Summary
This thesis describes the research concerning the sustainability issues within the investment market from a management perspective. Experts are interviewed to examine the sustainability performance of their real estate portfolio and what they do to further develop a sustainable real estate portfolio.
The main research question is: “Which aspects motivate investors to invest in the sustainability performance of office buildings in the Netherlands, and to what extent?”. In order to answer this research question, eight semi-structured interviews were conducted.
For this research, a qualitative framework is used to gain insight into the perception of sustainability and the implementation of sustainability measures within office buildings. The findings show that, within the investment market, sustainability is considered to be very important and investors are willing to improve the sustainability performance of office buildings. However, there is a strong focus on costs and investors have to deal with several issues. The analysis resulted in a measures catalogue for investors to apply to improve the corporate sustainability strategy and the sustainability performance of their real estate portfolio.
Furthermore, recommendations are formulated. Possible further research could focus more specifically on private equity investors, the financial consequences of the measures catalogue, and rules and regulations to motivate investors to improve the sustainability performance of their office buildings.
Preface
This thesis is written as graduation work for the Master Facility and Real Estate Management at the Saxion University of Applied Sciences in Deventer and the University of Greenwich in London.
I graduated in 1999 for my Bachelor Facility Management and have worked with several national and international organised companies. Two years ago, I really wanted to further develop myself and the Master Facility and Real Estate Management was the perfect study for me.
Since the Master Facility and Real Estate Management is merely focused on real estate and I merely have facility experience, I wanted to get more specialised and decided to choose a subject in real estate for my thesis.
Office buildings are important for many shareholders such as municipalities, investors, developers and other organisations in order to improve economic growth, exploitation and housing the working population. Investing in office buildings is risky and the returns are highly important. Since sustainability is such an issue nowadays, I have investigated the willingness of investors to invest in the sustainability performance of office buildings in the Netherlands for this thesis.
At the moment I work with Kiwa for the facility department. Kiwa is an international company specialised in TIC services. TIC stands for Testing, Inspection and Certification services. For Kiwa, sustainability is a well-known and popular subject, not only for the TIC services but also for Kiwa’s Corporate Social Responsibility goals. I thank Kiwa as my employer for making this master study possible for me and also my colleagues for their interest and support.
This thesis would not be completed without the contribution of many other people. Firstly, I want to thank my tutor Jan van den Hogen for all his support and coaching. I am grateful for his patience, constructive critics and his enthusiasm, which kept me motivated to finish this thesis.
In addition, this thesis would not have been possible without the help of all the experts. Therefore, I want to thank all the enthusiastic experts, who participated in this study for taking the time to help me. Finally, I want to thank my family and friends for their continuous support during my entire study.
Lee Dorland
Apeldoorn, August 16, 2019
This thesis report is my own work, except where stated otherwise.
“Sustainability: beavers repair theirs dams year after year, and some beaver dams are thought to be centuries old” (Pinterest, 2019).
Contents
Summary ... 5 Preface ... 7 Contents ... 9 List of figures ... 11 List of tables ... 11 List of abbreviations ... 12 1 Introduction ... 13 1.1 Background information ... 13 1.2 Problem statement ... 131.3 Contribution to the FREM field ... 14
1.4 Scope ... 14
2 Literature review ... 15
2.1 Sustainability ... 15
2.2 Sustainability in real estate ... 16
2.3 Sustainability in the investment market ... 19
2.4 Sustainability performance ... 23
3 Research objective and questions ... 25
3.1 Research objective ... 25 3.2 Research questions ... 25 3.3 Conceptual model ... 25 4 Research design ... 26 4.1 Research strategy ... 26 4.2 Data collection ... 26 4.3 Sampling technique ... 27 4.4 Operationalisation ... 28 5 Research methodology ... 29 5.1 Data analysis ... 29 5.2 Presentation of analysis ... 29 5.3 Results ... 29 5.3.1 Questionnaires ... 29 5.3.2 Interviews ... 30
5.3.3 Sustainable real estate ... 31
5.3.4 Investing in sustainable office buildings ... 31
5.3.5 Making office buildings more sustainable ... 31
5.3.6 Sustainability aspects ... 32
5.3.7 Sustainability performance ... 32
5.5 Reliability ... 33 5.6 Validity ... 33 5.7 Limitations ... 34 6 Conclusions ... 35 7 Recommendations ... 37 List of references ... 38 Appendices ... 41
Appendix 1 Sustainability performance ... 41
Appendix 2 Questionnaire ... 44
Appendix 3 Interview guide ... 48
Appendix 4 Codebook ... 49
Appendix 5 Results questionnaires ... 51
Appendix 6 Results interviews (table) ... 56
Appendix 7 Results interviews (per subject) ... 57
List of figures
Figure 1: FREM and sustainability - model ‘Green FM as a way to create value’ (Jensen et al., 2012) ... 14
Figure 2: Three pillars of sustainability (Drèo, 2006) ... 15
Figure 3: The real estate chain (Van Driel and van Zuijlen, 2016) ... 16
Figure 4: Stock of office buildings per energy label (EIB, 2016) ... 17
Figure 5: Volume of new and existing office buildings in the Netherlands (NVM, 2017) ... 17
Figure 6: Key benefits of sustainability and impact on value (Warren-Myers, 2012)... 18
Figure 7: Building progress (Buckman et al., 2014) ... 19
Figure 8: Investment volume in the Netherlands (CBRE, 2017) ... 19
Figure 9: Vicious circle of blame by Cadman (RICS, 2008) ... 21
Figure 10: Breaking the vicious circle of blame (RICS, 2008) ... 21
Figure 11: Sustainability matrix of aspects and strategies (Baumgartner and Ebner, 2010) ... 23
Figure 12: Conceptual model (Author, 2019) ... 25
Figure 13: Research model (Author, 2019) ... 27
Figure 14: Research structure (Author, 2019) ... 28
Figure 15: Measures catalogue (Author, 2019) ... 36
List of tables
Table 1: Theoretical drivers of sustainability for the market, owner, and tenant (Warren-Myers, 2012) ... 22Table 2: Research methodology (Author, 2019) ... 26
List of abbreviations
Abbreviation Explanation
AFM Autoriteit Financiële Markten BENG Bijna Energie Neutrale Gebouwen
BREEAM Building Research Establishment Environmental Assessment Method
CO₂ Carbon dioxide
CREM Corporate Real Estate Management
CSR Corporate Social Responsibility
DGBC Dutch Green Building Council
ECN Energieonderzoek Centrum Nederland
EED Energy Efficiency Directive
EEFIG Energy Efficiency Financial Institutions Group
EIB Economisch Instituut voor de Bouw
EPC Energy Performance Certificate
ESG Environmental, Social and Governance / Environment Sustainable Governance
EZK Economische Zaken en Klimaat
FM Facility Management
FREM Facility and Real Estate Management
GBC Green Building Council
GHG Green House Gasses
GPR Gemeentelijke Praktijk Richtlijn
GRESB Global Real Estate Sustainability Benchmark
GRI Global Report Initiative
IGCC Investor Group on Climate Change
IISD International Institute for Sustainable Development IPCC Intergovernmental Panel on Climate Change
IVBN Vereniging van Institutionele Beleggers in Vastgoed, Nederland LEED Leadership in Energy and Environmental design
MVO Maatschappelijk Verantwoord Ondernemen
NEV Nationale Energie Verkenning
PBL Plan Bureau voor de Leefomgeving
PRI Principles for Responsible Investment RICS Royal Institution of Chartered Surveyors
RPI Responsible Property Investment
SDG Sustainable Development Goal
SPI Sustainability Performance Indicators SRI Socially Responsible Investment
UNEP FI United Nations Environment Programme Finance Initiative USGBC United States Green Building Council
WCED World Commission on Environment and Development
1 Introduction
1.1 Background information
The focus on sustainability began started with the discussion on the impact of the current climate changes and the global warming trend caused by the greenhouse effect. The growth in world population and the economic growth cause an increase in the production and consumption of market goods and services which improves human well-being. The growth of material production and consumption is limited by natural resource constraints and are causing greenhouse gas emissions (Howarth, 2012).
Most climate scientists agree that the main cause of the current global warming trend is human-generated expansion of the greenhouse effect. The atmosphere and oceans have warmed; the amounts of snow and ice have diminished; and sea levels have risen. The Fifth Assessment Report of the Intergovernmental Panel on Climate Change states that the building sector is responsible for approximately one-third of total energy use and one-third of CO₂ emissions (IPCC, 2014).
Following the Paris Climate Agreement, the Dutch government demanded a total reduction of CO₂ emissions, with a 50 percent reduction by 2030 and 95 percent by 2050. The Dutch government has recently published the Climate Agreement for the Netherlands in which measures and actions are described in order to
accomplish these reductions. Banks, pension funds, insurance companies, and investors signed this Climate Agreement on behalf of the financial industry last July (Klimaatakkoord, 2019). In the Netherlands, there are eight million buildings causing 36 percent of total CO₂ emissions. To accomplish the energy reduction targets, buildings have to reduce their energy consumption by 20 percent by 2020 (ECN, 2017).
1.2 Problem statement
Dutch office buildings are responsible for 18 percent of total CO₂ emissions (ECN, 2017). In order to reduce energy consumption, real estate owners should invest in the sustainability of buildings. End users can also influence the sustainability performance of the built environment by demanding sustainable office buildings. The Central Government Real Estate Agency is responsible for managing and maintaining the largest and most diverse property portfolio in the Netherlands and is the largest end user of 11 percent of all office buildings in the Netherlands (Agentschap NL, 2010). The Agency is reducing energy consumption by optimising climate installations and efficiently using office buildings. They established their sustainability strategy as a model following the principles of people, planet, and profit. Concerning the planet, they purchase renewable energy and ultimately strive for energy-neutral office buildings to reduce CO₂ emissions (Rijksvastgoedbedrijf, 2019).
The current trend of focusing on sustainable buildings contributes to the development of maintaining real estate in a sustainable way. In order to enlarge the amount of sustainable real estate, the government implements strict laws and intends to enforce more restrictions. New office buildings are developed more sustainably, but to actually increase the sustainability performance, the largest opportunity is the
improvement of existing office buildings. By 2023 all office buildings should obtain an energy label C. According to Facto (2019), 44 percent of all office buildings still do not have an energy label C. In addition to the Central Government Real Estate Agency, many office buildings are owned by investors. It is interesting to discover the constraints that investors face when considering the implementation of sustainability practices in their buildings. The mind set of investors regarding their investment strategy, sustainability strategy,
sustainability performance, and sustainability aspects for their portfolio can be examined. By providing insight into the market for investors, it is possible to find solutions for the problems that prevent improvement of the sustainability performance, and investors can use these solutions to improve their sustainability strategy. This thesis aims to provide answers and greater insight concerning these questions.
1.3 Contribution to the FREM field
This research is not only useful for investors, but also for facility and real estate managers. According to the Facility and Workplace Management Marketresearch 2019 (Twijnstra Gudde, 2019), sustainability is the most important theme for facility managers and their purchasing policy; even more so than customer focus and technology.
Figure 1: FREM and sustainability - model ‘Green FM as a way to create value’ (Jensen et al., 2012)
The above model by Jensen, van der Voort and others demonstrates the relevance of sustainability for the facility and real estate management (FREM) field, and the advantages of seeing green facility management (FM) as a way to create value (Jensen et al., 2012). This model includes various sustainability aspects focusing on the sustainability performance of the built environment. This research, concerning these elements of the sustainability performance, can contribute to further professionalisation and transparency for sustainability strategies in the Dutch investment market for office buildings.
1.4 Scope
The subject of this thesis is the sustainability performance of office buildings in the Netherlands. This is a wide subject, therefore the scope of the thesis is limited to the motives of investors for investing in the sustainability performance of office buildings in the Netherlands. This is a significant topic, since investors are becoming more interested and involved in sustainable real estate. There are several issues to investigate in relation to this topic, such as the drivers and barriers for investors to invest in sustainable real estate. Based on the outcomes of this research, sustainability in office buildings can be further stimulated and improved.
2 Literature review
2.1 Sustainability
Much has been written about sustainability since it is a complex and comprehensive concept. According to Geissdoerfer (2017, p. 766), sustainability is ‘the balanced integration of economic performance, social inclusiveness, and environmental resilience, to the benefit of current and future generations’. Another definition of sustainability is “the need to develop the sustainable models necessary for both the human race and planet Earth to survive” (Sustainability Degrees, 2018). Another popular view of sustainability consists of the overlap of three pillars of
sustainability: ecological factors, social factors, and economic factors as shown in figure 2 (Drèo, 2006).
Figure 2: Three pillars of sustainability (Drèo, 2006)
According to Dyllick and Hockerts (2002), sustainability is concerned with three different types of capital: economic, ecological, and social as shown in figure 2. Finding a balance between economic growth, capacity of natural resources, and social responsibility refers to the three P’s of people, planet and profit. Elkington (2004) has explained that the three P’s create financial value for the organisation, while taking care of employees, stakeholders, and society without doing harm to the environment.
Hassan (2016, p. 835) has elaborated on this notion and has written that “sustainability is a multidimensional concept characterized by complex interrelations between ecological and socio-economic systems. The concept of sustainability has emerged in the past four decades as a leading framework for understanding economic development, community development and natural resource management. One of the most widely accepted and used definitions of sustainability is meeting the needs of the present without compromising the ability of future generations to meet their own needs”.
In the 1980’s, the United Nations set up the World Commission on Environment and Development, also known as the Brundtland Commission. The outcome of the Brundtland Commission was a document entitled "Our Common Future", otherwise known as the Brundtland Report. Sustainability has been defined in many ways, but the most frequently quoted definition is from this report: ‘the development that meets the needs of the present without compromising the ability of future generations to meet their own needs.’ (WCED, 1987, p. 40). That is, what we do now, should not harm future generations.
Sustainability is focused on stabilising the climate to create a sustainable future, that meets the needs of future generations globally. This is the foundation for the 17 sustainable development goals and 169 targets formulated by the International Institute for Sustainable Development (IISD), known as Agenda 2030. Agenda 2030 was adopted by many countries in 2015. These goals and targets vision ending poverty, protecting the planet, and ensuring that all people enjoy peace and prosperity. The goals and targets are universal, meaning that they apply to all countries around the world and not only to poorer countries. For example, the goals focus on the reduction of greenhouse gas emissions, the expansion of wind and solar energy, and the improvement of energy efficiency. Reaching the goals by 2030 requires action on all fronts. Governments, businesses, civil society, and people everywhere have to be involved and work on the following areas of critical importance for humanity and the planet: people, planet, prosperity, peace, and partnership (IISD, 2018).
Nowadays, organisations are more aware of sustainability issues and implement corporate social
responsibility (CSR) or socially responsible investment (SRI) policies to take responsibility for the effects of their business activities. Companies try to find a balance between people, planet and profit with regard to the economic, ecological, and social dimensions of sustainability. Depending on company size, sector, culture,
and strategy, CSR performance is an instrument used to measure the CSR activities of organisations. Corporate social responsibility should be embedded in all business processes and corporate strategy.
2.2 Sustainability in real estate
Sustainability is an important real estate trend and returns in several reports from Jones Lang LaSalle (JLL). JLL have referred to sustainable business models that add lasting value to customers, employees, shareholders, and communities, and concerning smart real estate to adapt to the changing global environment (JLL, 2017 and 2018). The long-term ambition of an energy-neutral built environment by 2050 was formulated by the Dutch government in order to meet the Paris Agreement. Dutch office buildings are responsible for 18 percent of total CO₂ emissions (ECN, 2017). Therefore, focusing on sustainable office buildings contributes to the development of maintaining real estate in a sustainable manner and reducing emissions.
Figure 3: The real estate chain (Van Driel and van Zuijlen, 2016)
Sustainability in real estate can be approached from an organisational point of view. According to van Driel and van Zuijlen, managing real estate in a sustainable way has become professionalised. A strategic approach is necessary to optimise financial and social efficiency for aligning sustainability with the corporate strategy and strategic organisational targets. The added value of a strategic approach to real estate is shown in the real estate chain presented in figure 3 (Van Driel and van Zuijlen, 2016). This chain shows the connection between investment management and corporate real estate management (CREM) and that there are two ways to approach real estate. One approach is to view real estate as an investment and the other is to see real estate as an asset. The upper part of the figure is more focused on the owner/ investor, while the bottom part of the chain focuses on the end user/ tenant. The figure also shows the different organisational levels
Sustainable real estate
Sustainability on strategic level
Sustainability on strategic level Sustainability on tactical level
Sustainability on tactical level Sustainability on operational level
(strategic, tactical and operational) within the real estate market in which each level has its own
responsibilities. Sustainability is not only about sustainable real estate itself, but also about sustainable real estate management at all organisational levels, as shown in this real estate chain.
In addition to this strategic approach to improve sustainable real estate, the current rules and regulations concerning sustainability in the Netherlands are influential. For example, regulations require the reduction of the production of emissions and that all office buildings need an energy label C before 2023. It is expected that all office buildings will be obliged to upgrade to an energy label A by 2030 (RVO, 2018). A building can attain an energy label C with just a few measures, such as LED-light, adjusting technical installations, isolation of roofs and facades, and solar panels with an average payback period of approximately five years. In a research for energy labels for office buildings of Holland’s 20 largest market leaders was concluded that more than half of the office buildings involved did not attain the energy efficiency stipulations for energy label C. Only six of the market leaders have an energy label C for at least 66% of their office buildings (Natuur and Milieu, 2016). Figure 4 shows that less than 50% of current office buildings have an energy label C or higher.
Figure 4: Stock of office buildings per energy label (EIB, 2016) Figure 5: Volume of new and existing office buildings in the Netherlands (NVM, 2017)
Large companies are obliged to perform energy audits. Due to these rules and regulations, new buildings are developed sustainably, but as figure 5 shows, existing office buildings account for the largest volume. Therefore, in order to improve the sustainability of office buildings, it is, arguably, more important to improve the existing office building stock than to develop new office buildings. Nevertheless, it is
considerably more difficult to apply sustainability measures to existing office buildings than to create a new sustainable office building. Improving sustainability in existing stock mainly depends on owner-tenant collaboration, since every sustainability upgrade requires the cooperation and participation of the owners and tenants.
The government has the largest real estate portfolio in the Netherlands and aims to set a good example for other buildings owners. Targets for office buildings of the Central Government Real Estate Agency in the Netherlands (Rijksvastgoedbedrijf, 2019) are:
2019 – Bijna Energie Neutrale Gebouwen (BENG) for new constructions; 2020 – 25% CO₂-reduction compared to 2008;
2023 – Average of all office buildings with label B; 2030 – Average of all office buildings with label A; 2040 - 50% CO₂-reduction compared to 2008;
2050 – Circular for new constructions, entirely sustainable energy supply, real estate portfolio is CO₂ neutral.
Sustainability is more than reducing the CO₂ footprint, energy labels, windmills and solar panels. Sustainable buildings are energy efficient, generate energy, and materials with less damage to the natural environment are used. The advantages of adapting sustainability in buildings are shown in figure 6.
Figure 6: Key benefits of sustainability and impact on value (Warren-Myers, 2012)
Other sustainable elements, specifically for buildings, mentioned by Pivo (2010) are: Waste management plan;
Alternative transportation; Efficient lighting;
Water reduction; Recycling facilities; Indoor air quality.
In order to determine whether buildings are environmentally efficient, there are different options to measure sustainability in buildings such as:
Gemeentelijke praktijk richtlijn (GPR) for buildings and GreenCalc are digital instruments to measure the sustainability of a building by scoring a building on the subjects energy, milieu, health, quality of use and future value (RVO, 2010);
Building research establishment environmental assessment method (BREEAM) is a method to determine the sustainability performance of buildings (BREEAM.nl, 2018);
Leadership in energy and environmental design (LEED) provides a framework that can be applied to create healthy, highly efficient, and cost-saving green buildings. Also costs and profits for sustainability can be calculated. This is the most widely used green building rating system in the world and a globally
recognised symbol of sustainability achievement (USGBC, 2015);
An energy label indicates to what extent a building is energy efficient and explains possible energy efficient measures (RVO, 2018).
The green building rating systems are globally recognised and gaining attention within the real estate industry as methods for promoting and improving investment in sustainable real estate (Kotchen, 2006). Besides these green building certification and assessment tools, the development of smart buildings is growing rapidly. According to Buckman et al. (2014, p. 98-99), smart buildings are “buildings which integrate and account for intelligence, enterprise, control, and materials and construction as an entire building system, with adaptability, not reactivity, at the core, in order to meet the drivers for building progression: energy and efficiency, longevity, and comfort and satisfaction. The increased amount of information available from this wider range of sources will allow these systems to become adaptable, and enable a smart building to prepare
itself for context and change over all timescales”. Smart buildings can be divided into three types of buildings (intelligent, smart, thinking) as shown and explained in figure 7.
Figure 7: Building progress (Buckman et al., 2014)
Combining the trends and developments in the FREM work field and focusing on sustainability in real estate, it concerns satisfied stakeholders and reduction of the greenhouse effect in many ways. This can only be implemented and accomplished by focusing on collaboration between all stakeholders (Facto, 2019). Therefore, innovation focusing on sustainability in real estate, is one of the leading trends in FM for the real estate chain. Rules and regulations, environmental efficiency, and smart buildings are also important issues.
2.3 Sustainability in the investment market
Geltner, Miller, Clayton and Eichholtz (2006) have distinguished the following four major asset classes: cash, stocks, bonds, and real estate. In general, the real estate market in the Netherlands can be divided into the following sectors: office buildings, industrial, retail, residential, hotel, and other (CBRE, 2018). Also Colliers International (Colliers, 2017) and JLL (JLL, 2017) has adapted these types of real estate for the investment market in general. Figure 8 shows that office buildings are the largest sector based on investment volumes and, after the latest recession in 2008, the investment market has improved. After 2012 the total investment volume in the Netherlands has improved each year in comparison to the year before. In 2017 a record amount of almost nine billion euro was invested in Dutch office buildings (FD, 2018).
According to Geltner et al. (2006), the major constraints and concerns, that affect most investors in particular in the real estate market are risk, liquidity, time horizon, investor expertise and management burden, size, and capital constraint. Besides these constraints and concerns, in order to make a valid investment decision, the total cost of ownership should be taken into account. According to Fuller (2006), the total cost of ownership relates to all costs of acquiring, owning, and disposing of a building. In general building-related costs can be divided into the following categories:
Initial costs (purchase. acquisition, construction, and renovation costs); Fuel costs (energy and water costs);
Operation, maintenance and repair costs; Replacement costs;
Residual values (resale of salvage values or disposal costs);
Other costs (finance charges, loan interest payments, non-monetary benefits or costs). In addition to positive developments in the investment market, due to economic growth, and rising
employment figures, the main concerns for investors are uncertainties over the development of interest rates and overpriced properties. On the other hand, the main motivators are asset class diversification, yield related to other asset classes, and higher income return compared with other asset classes (CBRE, 2018). It can be concluded that investors focus on other asset classes for diversification, spreading risks, and higher returns but sustainability is not mentioned. Sustainable development is not a high priority for several reasons such as “a lack of awareness and knowledge about the performance of buildings in general and the benefits of sustainable design in particular, and a lack of mechanisms to align environmental and social issues with economic return” (Lützkendorf and Lorenz, 2005, p. 215).
Sustainability, however, must be a high priority for investors. The development of investing in sustainable real estate also depends on political, economic, technological, ecological and social considerations. The Dutch government uses laws to oblige investors to “green” their assets. According to Gool et al. (2013), there are several options for investing sustainably in real estate, which are:
Invest in buildings which meet all sustainability requirements; Invest in older buildings to renovate or redevelop more sustainable; Green leasing;
Avoid investments in less sustainable buildings.
Investing in environmentally efficient buildings can have a positive impact on the real estate value by reducing operating and maintenance costs and improving the working environment. On the other hand, investing in sustainable real estate causes higher capital costs, which causes lower capital returns and thus can have a negative impact on the real estate value (Warren-Myers, 2012). Nowadays, companies are willing to pay higher rents for sustainable buildings because many companies have a corporate social responsibility strategy. Nevertheless, there is an issue regarding costs and the potential that sustainable investments are not financially viable. Existing lease contracts with tenants also present a challenge. These contracts do not allow the increase of rental costs based on the invested capital costs by the owner. The split incentive is a bottleneck in the real estate market concerning investors and tenants. This occurs when an owner makes investments regarding sustainability and the tenant benefits from this due to the lower energy costs. A checklist split incentive and guide split incentive with tools for tenants and owners has been published by Platform Duurzame Huisvesting (2019).
Sustainability requires not only involvement on all organisational levels, but also from all stakeholders. Cadman (RICS, 2008) has developed a model that consists of four stakeholders involved in the development of commercial real estate, which illustrates this dilemma (see figure 9). The interrelations and the motives and triggers indicate the difficulties for each of these stakeholders to initiate the change and start demanding sustainable office buildings. The majority of companies are profit driven and, thus, for them, sustainability only makes sense if it translates into profit increase. For a company, sustainability mostly needs to be financially feasible and preferable. The Delft University of Technology (TU, 2015) has claimed that
stakeholders in the real estate market often do not strive for sustainable buildings, because other parties in the market are not striving for sustainability, so they are waiting and depending on others.
Figure 9: Vicious circle of blame by Cadman (RICS, 2008) Figure 10: Breaking the vicious circle of blame (RICS, 2008)
Lützenkendorf (2011) has stated that the vicious circle of blame for the low demand for sustainable buildings can be broken. By introducing adequate incentives, more sustainable achievements can be accomplished (figure 10). Investors could try to find ways to work together with their stakeholders through sustainable incentives, educational programmes, and green leasing. They can work with new and existing tenants towards greater cooperation and towards greater cooperation in responsible property investing in relation to sustainable real estate (Pivo, 2010). Collins, Junghans, and Haugen (2018) have defined green leasing as an agreement to improve the environmental performance of a building by both owner and end user. Green leasing also covers environmental activities and practices focusing on environmental performance targets for the property. This can be used by the real estate sector in seeking for opportunities to increase their energy efficiency and implement sustainability features in their buildings.
Also according to Derhake (2017), most commercial real estate owners, investors, and developers recognise that it can be financially rewarding to invest in sustainability upgrades. Many organisations in the
Netherlands, such as ABN AMRO, have already begun to make their own buildings more sustainable (ABN AMRO, 2017). The government real estate company has described policies for sustainable real estate in its corporate real estate strategy. Also tenants, owners, and other stakeholders are demanding more sustainable, greener and healthier buildings, and infrastructure. Sustainable real estate is more value-resistant with higher efficiencies for investors and society. Since commercial organisations now have corporate social responsibility policies, they are willing to pay higher rents for sustainable buildings (USGBC, 2015). Investors in real estate want certainty and therefore choose sustainable real estate according to the global real estate sustainability benchmark (GRESB, 2018).
According to Wyman et al. (2011), real estate investment decisions are made with fundamental uncertainty about the future. Investors are investing in real estate based on mathematical probability (valuation) and uncertainties (trends and developments). Collins et al. (2018) have argued that ‘there is little incentive for building owners to install energy efficient technologies in their buildings because of the upfront costs and expensive maintenance and sustainable building management and FM are being increasingly driven by legislation’ (p. 252). However, according to Wyman et al., this way of thinking needs to be changed in order to attain better value.
Market Owner Tenant Increasing shareholder value and
building value Enhanced brand Enhanced brand
Tenant attraction and retention Higher net revenue return Reduced operating costs Staff attraction and retention Improved tenant retention Improved productivity Government reduction targets and
accommodation criteria Higher rents Enhanced building quality
Demand for quality space Mitigation of future regulatory impacts
Mitigation of future regulatory impacts
Reduced operating costs Shorter letting-up periods Decreased environmental footprint Pressure from stakeholders and
shareholders Reduced operating costs
Retention and attraction of employees
Demand for SRIs Increased market share Enhanced building environment
Global reporting and disclosure
projects Differentiated position of asset
Stronger tenant/owner/manager relationships
Risk migitation and good governance Efficient reporting to stakeholders Efficient reporting to stakeholders Legislative changes
Escalating cost of resources Brand protection
Corporate social responsibility Increased global focus on climate change
Table 1: Theoretical drivers of sustainability for the market, owner, and tenant (Warren-Myers, 2012)
In general, the certification of building sustainability should lead to an improved environmental performance, lower operating costs, better returns on investments, and, thus, a greater appeal for investors and tenants. Certified buildings are higher valued and create safer long-term investments. This and other theoretical drivers for sustainability in relation to real estate are outlined in table 1. Despite the advantages of sustainable buildings, there are also barriers concerning sustainability in real estate (Collins et al., 2018; Bond and Parrett, 2012), which align with the vicious circle of blame:
Rules and regulations; Higher costs for tenants; Higher costs for owners;
Financial considerations meaning the perception that they cost more compared to conventional buildings; Split incentives between owners and tenants where the owners are investing in green buildings but the
tenants are benefiting through reduced energy and water costs, greater productivity, and so on; Lack of knowledge and experienced workforce and, thus, a lack of practical understanding among
building owners about energy efficiency and green building, including overestimates of the initial cost premium, which hinders the implementation of sustainability measures;
Lack of incentives, that are strong enough to change behaviour. Energy prices are still low and tax and other political incentives are not significant enough to change behaviour.
Since many organisations are active in the sustainable real estate market, this thesis focuses on the behaviour of investors in office buildings in the Netherlands. There are different types of investors such as private equity, private investors, and institutional investors. Institutional investors are large companies such as pension and insurance funds and ‘manage diversified long-term portfolios with high capital exposure which forces them to consider and anticipate risks’ (Geiger, Cajias and Fuerst, 2014). Naturally, they aim to minimise the risks and costs, and to maximise the benefits of sustainable investment opportunities. This is known as active ownership in the principles for responsible investment (PRI) developed by investors and for investors as possible actions for handling environmental, social, and corporate governance (ESG) issues in the investment market (UNPRI, 2011). The principles have an overlap with socially responsible investment,
sustainable investment and green investment used by investors to distinguish themselves from the competition.
The office market houses a large part of the workforce and is important for municipalities, developers, investors and other companies for development, exploitation and housing. The trend for focusing on sustainable buildings parallels a higher focus on tenant satisfaction and comfort improvement, while maintaining real estate in a sustainable way. Investors are becoming more interested and involved in sustainable real estate.
2.4 Sustainability performance
Like sustainability itself, sustainability performance is a broad concept. Sustainability performance can be measured by collecting data concerning sustainability key performance indicators for an integrated assessment of a property (Lützkendorf and Lorenz, 2005). This research focuses on the sustainability performance in general of office buildings. Improving the sustainability performance of office buildings is a business opportunity for investors to distinguish from other competitors.
To clarify and formulate the sustainability performance, Baumgartner and Ebner (2010) have developed profiles of sustainability strategies based on 21 sustainability aspects (see figure 11). These 21 sustainability values can be divided into economical, ecological, and social aspects, with both internal and external issues. A four-level maturity grid is used to indicate the maturity levels and differences of each sustainability aspect occurring in an organisation. By validating the sustainability aspects along with maturity levels, the results can be used to formulate the corporate sustainability strategy of investors and to monitor the development and progress of an organisation’s sustainability.
The following profiles of sustainability strategies can be distinguished according to Baumgartner and Ebner (2010): Introverted; Conservative; Conventional extroverted; Conventional visionary; Transformative extroverted; Systemic visionary.
A more detailed explanation of these sustainability aspects and strategies is given in appendix 1.
Summarising this literature review, sustainability in general, concerning real estate and, specifically, in the investment market is not only an important trend but also a substantial contemporary issue. Sustainability concerns investors on all organisational levels, the investment market in general, end users, and other stakeholders. Investors have to take many issues into account, such as corporate strategies, rules and regulations, drivers and barriers, and the sustainability performance of office buildings when investing in sustainability.
Although much has been written about sustainability, it is remarkable that the literature review shows that sustainability is not high on investors’ agendas. Investors are becoming more interested and involved in sustainable real estate, but it is interesting to investigate their motivations. Therefore, this thesis explores what sustainability strategies investors have or desire, in order to analyse the willingness of investors to invest in the sustainability performance of office buildings in the Netherlands.
3 Research objective and questions
3.1 Research objective
Drawing on the conclusions from the literature review, the objective of this research is to analyse the behaviour and sustainability agenda of investors and their investment characteristics to distinguish the differences, similarities, and their motivations to invest in (the improvement of) the sustainability performance of office buildings in the Netherlands. This research aims is to broaden knowledge and gain insight into the perception of sustainability and the implementation of sustainability measures within office buildings from an investor’s perspective. The research results in a measures catalogue, which is of interest for investors, government, municipalities, and real estate agents for use in their corporate strategies and decision making processes.
3.2 Research questions
The main research question (RQ) for this research is:
RQ: Which aspects motivate investors to invest in the sustainability performance of office buildings in the Netherlands, and to what extent?
The sub questions (SQ) for this research are:
SQ1: What are the current sustainability strategies among investors?
SQ2: Which aspects regarding sustainability in office buildings are important for investors?
3.3 Conceptual model
To structure and visualise the information from the literature review with the research questions and objectives in mind, the conceptual model in figure 12 is designed as a framework to support the insights of this research. This conceptual model illustrates the relationship between trends and developments and the results of this research. This inverted, coloured triangle provides a framework for this research in focusing from the more general trends and developments in the corporate real estate market and narrowing towards specific measures to stimulate investments in sustainability for investors.
Figure 12: Conceptual model (Author, 2019)
Trends and developments
Drivers and barriers
Motives to invest
in sustainability
Measures to
stimulate
investing in
sustainability
CRE market Investment market Investor4 Research design
4.1 Research strategy
According to Saunders, different research approaches can be distinguished. For this thesis, the inductive approach was applicable, since this research was based on empirical data and focused on identifying themes and patterns to create a conceptual framework (Saunders, 2012). The research method for this thesis consisted of a range of data collection, which are literature desk research, semi-structured expert interviews, and questionnaires as outlined in the table below.
The following methodology was used to address the sub questions:
Research Explanation
Method Literature desk research.
Questionnaires concerning the organisation and sustainability strategies of experts.
Eight extensive, semi-structured, and in-depth interviews with experts. Measurement
procedure
Literature to be read and analysed. Questionnaires.
Interview questions/ outcomes from the interviews.
Data analysis Analysis of data by using academic information based on literature / analysis of data on an academic level collected from the in-depth interviews. Open and axially coding.
Expected results It is expected that the results of these sub questions provide a clear understanding of future developments that are likely to influence investors. Resources Books, journals, academic reports, industry reports, publications, legislation,
municipal policies and so on. Questionnaires.
Expert Interviews.
Table 2: Research methodology (Author, 2019)
The object of this exploratory, descriptive research is to broaden the knowledge from an investors perspective, which is of interest for investors, government, municipalities, real estate agents, and other stakeholders. The more detailed aim of this research is to distinguish the strategies, targets, portfolio criteria, and the motivation of investors to invest in the improvement of the sustainability of office buildings. The possible outcomes of this research could impact on corporate strategy and decision making processes since better insight into measures for investors could motivate further investments in sustainable real estate to improve the sustainability performance of their office buildings.
4.2 Data collection
A literature desk research was initially carried out to investigate the sub questions, to explore developments in sustainability, the current real estate and investment market, and the sustainability performance of office buildings in the Netherlands. The literature helped to collect information as input for the structure and questions for the interviews, and enabled the compilation of an interview guide.
Alongside the eight semi-structured expert interviews, extra data were retrieved with questionnaires to gain more insight into the organisations of the experts and current and future sustainability strategies. Prior to the interview, the questionnaire was sent by email to the expert, together with an accompanying text as shown in appendix 2. The questionnaires were conducted in English. Since the information from the questionnaires already gave insight into the expert’s organisation, it was unnecessary to discuss this information in the interviews, and this allowed the interviews to be concise. A list of sustainability aspects and some additional information as shown in appendix 1 were included in the questionnaire(Baumgartner and Ebner, 2010). The expert was asked to grade the sustainability aspects based on the current and future focus of their
The eight semi-structured interviews were undertaken in a mode known as non-standardised deductive research, since a list of themes and questions were used and the interviews did not follow a strict pattern. However, the semi structured interviews followed the same interview guide with subjects and questions, which was prepared in advance of the meeting with the experts, and is shown in appendix 3. This procedure facilitated the comparison of the results afterwards. This type of interview was chosen to ensure that all subjects were discussed and the experts could elaborate on certain subjects, depending on their particular interests. This method aimed to garner more depth to the conversation and to gain extra and useful information that emerged during the interviews. In a fully structured or standardised interview, in contrast, interviewees might not feel encouraged to speak freely (Boeije, 2016). In order to prevent language misunderstandings or difficulties in answering, the interviews were held in Dutch.
This research is a combination of quantitative and qualitative research since the data were collected through questionnaires and interviews and the outcomes were numerical and non-numerical data (Saunders, Lewis and Thornhill, 2012). The collected data was processed through open and axial coding. Open coding involves reorganising the data into categories, and axial coding is the ‘process of recognizing relationships between categories’ (Saunders et al., 2012, p. 186). This procedure is summarised in the following research model:
Figure 13: Research model (Author, 2019)
The outcomes of the interviews were compared with the research literature to make a comparative and critical review on the subject.
4.3 Sampling technique
The principles of qualitative research are purposive sampling, constant comparison of data, and
intersubjectivity (Boeije, 2016). For this research, the purposive sampling was used as the sampling strategy, since the total population of investors is not statistically known and a non-probability sampling was used to select the experts. The results of the interviews and questionnaires were compared. Furthermore, self-selection and convenience sampling were used based on self-selection criteria. The self-selection criteria for the experts were expertise and knowledge of the Dutch real estate office and investment market, in combination with the function and availability of time for this research (Saunders et al., 2012).
Research regarding sustainability
in real estate
Research regarding sustainability
in the investment market
Literature desk
research
Conclusions and recommendations
Empirical research
Data analysis
Research regarding sustainability
performance
Questionnaires and interviews
A sample of eight non-random experts were selected. The experts were working with institutional investors, real estate agents, and other professionals to gain insight into the behaviour and sustainability agenda of the investors and their investments in Dutch office buildings.
The following people were interviewed:
Nr. Company Type investor/organisation Function
1 Deka Institutional General manager of real estate
2 Merin Institutional Sustainability and building innovation manager
3 NSI Institutional CIO
4 Annexum Private equity CEO
5 Bloc Developer Partner
6 Besix Construction company Commercial director
7 Savills Real estate broker Head of property management
8 Bouwinvest Institutional Director Dutch Office and Hotel Investments
Table 3: Sample of experts for the semi-structured interviews (Author, 2019)
4.4 Operationalisation
According to Saunders et al. (2012), operationalisation is the process of strictly defining variables into measurable factors. Since this research focuses on abstract variables such as sustainability, sustainable real estate, investment market and sustainability performance, the research structure in figure 14 was created. It shows the operationalisation of the variables and the demarcation of this thesis subject for a specific branch.
Figure 14: Research structure (Author, 2019)
Following demarcation using the above research structure, the variables of sustainable real estate and sustainable performance were based on the literature review and indicated in the interview guide, as shown in appendix 3 and the codebook in appendix 4.
Subjects interviews (interview guide):
Sustainable offices
Investing in sustainable offices/ the sustainability of offices Sustainability aspects and
performance of offices
Current and future willingness
Stimulate willingness Real estate => offices Investment market => types investors Sustainability performance Nav questionnaire: aspects => strategies Interviews Measure catalogue
5 Research methodology
5.1 Data analysis
Boeije has commented that ‘Data analysis is the process of systematically searching and arranging the interview transcripts, fieldnotes, and other materials that you accumulate to increase your own understanding of them and to enable you to present what you have discovered to others’ (Boeije, 2016, p. 92). For this research, the data were collected from questionnaires and interviews. Only four of the eight interviewees completed the questionnaires, by coincident these four interviewees were all institutional investors.
With the exception of one interview, the remaining seven interviews were held face to face at the workplace of the interviewee and recorded using a recorder-app on the smartphone. One interview was conducted on the telephone, since, due to a shortage of time, it was not possible to meet in person. All the interviews were literally transcribed and checked for inaccuracies, to enable analysis of the data after the interviews were concluded.
Given the fact that some interviewees requested confidentiality on information given, the transcripts and questionnaires were documented separately on a USB stick. In the transcripts, parts of the text related to the codebook are labelled by hand. These labels refer to the subjects in the codebook, using open and axial coding. Saunders et al. (2012) have defined these analysis techniques as follows:
Open coding is ‘the process of disaggregating data into units’ (p. 676);
Axial coding is ‘the process of recognising relationships between categories’ (p. 666).
The codebook is a coding schema in which the topics from the literature review and the variables, themes, issues, and other aspects are shown. The codebook for this research is included in appendix 4.
5.2 Presentation of analysis
The results from the questionnaires are summarised and shown in two parts. The first part is an overview of the answers on the questions concerning general information about the organisations of the interviewees. In the second part, the responses of the interviewees on the sustainability aspects concerning the current and future (desired) focus were translated into separate sustainability matrixes per interviewee and per focus. From these matrixes, current and desired sustainability strategies are distilled. The results from both parts of the questionnaires are presented in appendix 5.
The codebook (appendix 4) was used to analyse the transcripts. The labels in the transcripts refer to the subjects in the codebook. The subjects, that occurred most frequently during the interviews, are shown in appendix 6. This overview indicated the most important aspects and suggested measures to improve the sustainability performance of office buildings according to the interviewees. The interviewees are numbered from 1 to 8.
5.3 Results
The answers of the interviewees were summarised for each subject. In the resume below, the contradictions are also outlined.
5.3.1 Questionnaires
The questionnaires were sent to gain general background information from the investors. The results from the questionnaires are presented in appendix 5. Only four of the eight experts (all institutional investors) completed the questionnaires. In the Netherlands, the total stock of office buildings is approximately 49 million square meters. Members of Vereniging van Institutionele Beleggers in Vastgoed Nederland (IVBN) and, thus, the institutional investors own around five million square meters (IVBN, 2019). Of the four investors, who returned the questionnaires, two were members of IVBN, which is responsible for a total of 1,765,000 square meters, which represents approximately 35 percent of the office buildings owned by institutional investors in the Netherlands. These institutional investors have large real estate portfolio’s in value and the
number of buildings. In general, they require a payback period of ten years or at least within the letting period and their expectations for the following five years are an expected growth of at least 50 percent in relation to the portfolio of office buildings in the Netherlands. All office buildings of these institutional investors are certified. Sustainability performance is (very) important for all of them. The most important motives for enhancing the sustainability performance in general are:
Satisfaction and wishes of tenants; Improvement (for owners and tenants); Futureproof;
Competitive advantage; Cost of exploitation;
Improvement of letting situation/ occupancy; Positive effect on environment;
Marketing of investment company;
flexibility in contracts and technical flexibility; Location and accessibility.
The constraints, referred to, included improving the sustainability performance, insufficient willingness of tenant(s) to pay more for sustainability measures, and the feasibility of the business cases.
For the questionnaires, the distinguished maturity levels from Baumgartner and Ebner (poor, sufficient, satisfying, and sophisticated) were translated into different focus levels (low, moderate, high, and very high) to simplify answering for the experts in judging their own organisation. The sustainability matrixes showed that all four institutional investors want to improve their focus on sustainability aspects to higher levels and attain more mature sustainability strategies. The mapping of the interviewees’ current focus is divided between twice a conventional extroverted and twice a transformative extroverted strategy. For the future (desired) focus the mapping is clearer, since three experts aimed for a systemic visionary strategy, while the fourth aimed for a combination of a conservative and transformative extroverted strategy.
In an extroverted strategy, an organisation focuses on the external representation of sustainability. An organisation focusing on the conventional extroverted strategy aims at communicating its sustainability commitment to society in order to differentiate itself from competitors and to increase its credibility. An organisation focusing on a transformative extroverted strategy, strives for corporate sustainability in society in order to gain greater credibility.
In contrast to the conventional strategies, in the systemic visionary strategy it is important for organisations to show very good results in all sustainability aspects in order to carry out their sustainability commitments and efforts with stakeholders.
5.3.2 Interviews
In addition to the questionnaires, the expert interviews were carried out. In these interviews, five main subjects were discussed which are summarised in the following paragraphs. The subjects that came up the most frequently during the interviews are shown in appendix 6. This overview indicated the most important aspects and suggested measures to improve the sustainability performance of office buildings for the interviewees. The specific responses of each of the interviewees are shown in appendix 7.
Concerning the characteristics of sustainable offices and the sustainability performance of office buildings, the interviewees mentioned the following aspects most frequently:
1. Energy efficiency, neutral, generation and return, renewable energy (Paris proof); 2. Certification and energy labels;
3. Profitability, easier to rent out, and less vacancies.
As measures, improvements, and actions for investing in or improving the sustainability performance of office buildings, the following responses most frequently returned in the interviews:
1. Higher certification and energy labels;
2. Energy management system for measuring, monitoring, and reducing energy consumption and emissions (CO₂ footprint);
3. Solving split incentives.
Comparing the characteristics and improvements, both certification and energy labels were often returned in the interviews. Also, profitability and rental contracts were related to solving split incentives on a financial level.
5.3.3 Sustainable real estate
According to the experts interviewed, sustainable real estate is concerned with economic, ecological, and social sustainability; is certified and has energy labels; is, preferably, a multifunctional building that can be used for centuries. All buildings should be built with sustainable commodities, materials, and products with minimal CO₂ emissions which can be used as long as possible or reused. For the experts, sustainable real estate consists of smart buildings with minimal CO₂ emissions during use, achieved through monitoring, renewable energy, or even energy neutral solutions. Separation of waste and minimum waste, were also mentioned as characteristics of sustainable real estate.
5.3.4 Investing in sustainable office buildings
The experts agreed that it is necessary to invest in sustainable office buildings, since it is an important part of their investment strategy and also more important for tenants and end users. Investments are based on due diligences, sustainability scans, lease agreements and possibilities for developing sustainable office buildings. Some motives for enhancing the sustainability performance from the questionnaires were confirmed by the experts such as future proof locations, improving certificates and energy labels.
5.3.5 Making office buildings more sustainable
The improvement of the sustainability performance of office buildings is required by rules and regulations concerning energy labels and the Paris proof agreement. The Dutch expression ‘low hanging fruit’ was used in a number of interviews. This expression is a commonly used metaphor for doing the simplest or easiest work first or a target that is easy to achieve. In relation to sustainability, it refers to improving the
sustainability performance with the easiest measures, which have the most impact on the reduction of CO₂ emissions.
Other motives for enhancing the sustainability performance from the questionnaires were confirmed by the experts such as investing in and improving modern technology for greater energy efficiency, comfort improvement, and renewable energy. In the interviews, the total cost of ownership was mentioned as part of the sustainability strategy, not only focusing on costs but also considering and improving the total usage of a building including comfort. Corporate companies have the highest sustainability targets, improving the sustainability performance is an important issue for investors and tenants.
The barriers that have been described by Collins et al. (2018), and Bond and Parrett (2012) were mentioned in the interviews, with the exception of lack of knowledge and experienced workforce. Higher costs for tenants and for owners, and financial considerations are the largest barriers. However, it is difficult to renovate and improve the sustainability performance in the case of a long-term lease agreement and tenants are not willing to pay higher rents and service costs. Another barrier to invest is when a building is likely to be sold in the near future.
Since it is difficult to calculate the savings for owners and tenants exactly, split incentives between owners and tenants or green leases to invest with tenants in energy saving measures are difficult to promote. Involving and motivating tenants to reduce energy consumption, can partly contribute to addressing these barriers. Sustainability also concerns other stakeholders besides owners and tenants, so all stakeholders
should be involved in the improvement of the sustainability performance of office buildings in the Netherlands.
5.3.6 Sustainability aspects
The experts agreed that all sustainability aspects (economic, ecological, and social) are important, with the economic aspects having the greatest financial impact, and with all requiring significant time investment. Financial and ecological efficiency were most important for the experts in relation to profits and sustainability strategies.
5.3.7 Sustainability performance
For the experts, the sustainability performance consisted of the overall performance and CO₂ footprint of buildings. The behaviour of end users in the buildings influenced the sustainability performance.
Sustainability performance also involved monitoring energy consumption by square meter for benchmarking and reducing energy consumption and CO₂ footprint. Through monitoring and targets, the sustainability performance could be improved and made more advanced and smarter. The number of green leases was mentioned as an aspect of the sustainability performance.
5.4 Discussion
The range of different opinions about the value of sustainable real estate was remarkable. The majority of the interviewees claimed that sustainable real estate has higher value in terms of future proofing, is less risky, easier to rent out, more competitive, and gains higher rental prices. Sustainable office buildings attract new tenants and higher rents can be obtained for highly sustainable office buildings.
Interviewees 1, 3 and 7 contradicted the other interviewees on the higher value of sustainable real estate. The interview responses indicated that sustainable office buildings may currently enable significant earnings, but that this difference is likely to disappear and no longer be a distinctive feature. The competitive position is likely to decrease and tenants are unlikely to want to rent non-sustainable buildings. Sustainability is a crucial topic now, but is likely to become standard, given the rules and regulations, and to become the only way to continue earning money in the future.
It might seems a simple matter to obtain a higher energy label, but it is not always favourable to obtain an energy label A, due to the higher investments and the fact that tenants are not willing to pay higher rents. The interviewees also mentioned that the point distribution for BREEAM is odd and labels do not always give the right image of a building, since they notice large differences between the energy labels and the real energy consumption. Labels are specifically for a building but also the environment should be included in the judgement process. To gain an energy label A for a building, a large investment is necessary, while the same amount of money could be used for more sustainable measures in more buildings.
Substantially increasing the sustainability performance of office buildings requires large investments but then the problem is who will pay for the investments. Generally, according to the rental contracts in the
Netherlands, the owner is responsible for the maintenance of buildings and tenants pay for energy consumption through service fees or directly to the energy supplier. The interviewees mentioned that in England all costs carried by the tenants and in the United States an all-in-rent is commonly used. Using one of these constructions, it is clear that those who invest in sustainability improvements directly profit from them. Some interviewees already investigated or experimented with fixed service fees.
Apart from the fixed service fees, the costs for sustainable investments can also be retrieved from split incentives and green leases but the motivation among owners and tenants to initiate this is low. Also, investors would prefer more initiatives from tenants in the context of corporate social responsibility.
5.5 Reliability
Reliability is the degree to which data collection techniques are independent of coincidence. Therefore, similar observations or conclusions would be made by other researchers (Saunders et al., 2012). To secure the reliability of the findings, several actions were performed. From the literature desk research, subjects and data were processed into assumptions and tested during the interviews. A solid structure of the interview questions was used and the interviews consisted of a number of fixed and open questions. By using this structure, the topics for the interviews were the same in each interview, and, therefore, the risk of collecting different kinds of data was minimalised. This and the fact that the experts were interviewed independently, increased the reliability. The outcomes of the interviews were made anonymous, therefore misinterpretations or (socially) desired answers were excluded in order to prevent biases. All interviews were recorded to ensure reliability and to prevent a researcher bias (Saunders et al., 2012).
In the definition of qualitative research, three important elements are defined. In a qualitative research meanings, experiences, and points of view are systematically collected from interviews or observations to support the understanding of social appearances in their natural context. Since much is written about sustainability, there are many reports about the office and investment market, but this time the focus on sustainability is from a personal investors point of view based on experiences
For this research the weakness could be the sample. Just four of the eight experts completed the
questionnaires, and these were all from the institutional investors. These investors are responsible for a total of 1,765,000 square meters and 176 buildings which is around 35 percent of the office buildings in the Netherlands. The interviews were held with eight experts chosen because of their expert knowledge. Although, the choice of the experts is well explained, it is not possible to represent the entire population of investors, since self-selection was chosen.
5.6 Validity
Validity is the extent to which data collection methods measures what it should measure (Saunders et al., 2012). The level of validity was taken into account since the interviews were conducted carefully due to the scope of clarifying questions. This enabled the exploration of meanings, responses, and themes from a variety of angles (Saunders, Lewis and Thornhill, 2012).
Validity can be divided in three segments (Saunders et al., 2012):
Construct validity, this is the extent to which measurement questions actually measure what is intended to measure. It is an explorative research with a deductive approach, with interviews focusing on the opinions of the experts in the field;
Internal validity, this is the extent to which findings can attribute to interventions rather than any flaws in a research design. Triangulation was used in order to assure the internal validity of this research.
Literature review, questionnaires, and semi structured interviews were used for data collection;
External validity, this is the extent to which the research results from a particular study are generalisable to all relevant contexts. The data obtained from the experts were generalisable to a certain extend. Other experts should give the same data on trends and developments, however, they all have their own vision. This depends on the type of investor, strategy of the organisation, size, content, and focus of the real estate portfolio.
In this research multiple data sources were used and compared to demonstrate the validity of the findings. The population of the investment market is too large to fully research, therefore, a purposive sampling was used. Experts were selected based on their expertise, knowledge, and function within their organisations and the availability of their time. Open questions were used in the interviews to give the experts enough space to answer expansively and to make their own contribution to this subject by bringing up relevant new topics during the interview. The interviews were conducted with a careful focus on the subject of this research.
