Retail Market Breakdown: Sustainability Trends and Outlook

The discussion — moderated by BREEAM’s U.S. Director of Operations Breana Wheeler — focused on how retail owners, tenants, and investors can thoughtfully advocate for green initiatives, breaking down what an impactful sustainability strategy looks like. The panelists shared diverse insights, experiences, and anecdotes informed by their combined decades of experience, including:   

1. Discussions about sustainability and green initiatives must be approached differently depending on the type of tenant occupying a property.  

“Some of these larger national retailers are facing stakeholder pressures and have goals around sustainability — whether it's energy, water, waste, or carbon —and their goals can be aligned with REITs, such as [Kimco Realty Corporation],” said Tamara Chernomordik. “Conversely, not every smaller space is occupied by a mom-and-pop tenant, but [in those instances], the person who owns the business is often the maintenance tech, the salesperson, and is taking on multiple roles to run their business. Because of this, terms like ESG and corporate responsibility don't land in the same way; perhaps the focus is more on cost savings through operational efficiency versus a term like sustainability.”  

Echoing this sentiment, Rielle Green added, “Many big box stores have their own sustainability goals, so being able to come to them and talk the same language might be easy — but our sustainability goals and our ability to make an impact at those properties [don’t always] align. We actually find that, whether it's lease language or control over parking space or roofs, our ability to deploy initiatives might, even more, benefit those smaller tenants at shopping centers or other spaces…At the end of the day, we're looking to do initiatives that are going to save energy, save water, and be [financially] beneficial.” 

2. Reporting on asset performance has become a more significant priority for some investors, but collecting data at retail properties poses challenges.   

“The biggest data coverage issue in a triple net lease scenario across sub-industries is going to be getting tenant utility consumption [data],” noted Tamara Chernomordik. “I think there are a couple of methods that different organizations have explored, whether through compliance-focused programs, like energy benchmarking ordinances in particular cities and states; technology implementations; or direct engagement with tenants to share information. We're all waiting for the silver bullet tool that makes it easy to automate this type of thing… Incremental progress is a key strategy at this point.”  

“I think the problem is, how do you get credit for the improvements you've made? Part of the reason [LaSalle ] likes BREEAM and uses the “Part One” assessment is because we can do it without whole building data. We can go in and say, here's where we're at and where our opportunities are,” shared Elena Alschuler. “[However], as soon as you start talking about implementing some of those things, you want to be able to give yourself credit for the impact in terms of energy savings, not just BREEAM points. So the question is are we just going to estimate what we think the impact of that action was? That’s when it gets complicated."

3. Prioritizing property resiliency and community engagement are key to maintaining and boosting long-term asset value.  

“[LaSalle] does climate risk assessments at all of our… properties including open-air [sites]; and often it’s about having good emergency preparedness plans in place,” said Elena Alschuler. “For example, we own an open-air retail center very close to where the Maui fires happened. Our property was not impacted, but we were able to offer our property as a community response and recovery site, offering the parking lot and vacant space for the Red Cross and community organizing and food drives…These open-air centers are community centers and become good resources for supporting community resilience. Tying that back to the business case, it helps build the brand and loyalty to that center.”  

 “On the resiliency side, [Acadia Realty Trust] looks at all of our assets during due diligence and on an annual basis. Not only are we evaluating transitional risk… including our ability to procure green renewable energy or have solar within our site,” added Rielle Green. “We look at it from a physical risk standpoint as well as a social risk and opportunity standpoint. Understanding where our assets are, what communities they're in, and how they are structured is key to how we map out those risks and those opportunities, whether it's about climate risks or a community opportunity that we're able to tap into and support."

If you missed the webinar, you can view the full recording here.   

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