Its 53 LEED-certified projects and 20 LEED-dedicated employees also give Corporate Office Properties, the winner of a prominent industry customer service award for excellence five years running, foresight to understand what clients want and ability to meet tenant demands, says Lucas.
Shopping center developer Regency Centers Corp. (NYSE: REG) is also a leader in the sustainability process, says Lucas. He currently has a neutral rating on it because of occupancy concerns. Getting buy-in for green initiatives from retail tenants can also be difficult. "Shopping centers are driven by anchors. If (green) is part of their culture, the landlord will make it part of their culture and the little stores will have to adapt," he says.
Paula Poskon, a Baird senior real estate analyst who covers residential and self-storage REITs, isn't seeing major green initiatives in this economy. Still, a couple of REITs she tracks are marketing green-friendly elements which she says make good business sense with this very environmentally conscious next generation of renters.
New student housing in Arizona from American Campus Communities (NYSE: ACC) has outdoor furniture made from recycled materials and captures water run-off for landscaping. A new Northern Virginia apartment development from Camden Property Trust (NYSE: CPT) is using low-wattage lighting in its carpet-free hallways and low-VOC paint.
Looking ahead, wealth manager Jordan Heller--who helped bring much of the REIT industry public during his 15 years as a Wall Street real estate analyst--expects to see the green theme emerge first in areas closest to full recovery. More specifically, he points to multi-family and office properties in metro market infill locations. "Rents will have to rise enough to justify new development; then green will come into play," says Heller, president of Heller Wealth Advisors LLC in Roseland, NJ.
"For the next five years, public REITs are probably in the best position to take advantage of the depressed fundamentals in the real estate economy," since they have the strongest balance sheets, the best access to large amounts of capital, and tax advantages, he adds.
Greening older real estate is also expected to become more prevalent. David Wood, director of the Initiative for Responsible Investment at Harvard University and co-director of the RPIC, says he's been hearing a lot of, "What do I do with existing building stock? How deep do we retrofit? How do we finance it?"
Heisterkamp says REITs are well-structured for green initiatives since most are run by owner/operators rather than third-party property managers. "One less potential disconnect can make a large difference in seeing these changes implemented across the portfolio" he says.
"I fully expect a rise in the number of existing REITs that commit to green initiatives in their portfolios in the future, says Pivo, who notes that environmental performance indicators--including energy efficiency, carbon footprints, water usage and recycling - are just part of the SRI picture.
"You also have to consider their effect on land use and transportation
issues including walkability, urban sprawl, natural hazards, auto
dependence, and wildlife habitat. Then there are important social
considerations, such as whether they provide fair wages and benefits to
their corporate and building staff, including janitors, security and
other service personnel, whether the property is handicapped
accessible, security and safety," says Pivo.