In September, with few tenants on site because of the COVID-19 pandemic, work began on a multimillion dollar retrofit of a 20-storey office building in downtown Toronto.
A new heating, cooling and ventilation system at 11 King St. W., replacing one installed 60 years ago, incorporates state-of-the-art technology to enhance air quality. As well, the two-year modernization by property management company Triovest Realty Advisors Inc. will cut energy use and greenhouse gas emissions and meet sustainability standards of the Canada Green Building Council.
The project is one example of an industry-wide strategy to press ahead with sustainability investments in commercial real estate despite pandemic-induced economic setbacks.
“The sustainability effort continues full steam ahead,” says Frank Magliocco, national real estate leader for consultants PwC Canada, which reports a “growing focus on environmental, social and governance factors” by commercial real estate investors and operators. “That [attention to sustainability] is critical for the long-term value of their investment and they are not going to back off on that,” he says.
Last May, the Green Building Council warned the federal government that energy efficiency and low-carbon upgrades to existing buildings “are not happening at the depth or pace necessary” to meet Canada’s 2030 emission reduction targets.
“The commercial real estate industry recognizes that [climate change] is a threat and we need to have urgent action in addressing it,” says council president Thomas Mueller, who sees “undiminished” industry interest in sustainability.
Some companies, including Triovest, took advantage of reduced occupancies to carry out retrofits during the daytime.
“The sustainability-related initiatives continued and in some cases expanded, even with the additional work imposed on building owners and managers by COVID,” says Philippe Bernier, vice-president of innovation and sustainability at Triovest.
In some cases, health and safety measures heightened interest in sustainability.
“Cleaning has a hygiene aspect and a sustainability footprint,” says Ben Shinewald, president and chief executive officer of BOMA Canada, whose “BOMA BEST” certification for energy and environmental management and performance grew to 3,300 participants this year.
Easing up is not an option, he says. “This is not a luxury; it is an imperative,” he says. “Companies simply have to be sustainable to be competitive.”
Recently, several Canadian real estate companies supported the United States-based non-profit Center for Active Design, which operates the Fitwel certification program for healthy buildings, in developing a “viral response module” that validates best practices in limiting the spread of contagious diseases.
The module, rolled out in September, puts a premium on quality cleaning protocols and ventilation systems that boost indoor air quality, often with high-end filters that capture fine particulate matter.
But the high-performing filters sometimes force a ventilation system to work harder, increasing energy use, a conflict that concerns industry officials.
“As a sector, we are trying to figure that out now,” says Steven Pacifico, director of sustainability and innovation for Epic Investment Services, which owns and manages properties across North America. “While operating buildings with these higher performance measures for air quality, we are also thinking about how we are going to meet our energy and carbon reduction goals,” he adds. “That is the complexity we are dealing with, and I will be honest, we don’t have all the answers yet.”
Still, Mr. Pacifico and many others credit the pandemic with shining a light on sustainability practices that benefit tenants.
“The pandemic helped us say, ‘Let’s not use energy or utilities that we don’t need to use’ and save costs for tenants and clients,” he says. “It allowed us to take time to ensure that our systems are performing at optimal peak performance, which helps create more energy efficiency.”
Increasingly, companies invest in “smart” technology, such as automatic doors and occupancy sensors that identify the location and number of people in a building.
“In that case, we can review the cost of operating the building if it is not at full capacity,” says Mehrnoosh Ebrahimzadeh, manager, national sustainability and energy at Colliers International Real Estate Management Services.
“It has made everyone aware of the importance of sustainability over all,” she says. “They are more conscious of the environment now.”
Some firms now set targets for energy and water consumption and, increasingly, enroll in “green” certification programs.
In 2017, Manulife Investment Management announced a five-year target for its global real estate portfolio to use 10 per cent less energy, 7.5 per cent less water and divert 65 per cent of waste from landfill.
The company sets expectations for local property managers and conducts an internal audit twice a year to monitor performance, says Regan Smith, Manulife Investment Management’s assistant vice-president and managing director of real estate sustainability.
With sustainability already embedded in management practices, she says COVID-19 only serves as “an accelerator.” The response to climate change and COVID-19, she argues, requires a commitment to science and positive tactics, not fear, to engage tenants and the public.
Two years ago, her company collaborated with MicroHabitat, a Montreal urban agriculture firm to manage urban gardens on the rooftops of half a dozen Manulife Investment Management offices and renewed the project despite the pandemic. This summer’s harvest yielded 1,800 pounds of fresh fruits, herbs and vegetables.
Ms. Smith sees no reason to slow down on sustainability because of a disruptive pandemic.
“We stayed the course because we, as global managers and owners of assets, have a long-term view and we need to take a long-term view on sustainability as well.”