Back-Office Data Servers Are ESG Killers
January 17, 2023 3 Minute Read
For forward-looking tenants and landlords, the focus these days is all on Environmental, Social and Governance standards, or ESG.
And office buildings have hefty carbon footprints, the older ones especially.
“Real estate today is all about energy and how you’re going to craft a clean carbonless strategy,” says CBRE's Scott Harper, whose team specializes in guiding tenants on evaluating their carbon footprint and how best to optimize it.
Tenants who want to tick the boxes on their ESG scorecards are looking to locate in newer, state of the art buildings that can achieve the greatest sustainability standards.
But this can represent a daunting challenge for groups like law firms and banks, which typically host their highly sensitive data on-site in the form of back-office servers.
“If the best footprint for you is to be in a better building that’s ESG-friendly, it becomes challenging when your relocation involves a very expensive built out of new data center that is currently exists in your older office premises,” Harper says.
“The problem is that these tenants can’t meet their ESG objectives because they’re being held hostage by the infrastructure cost to relocate.”
Free to Flee and Fulfill
Harper and his team can see a way forward. They have successfully strategized with tenants to move data to the cloud, or off-site, freeing them up to lease whatever office space allows them to meet their business and sustainability goals.
“You can go choose the building that represents the most economically feasible business case for your organization, and that will drive an energy strategy that is more sustainable.”
“Why be stuck in an older building with a massive carbon footprint and it’s totally ineffective because you’ve got a data centre there,” Harper asks. “It makes no sense.”
His team has been working with CBRE’s U.S.-based carbon rating software specialists, introducing them to Canadian landlords to help rate the carbon footprint of their properties.
“Landlords who are holding buildings for 20 years are eager to get into the carbon rating game, so they can use it as a baseline to get better and show tenants they’re getting better. It can be a real differentiator in the market right now.”
Europe Leads the Way
In the 2022 Canadian Real Estate Lenders’ Report, 86% of those surveyed reported that they either already have or plan to incorporate some form of ESG criteria into their real estate lending decisions. However, lenders felt that there was still a 3 to 5 year window before mortgage availability was impacted for carbon-intensive assets.
ESG requirements and reporting are even more developed in Europe. Many Canadian landlords and lenders with a global presence are bringing best practices to Canada, including emissions reporting, action plan verification, future ESG capital expenditure assessments and 3rd party ESG consultants.
“ESG is driving real estate leasing and investment decisions, not to mention future capital availability. It’s not a future prospect, it’s here and now. That’s why the unthinkable, like moving on-site servers into data centres, is suddenly viable,” says Amy Bugg, Senior Director of Client Care at CBRE in Canada.
“Look for energy efficiencies to move into the top tier of real estate requirements for office tenants along with building amenities. ESG is not as sexy as amenities, but is no less important. “
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