Increased Demand

As more people become aware of the importance of environmental sustainability, there is an higher demand for green buildings. Environmentally conscious people seek sustainable products, whether it is shoes they wear or houses they live in.

A study shows that over the last five years, there has been a 71% increase in online searches for sustainable products.

With the increasing demand, the price of such buildings will also rise, as the general law of demand goes. So, if you invest in a green building today, you can expect a significant capital appreciation in the future.

Green Buildings as a Substitute

Green buildings are substitutes for traditional buildings and they have a positive cross elasticity of demand, insomuch as they are different products with different demands but very much interlinked in price.

Bills are cheaper for green buildings due to the aforementioned energy efficiency, and if tenants are responsible for paying their bills, then their overall their cost of living in the property decreases if they choose to live in a green building.

Consequently, tenants will choose to pay the lower price when possible, so the quantity of green buildings rented will increase and the quantity of traditional buildings rented would decrease.

Therefore, if you are considering finding tenants for a green building, it is well worth using the lower in energy costs in your marketing of the property.

Sense of Investor Social Responsibility

Everyone in the world is responsible for contributing to environmental sustainability by adopting conscious practices. A sustainable property investment offers you peace of mind and satisfies your sense of social responsibility.

The biggest upside of this investment is that it contributes to environmental well-being while offering financial benefits in the form of stable returns. As an investor, you can do well financially and fulfil your social responsibility without much hassle.

Challenges of Sustainable Property Investment

Besides the various benefits offered by green buildings, there are some challenges, too, facing sustainable property investors. Here are some of them:

The upfront cost of building or buying a green building is usually higher than a traditional one. You may need a heavy investment to bear the upfront cost.
Turning an existing building green can also be expensive and requires effort and time.
Finding sustainable building materials can be challenging in many parts of the world, especially under-developed or developing countries. Sourcing it from another region can increase the total cost.
Measuring a building’s sustainability performance is quite tricky. There is no universal standard for a globally accepted measure.
Investing in sustainable projects might not be feasible for beginners or those with low-risk tolerance.
There might be insufficient resources to meet your funding needs, as such projects are still considered a bit riskier.

Wrapping Up

Green buildings offer a number of benefits to investors, and the most highlighted among them is that they facilitate sustainable investing. Despite the challenges facing this investment sector, the future of green buildings looks promising.

If you want to invest in sustainable properties, you must do your research to understand this market before making a decision. You may seek help from a professional to ensure that you identify viable investment opportunities for your portfolio.

Frequently Asked Questions

What are green buildings?

Green buildings are designed and constructed to reduce the environmental carbon footprint. They are an initiative to promote environmental sustainability and reduce climate change by efficient use of resources and reduction in waste production.

What is the role of green buildings in sustainability?

Green buildings reduce carbon footprints in the environment by preserving natural resources and efficient waste management and control. They may contribute to creating a positive impact on the environment and society by improving the quality of life.