{"id":1004571949,"date":"2022-03-15T16:01:02","date_gmt":"2022-03-16T00:01:02","guid":{"rendered":"https:\/\/www.commercialsearch.com\/news\/?p=1004571949"},"modified":"2022-12-08T13:58:57","modified_gmt":"2022-12-08T21:58:57","slug":"can-the-russia-ukraine-crisis-make-cre-more-sustainable","status":"publish","type":"post","link":"https:\/\/www.commercialsearch.com\/news\/can-the-russia-ukraine-crisis-make-cre-more-sustainable\/","title":{"rendered":"Can the Russia-Ukraine Crisis Make CRE More Sustainable?"},"content":{"rendered":"

With energy prices skyrocketing since Russia invaded Ukraine, there\u2019s a lot of talk about how to reduce U.S. dependence on expensive foreign oil and how to reduce our dependence on oil and gas, period. Does that mean the Ukraine crisis will accelerate energy efficiency and the transition to renewable energy? If the pattern of history repeats itself, it will.<\/p>\n

On March 8, President Biden banned Russian oil imports. That, along with other sanctions, was designed to stymie Russia\u2019s economy and make it more difficult for Vladimir Putin to wage war. But these measures have been a difficult sacrifice for U.S. businesses and consumers, who were already feeling the post-pandemic inflationary pinch at the pump and on their energy bills.<\/p>\n

\n

LISTEN TO THE PODCAST: <\/strong>What the New Energy Crisis Could Mean for CRE<\/a><\/p>\n

\n
\"\"

Economist Hugh Kelly<\/p><\/div>\n

“You had both demand (pull) and cost (push) pressures on prices, and now you’ve got the exacerbation of that from Ukraine,\u201d said economist and\u00a0Commercial Property Executive<\/em> columnist Hugh Kelly. \u201cIt\u2019s an extraordinary moment.\u201d<\/p>\n

The price of oil was $75 per barrel at the beginning of the year and about $100 a barrel in February before the conflict\u2019s outbreak. In anticipation of Biden’s ban announcement, oil reached $130 per barrel, a 13-year high, on March 6. This week the price dropped back down below $100 a barrel as Russia and Ukraine enter talks and China\u2019s COVID-19 lockdowns threaten demand.<\/p>\n

For now, the U.S. will fill the void in Russian oil with more oil. Domestic production of oil and natural gas will likely increase, and the U.S. will probably import more oil from its other foreign sources, which include Canada, Mexico and Saudi Arabia.<\/p>\n

But you can also expect a greater focus on energy conservation, alternative sources, and energy technology as the government and industry seek solutions to the sticker shock and geopolitical tensions. That activity will help drive down the price of innovation and renewables.<\/p>\n

According to Elizabeth Beardsley, senior policy counsel at the U.S. Green Building Council<\/strong>, the increased urgency for energy efficiency and sustainability is likely because sky-high energy prices are both a \u201ckitchen-table\u201d and a boardroom issue; the price hikes highlight that energy, particularly fossil fuels, is a finite resource; and oil independence is a national security issue. Besides, the U.S. has been down this road before.<\/p>\n

\"\"

Elizabeth Beardsley, Senior Policy Counsel, U.S. Green Building Council<\/p><\/div>\n

\u201cIf we look at the 1970s energy crisis, that was really impactful in starting to drive better attention and investment on efficiency and made efficiency be taken seriously as a resource,\u201d Beardsley said. \u201cThe cheapest unit of energy is the one you don’t need and that’s still the case. We got a good start on efficiency in the last 50 years, but there’s still a ways to go.\u201d<\/p>\n

That energy efficiency has increased U.S. energy productivity\u2014the ratio of GDP to total primary (natural) energy usage. The Russia-Ukraine crisis and its fallout will be another driver to continue that trend, Beardsley said. And, yes, that\u2019s good for the planet, also.<\/p>\n

\u201cWe\u2019re a little ecumenical as far as motivation,\u201d she said, \u201cas long as the steps are in the right direction, and it\u2019s the progress that we want to see.\u201d<\/p>\n

The Price Is Right<\/strong><\/h2>\n

Energy productivity is also a microeconomic issue, so the commercial real estate sector is likely to partake in the push for efficiency and renewable energy investments. Again, not so much because it is better for the environment, but because when the price of hydrocarbon-based fuels like oil, gas and coal is surging, energy efficiency and renewable energy investments seem like economical alternatives.<\/p>\n

John Chang, senior vice president & national director of research and advisory services at Marcus & Millichap<\/strong>, noted that ESG and impact investing<\/a> is already on the rise, particularly by European investors, but for some investors it has been more of a \u201cmathematical\u201d question. With current forces converging, though, energy-minded investments are likely to pencil out for a wider segment of the industry.<\/p>\n

\u201cI think that everybody says ‘Yeah, that’s good, we should be doing that,'” said Chang. “However, what they don’t want to do is pay extra for it, right? There’s a resistance to it.”<\/p>\n

\"\"

John Chang, National Director of Research and Advisory Services at Marcus & Millichap<\/p><\/div>\n

Chang called increased energy awareness a \u201csilver lining\u201d of the Russia-Ukraine crisis for commercial real estate. Rising energy prices also present major challenges for the office and industrial real estate markets.<\/p>\n

Increased inflation and a higher cost of capital\u2014the Federal Reserve is expected to begin increasing interest rates<\/a> this week\u2014will negatively impact both property types. Meanwhile, office workers who were reluctant to return to the office will be even more resistant due to the increased cost of driving to work. Industrial property owners could see a decreased demand from logistics tenants and a reconfiguration of distribution networks.<\/p>\n

Infrastructure Constraints<\/strong><\/h2>\n

Regardless of how high geopolitical tensions drive the price of energy, however, the commercial real estate industry\u2019s relationship with fossil fuels is a complicated one and will not be ending soon.<\/p>\n

\u201cA vast amount of the electricity that is produced in the U.S. derives from things like natural gas, and so it\u2019s going to be really hard to have a building powered strictly on alternatives,\u201d said Preston Young, national head of office investor services and partner for Dallas-based Stream Realty Partners<\/strong>.<\/p>\n

Natural gas is a domestically harvested fossil fuel. It is cleaner and less expensive than oil and coal, and it has been suggested as a logical replacement for the 8 percent of U.S. oil supply that we get from Russia. According to the National Resource Defense Council<\/strong>, however, it is also \u201ca major contributor to air pollution, water pollution and climate change.\u201d<\/p>\n

When it comes to sustainable investments, Young counts himself among the cost-conscious. The company uses solar panels<\/a>, mostly on industrial properties whose large roofs provide good surfaces for the equipment.<\/p>\n

\u201cWe’re entering this energy transition, knowing that there has to be a reasonable time period that takes place, and there has to be a reasonable amount of cost that people are willing to absorb because, if it starts to go up too much, then people will start to lose their patience pretty quickly,\u201d he said.<\/p>\n

In the meantime, Young agrees that energy efficiency and energy management will be paramount for property owners as they attempt to ride out the price spikes.<\/p>\n

\"\"

Preston Young, National Head, Office Investor Services, Stream Realty Partners<\/p><\/div>\n

Stream will rely on the energy management systems it has deployed over the past 10 years like state-of the-art HVAC systems and devices that dim lights after business hours. \u201cWe are certainly being more conscious on the energy consumption side,\u201d Young said.<\/p>\n

On the supply side, Stream and other owners have become much more strategic about energy procurement and other expenses so they are less subject to market volatility.<\/p>\n

\u201cSometimes it’s local legislation and how that might impact property taxes or property tax valuations,\u201d he said. \u201cIt could be your electricity consumption. It could be a myriad of things. Having that type of foresight, particularly in markets of uncertainty, is very crucial.\u201d<\/p>\n

How Long a Trend?<\/strong><\/h2>\n

While Young is feeling pretty confident about managing expenses on current holdings and development projects, higher energy prices will cause the firm to be hesitant about new ventures.<\/p>\n

\u201cThe spike in energy has created a vast amount of\u00a0uncertainty, not just in the real estate financial markets, but all financial markets,\u201d he said.<\/p>\n

Uncertainty is certainly bad for commercial real estate and the rest of the economy, but it promises to have clear benefits for energy efficiency and sustainability. The degree to which the Russia-Ukraine conflict helps\u2014and hurts\u2014commercial real estate is connected not to the duration of the war, Chang said, but to the duration of the sanctions on Russian oil.<\/p>\n

\u201cIf Russia says \u2018O.K., we’re done. You can lift the sanctions now.\u2019 Is that what happens? Or do the sanctions extend through a post-war sequence that is tied to war crimes or compensation for the damages in that country?\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"

Owners will look to reduce energy costs in the wake of spiking oil prices. <\/p>\n","protected":false},"author":756,"featured_media":1004571955,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[22251,21783,21742,21786],"tags":[],"class_list":["post-1004571949","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-in-focus","category-investment","category-latest","category-sustainability"],"acf":[],"yoast_head":"\nCan the Russia-Ukraine Crisis Make CRE More Sustainable? - Commercial Property Executive<\/title>\n<meta name=\"description\" content=\"Commercial property owners may to look to energy efficiency and renewable energy for relief from spiking oil prices.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.commercialsearch.com\/news\/can-the-russia-ukraine-crisis-make-cre-more-sustainable\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Can the Russia-Ukraine Crisis Make CRE More Sustainable?\" \/>\n<meta property=\"og:description\" content=\"Commercial property owners may to look to energy efficiency and renewable energy for relief from spiking oil prices.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.commercialsearch.com\/news\/can-the-russia-ukraine-crisis-make-cre-more-sustainable\/\" \/>\n<meta property=\"og:site_name\" content=\"Commercial Property Executive\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/CPExecutive\" \/>\n<meta property=\"article:published_time\" content=\"2022-03-16T00:01:02+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2022-12-08T21:58:57+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2022\/03\/greenpic.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"800\" \/>\n\t<meta property=\"og:image:height\" content=\"620\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"Therese Fitzgerald\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@cpexecutive\" \/>\n<meta name=\"twitter:site\" content=\"@cpexecutive\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.commercialsearch.com\/news\/can-the-russia-ukraine-crisis-make-cre-more-sustainable\/\",\"url\":\"https:\/\/www.commercialsearch.com\/news\/can-the-russia-ukraine-crisis-make-cre-more-sustainable\/\",\"name\":\"Can the Russia-Ukraine Crisis Make CRE More Sustainable? - Commercial Property Executive\",\"isPartOf\":{\"@id\":\"https:\/\/www.commercialsearch.com\/news\/#website\"},\"primaryImageOfPage\":{\"@id\":\"https:\/\/www.commercialsearch.com\/news\/can-the-russia-ukraine-crisis-make-cre-more-sustainable\/#primaryimage\"},\"image\":{\"@id\":\"https:\/\/www.commercialsearch.com\/news\/can-the-russia-ukraine-crisis-make-cre-more-sustainable\/#primaryimage\"},\"thumbnailUrl\":\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2022\/03\/greenpic.jpg\",\"datePublished\":\"2022-03-16T00:01:02+00:00\",\"dateModified\":\"2022-12-08T21:58:57+00:00\",\"author\":{\"@id\":\"https:\/\/www.commercialsearch.com\/news\/#\/schema\/person\/72a93f240402a8c7f4e56a69aed5f713\"},\"description\":\"Commercial property owners may to look to energy efficiency and renewable energy for relief from spiking oil prices.\",\"breadcrumb\":{\"@id\":\"https:\/\/www.commercialsearch.com\/news\/can-the-russia-ukraine-crisis-make-cre-more-sustainable\/#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\/\/www.commercialsearch.com\/news\/can-the-russia-ukraine-crisis-make-cre-more-sustainable\/\"]}]},{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/www.commercialsearch.com\/news\/can-the-russia-ukraine-crisis-make-cre-more-sustainable\/#primaryimage\",\"url\":\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2022\/03\/greenpic.jpg\",\"contentUrl\":\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2022\/03\/greenpic.jpg\",\"width\":800,\"height\":620,\"caption\":\"Image via Piqusels\"},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\/\/www.commercialsearch.com\/news\/can-the-russia-ukraine-crisis-make-cre-more-sustainable\/#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\/\/www.commercialsearch.com\/news\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"Can the Russia-Ukraine Crisis Make CRE More Sustainable?\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\/\/www.commercialsearch.com\/news\/#website\",\"url\":\"https:\/\/www.commercialsearch.com\/news\/\",\"name\":\"Commercial Property Executive\",\"description\":\"\",\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\/\/www.commercialsearch.com\/news\/?s={search_term_string}\"},\"query-input\":{\"@type\":\"PropertyValueSpecification\",\"valueRequired\":true,\"valueName\":\"search_term_string\"}}],\"inLanguage\":\"en-US\"},{\"@type\":\"Person\",\"@id\":\"https:\/\/www.commercialsearch.com\/news\/#\/schema\/person\/72a93f240402a8c7f4e56a69aed5f713\",\"name\":\"Therese Fitzgerald\",\"image\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/www.commercialsearch.com\/news\/#\/schema\/person\/image\/\",\"url\":\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2023\/02\/head.jpg?w=96\",\"contentUrl\":\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2023\/02\/head.jpg?w=96\",\"caption\":\"Therese Fitzgerald\"},\"description\":\"Therese Fitzgerald has nearly 20 years experience writing and editing commercial real estate content. She got her start writing about the New York City market with Real Estate Weekly and later joined CPE\u2019s predecessor publication, Commercial Property News, where she held various positions including editor in chief. In addition to working on the CPE and MHN websites, she edits CPE's Capital Markets Newsletter and MHN's Finance & Investment Newsletter. Tune into her Sustainability Street podcast on CPE.\",\"url\":\"https:\/\/www.commercialsearch.com\/news\/author\/therese-fitzgerald\/\"}]}<\/script>\n<!-- \/ Yoast SEO Premium plugin. -->","yoast_head_json":{"title":"Can the Russia-Ukraine Crisis Make CRE More Sustainable? - Commercial Property Executive","description":"Commercial property owners may to look to energy efficiency and renewable energy for relief from spiking oil prices.","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/www.commercialsearch.com\/news\/can-the-russia-ukraine-crisis-make-cre-more-sustainable\/","og_locale":"en_US","og_type":"article","og_title":"Can the Russia-Ukraine Crisis Make CRE More Sustainable?","og_description":"Commercial property owners may to look to energy efficiency and renewable energy for relief from spiking oil prices.","og_url":"https:\/\/www.commercialsearch.com\/news\/can-the-russia-ukraine-crisis-make-cre-more-sustainable\/","og_site_name":"Commercial Property Executive","article_publisher":"https:\/\/www.facebook.com\/CPExecutive","article_published_time":"2022-03-16T00:01:02+00:00","article_modified_time":"2022-12-08T21:58:57+00:00","og_image":[{"width":800,"height":620,"url":"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2022\/03\/greenpic.jpg","type":"image\/jpeg"}],"author":"Therese Fitzgerald","twitter_card":"summary_large_image","twitter_creator":"@cpexecutive","twitter_site":"@cpexecutive","schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"WebPage","@id":"https:\/\/www.commercialsearch.com\/news\/can-the-russia-ukraine-crisis-make-cre-more-sustainable\/","url":"https:\/\/www.commercialsearch.com\/news\/can-the-russia-ukraine-crisis-make-cre-more-sustainable\/","name":"Can the Russia-Ukraine Crisis Make CRE More Sustainable? - Commercial Property Executive","isPartOf":{"@id":"https:\/\/www.commercialsearch.com\/news\/#website"},"primaryImageOfPage":{"@id":"https:\/\/www.commercialsearch.com\/news\/can-the-russia-ukraine-crisis-make-cre-more-sustainable\/#primaryimage"},"image":{"@id":"https:\/\/www.commercialsearch.com\/news\/can-the-russia-ukraine-crisis-make-cre-more-sustainable\/#primaryimage"},"thumbnailUrl":"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2022\/03\/greenpic.jpg","datePublished":"2022-03-16T00:01:02+00:00","dateModified":"2022-12-08T21:58:57+00:00","author":{"@id":"https:\/\/www.commercialsearch.com\/news\/#\/schema\/person\/72a93f240402a8c7f4e56a69aed5f713"},"description":"Commercial property owners may to look to energy efficiency and renewable energy for relief from spiking oil prices.","breadcrumb":{"@id":"https:\/\/www.commercialsearch.com\/news\/can-the-russia-ukraine-crisis-make-cre-more-sustainable\/#breadcrumb"},"inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/www.commercialsearch.com\/news\/can-the-russia-ukraine-crisis-make-cre-more-sustainable\/"]}]},{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/www.commercialsearch.com\/news\/can-the-russia-ukraine-crisis-make-cre-more-sustainable\/#primaryimage","url":"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2022\/03\/greenpic.jpg","contentUrl":"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2022\/03\/greenpic.jpg","width":800,"height":620,"caption":"Image via Piqusels"},{"@type":"BreadcrumbList","@id":"https:\/\/www.commercialsearch.com\/news\/can-the-russia-ukraine-crisis-make-cre-more-sustainable\/#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/www.commercialsearch.com\/news\/"},{"@type":"ListItem","position":2,"name":"Can the Russia-Ukraine Crisis Make CRE More Sustainable?"}]},{"@type":"WebSite","@id":"https:\/\/www.commercialsearch.com\/news\/#website","url":"https:\/\/www.commercialsearch.com\/news\/","name":"Commercial Property Executive","description":"","potentialAction":[{"@type":"SearchAction","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/www.commercialsearch.com\/news\/?s={search_term_string}"},"query-input":{"@type":"PropertyValueSpecification","valueRequired":true,"valueName":"search_term_string"}}],"inLanguage":"en-US"},{"@type":"Person","@id":"https:\/\/www.commercialsearch.com\/news\/#\/schema\/person\/72a93f240402a8c7f4e56a69aed5f713","name":"Therese Fitzgerald","image":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/www.commercialsearch.com\/news\/#\/schema\/person\/image\/","url":"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2023\/02\/head.jpg?w=96","contentUrl":"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2023\/02\/head.jpg?w=96","caption":"Therese Fitzgerald"},"description":"Therese Fitzgerald has nearly 20 years experience writing and editing commercial real estate content. She got her start writing about the New York City market with Real Estate Weekly and later joined CPE\u2019s predecessor publication, Commercial Property News, where she held various positions including editor in chief. In addition to working on the CPE and MHN websites, she edits CPE's Capital Markets Newsletter and MHN's Finance & Investment Newsletter. Tune into her Sustainability Street podcast on CPE.","url":"https:\/\/www.commercialsearch.com\/news\/author\/therese-fitzgerald\/"}]}},"jetpack_featured_media_url":"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2022\/03\/greenpic.jpg","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/www.commercialsearch.com\/news\/wp-json\/wp\/v2\/posts\/1004571949","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.commercialsearch.com\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.commercialsearch.com\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.commercialsearch.com\/news\/wp-json\/wp\/v2\/users\/756"}],"replies":[{"embeddable":true,"href":"https:\/\/www.commercialsearch.com\/news\/wp-json\/wp\/v2\/comments?post=1004571949"}],"version-history":[{"count":10,"href":"https:\/\/www.commercialsearch.com\/news\/wp-json\/wp\/v2\/posts\/1004571949\/revisions"}],"predecessor-version":[{"id":1004573082,"href":"https:\/\/www.commercialsearch.com\/news\/wp-json\/wp\/v2\/posts\/1004571949\/revisions\/1004573082"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.commercialsearch.com\/news\/wp-json\/wp\/v2\/media\/1004571955"}],"wp:attachment":[{"href":"https:\/\/www.commercialsearch.com\/news\/wp-json\/wp\/v2\/media?parent=1004571949"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.commercialsearch.com\/news\/wp-json\/wp\/v2\/categories?post=1004571949"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.commercialsearch.com\/news\/wp-json\/wp\/v2\/tags?post=1004571949"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}