Sustainable Business Report: Retail: ISCS Retail Green

The ICSC Retail Green conference in Scottsdale, AZ presented an opportunity to meet with peers and gain new perspective on how the industry is progressing towards sustainability. A diverse group attended, including developers, retailers and portfolio investors.

Economic constraints continue to create challenges, and many on both sides of the tenant/landlord equation are still reeling from the financial crisis. Limited access to capital and restrained consumer spending exacerbate the problem as consumers save money and dig out of debt. Additionally, the retail real estate industry has been forced to contend with changing market dynamics in consumer awareness and green building demand, and, in many cases, respond to the needs of tenants looking to refresh business models with sustainability as a key driver. The need for creativity and innovation has never been more clear as new market realities take root.

The Sustainability Megatrend Drives Innovation (and a little pain)

Sustainability has emerged as the next prevalent business megatrend, arising from the convergence of resource constraints, climate change and corporate accountability. Much like the quality movement of the ‘80s or the IT revolution that continues to unfold, sustainability is a game changer resulting in winners and losers. The general consensus seems to be that those creating strategies and initiatives to get ahead of the change curve will win (Kohl's, Walmart, Target). Those that don’t will be left behind with startling speed.

Numerous studies by the Hartman Group, Accenture and others point to core consumers rapidly adopting greener values; a large portion make some purchasing decisions based on sustainability, and most also follow a predictable adoption curve. While there are multiple factors in play, the trend is clear: sustainability is going mainstream fast. As an example, green building – long considered a premium product – is becoming baseline Class A. Especially critical for developers that construct and hold properties long term, is making the clear decision to construct an asset that increases in value over time and offers operational savings that tenants want. If sustainability creates better environments for employees and customers, what will tenants prefer given the choice?

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