Going Green in Commercial Real Estate Investing: Finding Truth Behind the Hype

When it comes to investing in commercial real estate, there are some great ways to increase profitability. Additionally, there are some areas in which it can be difficult to assess whether an improvement will be a net positive in the long run. One of those areas is in going green or making green improvements just for the sake of it. Some of these kinds of improvements will help commercial owners see a lot of value and a good return on investment, while others are not going to bring about the profit margins that are hoped for. The key is in determining which green improvements are the right ones to make. Here’s what to consider:

Perception is Only a Part of the Issue

How a potential buyer or tenant perceives the property and the green improvements that have been made to it matters. Some tenants and buyers are specifically looking for green buildings. They may highly value the environment or they may be focused on saving money on their energy bills. No matter what their reasoning is, though, they can often see a benefit if they choose a green building. But how they perceive the value in green improvements is going to be different depending on what they want and need, so some people will value it much  more highly than others.

It’s also not just about perception when it comes to whether a potential buyer or a potential tenant will be interested in what a green commercial building has to offer. There are real areas to be studied, and these areas include the cost savings of the green improvements, whether there are maintenance issues that have to be considered, and other factors that can add to what a new tenant or owner would have to do in order to use and care for the building. With a clear understanding of the best green investments, a commercial real estate owner can make wise financial choices.

How Much Does the Green Investment Cost?

The cost of any green investment or improvement has to be low enough to make it worth doing. If a commercial building owner can’t comfortably afford to make the improvement, it may not be worthwhile to consider potential ROI. Many green improvements are often expensive, and it can take years to pay off the cost of them. in those cases, it can be a long time before any level of profit is seen.

Green investments can oftentimes be cost-prohibitive for a lot of commercial real estate owners. Much like extensive home smart technology, or comprehensive home solar panels, commercial owners face the decision of weighing the drain on capital versus the long term benefits. The price of the panels and the setup tend not to represent a positive ROI for years in many cases. Considering that, a commercial real estate owner may not have the flexibility of capital to make large improvements toward going green. They may also find that tenants or potential buyers for the real estate may not see the intrinsic, if not financial, value associated with the green improvements, meaning an owner may not be able to immediately raise the rent or selling price to their benefit.

The Goal Should Always Be Profit and Good Returns

No matter what else a commercial real estate owner seeks to accomplish by going green with their building, the ultimate goal should be, and oftentimes is, a positive return on their investment. That way owners make the investments in the building that are best for them, and focusing on what they can do to increase the value of the building itself. That may not always easy, but with some research into the best options for going green and what tenants and buyers in the local area are looking for, it’s possible for any commercial real estate owner to make the improvements that are going to provide the highest level of return on investment and the best overall profit margins.

About the author: Tommy Leigh is the Broker/Owner at Vegas One Realty Vegas One Realty. Tommy’s team takes great pride in its ability to put clients first and provide the highest level of honesty and expertise in everything they do.

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