Making sustainability benchmarking a reality in retail real estate
One of the biggest challenges for retail real estate owners is measuring the sustainability performance of existing properties. Although some standards and tools exist that address portions of the shopping center environment (e.g. EnergyStar for Retail tenants), as an industry we lack a holistic tool designed to meet our unique needs.
There are the several reasons why shopping centers are “different” when it comes to sustainability benchmarking:
- Shopping centers, by their very nature, are physically diverse. Enclosed malls, open-air centers, and lifestyle centers have different configurations, building sub-systems, and operating characteristics.
- Data is difficult to come by and many critical factors must be measured. The visibility to underlying data such as utility cost and consumption, which can be compartmentalized across individual tenants and landlords, can lead to an incomplete picture of performance.
- The base of property owners is very diverse, and includes large and small players alike. The large number of properties and owners makes alignment across common measurement standards challenging.
This is where the new ICSC Property Efficiency Scorecard comes into play. You might have read about it in the August issue of Shopping Centers Today. The scorecard, which is under development and scheduled for roll out next year, will be a benchmarking system uniquely tailored to the retail real estate industry.
I’m part of the committee that is guiding the creation of the Property Efficiency Scorecard Tool. The committee is comprised of 27 sustainability executives from ICSC member companies. The ICSC, comprised of 55,000 member companies globally, is playing a unique and important role in sponsoring an effort designed to solve a significant industry challenge.
The goal of this team is to build a framework and tool that will allow member companies to assess the sustainability performance of their properties against a set of standard measures. The tool will allow member companies to develop insights into how their properties perform relative to their peers, and will allow members to gain insights into and track ongoing improvement of those properties.
In addition, the committee wants to encourage fellow landlords to adopt sustainability insights and best practices across the industry. Kimco in particular– and many of our investors — feel strongly that retail owners should be transparent about their energy and water usage. We believe the industry will make greater strides as a whole by coming together to share information, ideas, and strategies, rather than siloing such insights within individual companies.
Creating a tool that meets these needs, while remaining streamlined and easy to use, is no small feat. Here are three ways I think we’ll get there:
1. Learn from the successes and failures of past benchmarking efforts. The landscape is littered with sustainability frameworks, benchmarks, scorecards, and rankings. It’s a crowded space that many occupy and few do well. The best benchmarking systems do three things well: First, they fill a specific measurement gap for a targeted audience — enabling them to take actions to improve performance and monitor results. Second, they are accessible — meaning they are relatively user-friendly and low-cost. Third, they evolve over time based on input from key stakeholder groups.
2. Recognize the key differences between shopping centers, and ignore those that don’t matter. One of the main reasons why the availability of benchmarking tools is limited for owners is that the population of buildings they own is diverse. Imagine the differences in how energy is used in a regional mall versus an open-air shopping center. There are significant differences in the two building types that require energy use for different purposes — such as the existence of large climate-conditioned interior spaces in malls. Equally important are the differences between control of spaces in different retail environments — specifically what areas are controlled by landlords versus tenants. Recognizing the key differences, as well as the commonalities, amongst different shopping center formats will allow us to isolate key areas for benchmarking.
3. Think big, but start small. The task of evaluating all of the dimensions of sustainable operations at a shopping center is daunting. The sheer number of potential measures is enormous, and the large number of owners and building types adds further complexity to the project. Although we want to keep the “bigger picture” in mind, taking small steps is a perfectly acceptable (and oftentimes more workable) path forward. Many efforts of this type have failed to deliver meaningful results due to the fact that the problem is poorly defined and the desire to come up with one-size-fits-all approach can lead to the creation of a Frankenstein solution. By focusing on specific sub-problems, such as measuring the energy performance of parking lot lighting, can lead to tangible “wins” that move us all forward.
Overall, the biggest key to creating a successful Property Efficiency Scorecard is taking a pragmatic approach and recognizing that a one-size-fits-all approach will not address all the goals of every owner.
Kimco is excited to play a role in creating a benchmarking tool that, we hope, will change the way our industry measures and assesses sustainability performance. It will be an important step forward in our ongoing efforts to improve the performance of our company, as well as our industry. We’ll keep you updated on the ICSC Property Efficiency Scorecard as things continue to develop.