Responsible Real Estate: ESG Considerations When Purchasing Commercial Property

Environmental, social, and governance ("ESG") considerations are becoming increasingly important for investors and businesses across all industries, including commercial real estate. These factors can have a significant impact on the value, performance and sustainability of assets, and therefore should be carefully considered when conducting due diligence.

Environmental considerations

Environmental considerations are some of the most important ESG factors to consider when buying commercial real estate. As climate change becomes an increasingly pressing issue, there is growing awareness of the impact that commercial real estate has on the environment. Some key environmental considerations when buying commercial real estate include:

1. Energy efficiency: Energy efficiency is an important consideration when buying commercial real estate. Buildings that are energy-efficient can reduce operating costs and contribute to a more sustainable future. Look for buildings with high Energy Star ratings, LEED certifications, or other energy efficiency certifications.
2. Carbon footprint: The carbon footprint of a building is another important consideration. Buildings that produce a high level of greenhouse gas emissions can be more expensive to operate and may be subject to regulatory requirements. Consider the sources of energy used by the building and the potential for reducing its carbon footprint.
3. Waste management: Proper waste management is important for reducing the impact of commercial real estate on the environment. Consider the building's waste management practices and whether there are opportunities to reduce waste and increase recycling.

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Social considerations

Social considerations are also important when buying commercial real estate. Social factors can affect the reputation of a building or company, and can have an impact on tenant satisfaction and retention. Some key social considerations when buying commercial real estate include:

1. Community engagement: Building relationships with the local community can be important for building goodwill and promoting a positive reputation. Consider how the building or company engages with the local community and whether there are opportunities to strengthen these relationships.
2. Diversity and inclusion: Diversity and inclusion are increasingly important considerations in all industries, including commercial real estate. Consider the diversity and inclusion policies of the building or company, and whether there are opportunities to promote greater diversity and inclusion.
3. Tenant satisfaction: Tenant satisfaction is a key factor in the success of commercial real estate investments. Consider the quality of the building's amenities, services, and overall tenant experience, and whether there are opportunities to improve tenant satisfaction.

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Governance considerations

Finally, governance considerations are important when buying commercial real estate. Good governance practices can promote transparency, accountability, and ethical behavior, which are all important for building trust and ensuring the long-term success of commercial real estate investments. Some key governance considerations when buying commercial real estate include:

1. Regulatory compliance: Regulatory compliance is an important consideration when buying commercial real estate. Consider whether the building or company complies with all relevant laws and regulations, and whether there are any outstanding legal issues or liabilities.
2. Ethical behavior: Ethical behavior is important for building trust and maintaining a positive reputation. Consider the building or company's ethical practices and whether there are any opportunities to promote greater ethical behavior.
3. Transparency and accountability: Transparency and accountability are important for promoting trust and ensuring that investors and stakeholders are well-informed. Consider the building or company's transparency and accountability practices, and whether there are opportunities to promote greater transparency and accountability.

In conclusion, ESG considerations are becoming increasingly important when buying commercial real estate. Environmental, social and governance factors can have a significant impact on the value, performance and sustainability of commercial real estate assets. By carefully considering these factors, investors can make more informed decisions and promote greater sustainability and long-term success.

Contact our Commercial Property Solicitors for more information.

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