Dr. Gleb Tsipursky – The Office Whisperer
Nirit Cohen – WorkFutures
Angela Howard – Culture Expert
Drew Jones – Design & Innovation
Jonathan Price – CRE & Flex Expert
- There is a substantial investment gap for achieving net-zero goals for the commercial real estate sector, with current annual green investments under $2 trillion, far below the needed $5-$7 trillion.
- As repurposers of older buildings and efficient space users, coworking spaces inherently support the “reduce, reuse, recycle” ethos, contributing to energy use reduction and the net-zero transition.
- Across various sectors, including coworking, there is a growing demand for “green skills”; however, coworking companies face capital constraints that inhibit their potential to further aid in the transition to a low-carbon economy.
Recent data published by Deloitte reveals that the global push towards net-zero emissions by 2050 requires an annual global investment of between US$5 trillion to $7 trillion in the energy sector. Currently, data shows investments are significantly lagging — with less than $2 trillion being funneled into green initiatives annually.
Commercial real estate is a major contributor to greenhouse gas emissions and must play its part in the transition to net zero. The shortfall identified by Deloitte presents unique opportunities for the CRE industry.
By investing into green financing strategies, the CRE sector can not only contribute to low-carbon goals, but also capitalize on the global transition to a low-carbon economy. How can the coworking sector play its part in the transition?
The green benefits of coworking spaces
The motto of the green movement is “reduce, reuse and recycle,” and I would argue that coworking is already in tune with this motto in several ways.
First, coworking operators are often to be found operating from older buildings, many of which are no longer Grade A, but where the skills and attention to detail of coworking companies enable these buildings to be repurposed to be suitable for 21st century clients.
The demolition of an older building and the subsequent construction of a new office building produces thousands of tons of CO2, so the reuse of such a building is an enormous saving.
Coworking operators pay attention to detail because in a service business, it is getting the details right that leads to sustainable profitability. This attention to detail makes these operators more efficient than conventional landlords in many respects, including energy efficiency and in efficient use of space amongst others, thus reducing the overall energy demand.
Where will the money come from?
Deloitte pointed out the investment gap between what green investment needs to reach net zero and what is currently being provided. It suggested that part of the problem was that green projects were perceived as being higher risk, and suggested that innovative financing solutions — such as de-risking tools and blended finance — are required to lower the costs associated with green projects.
The report projected that these kinds of strategies “could save the U.S. $50 trillion globally through 2050.”
Governments have a role to play in making this green investment a reality. By reducing financial barriers, policy makers can also spur more investments into sustainable building projects and renovations that align with broader environmental targets.
For example, in the six months leading up to September 2023, investors in London set a record rate of breaking ground on 43 new construction projects in the city — focused specifically on upgrading older buildings to meet rising environmental standards and changing customer demands.
They did so because the environmental standards will become mandatory in a few years’ time.
A 2023 survey published by LinkedIn also shows how “green skills” are becoming more in demand among certain jobs in the global workforce. LinkedIn’s data reveals that workers with at least one green skill have a hiring rate that is 29% higher than the workforce average.
This trend isn’t limited to traditionally green industries, either. Even in the financial sector, where only 6.8% of workers are reported to have green skills, there’s a noticeable demand.
Coworking companies are well known for their high standards of staff training, which is an essential component of their success, and training in green skills regularly features in their training programs and is strongly encouraged by the flexible space trade associations.
Although the coworking industry is well placed to assist in the transition to net zero, it also suffers from the lack of investment capital that is holding back green investment generally.
With one or two exceptions, coworking companies are not well capitalized and lack deep pocketed shareholders, who could fund the expansion of efficient, flexible workspaces. There has long been an attractive investment opportunity for a private equity real estate investor to make a strategic investment in coworking, and that investment case only becomes more compelling when the green transition is factored in.
As buildings account for a significant portion of global carbon emissions, the CRE sector’s move towards sustainability could serve as both a market driver and compliance may be required in the future in many markets.
For commercial real estate investors and developers, this represents not just a mandate for change, but a lucrative frontier open with new opportunities for growth and profit.
