February 29, 2008


Promoting Sustainability through Real Estate -- Jones Lang LaSalle

Keywords: Newsletter 

JFS Newsletter No.66 (February 2008)
Toward a Sustainable Japan--Corporations at Work Article Series No.69

Although many people would like to see society become sustainable, achieving this in the real world will be very difficult. This article covers another field in which this challenge is being taken up: the corporate real estate industry. Although business strategies focusing on profitability have been the top priority for this industry, more and more companies will in future have to consider their social responsibility as opposed to simply pursuing profit. Jones Lang LaSalle is a corporate real estate service and investment management firm that is leading the industry in creating a sustainability concept for this sector.

With revenue in 2007 of more than US$2.7 billion, this global company, based in Chicago, U.S.A., has about 22,000 employees in over 60 countries. Its business network extends through North and South America, Europe, the Middle East, and the Asia Pacific region. The company does not invest directly in real estate properties, but provides fully-integrated service menu, such as support and management services related to real estate acquisition as well as other consulting services. In November 2007, Jones Lang LaSalle in Hong Kong undertook a contract for facility management and won the Hong Kong Eco Business Award when its client, the YKK building, promoted waste management and energy conservation.

In November 2007, the company bought Upstream, a leading sustainability consultancy with a special focus on the property sector in the United Kingdom. The energy and sustainability service (ESS) division has become more specialized in providing strategic sustainability consulting services, such as creating indicators, conducting research and submitting proposals. Hiromi Shirakawa, senior manager in marketing, explained that "we are proud to say that our company is ahead of others in our field in its sustainability-conscious efforts."

Sustainability Needed in the Real Estate Sector

In cooperation with the CoreNet Global, a corporate real estate association, Jones Lang LaSalle conducted a survey in 2007 on corporate awareness of sustainability issues that targeted 400 companies with offices in Singapore, Denver, Melbourne and London. About 80 percent of the respondents said they thought that sustainability would gain recognition within two years. And astonishing 52 percent of respondents said they were willing to pay from one to five percent higher rent for sustainable real estate. In the office building business, the trend to seek sustainability was thus apparent on a worldwide basis.

How about sustainability trends in Japan? In the area of greenhouse gases, manufacturing industries are making efforts to reduce emissions by setting up voluntary action plans, while emissions from the service industries and household sector are increasing. In FY2006, carbon dioxide emissions from the service sector (including sales, services, offices, etc.) reached 230 million tons, up 41.7 percent from 1990 levels. It would not now be accurate to say that whole-building energy-management and the know-how to achieve a good energy balance of conserving energy and saving money are common in Japan. The Japanese government plans to subsidize energy-saving construction methods and to reinforce regulations. The Tokyo Metropolitan Government has set up an independent "Tokyo Climate Change Strategy," and will introduce mandatory reductions in total emissions for large-scale business institutions in FY2008.

A Basic Plan for "10-Year Project for a Carbon-Minus Tokyo"

"In Japan, although efforts such as introducing energy-saving measures have progressed at office buildings, most real estate businesses still care more about cost issues, such as recouping their investments or renting properties at lower prices, than they do about sustainability. Not many people recognize the value of a sustainable real estate investment," Shirakawa says.

Spreading Knowledge and Information on Sustainability

Against this backdrop, what are Jones Lang LaSalle Japan's strategies for promoting sustainable real estate?

First of all, it is necessary to encourage employees to become sustainability-oriented. The company has created a website, "ACT (A Cleaner Tomorrow)," which provides their employees with information and suggests actions for promoting sustainability. The website was originally established in Singapore, the company's Asia-Pacific base, and they hope to improve the Japanese site to make it more effective in the Japanese context.

To assist clients, they publish the "Advance" series of reports on sustainability, compiled by the overseas research department. Though not published regularly, at least one report comes out every quarter. The reports outline and analyze global trends concerning sustainability in the real estate industry. Because there are no staff working exclusively on sustainability in their Japan office, the reports are translated into Japanese for promotion purposes in Japan.

"In Japan, it is still not common for building owners to consider the effects of their buildings on the local community. I think these tools will help in this regard too," says Shirakawa.

Potential for Sustainability on Every Front

What sustainability services are now being provided in Japan? In 2006, the company established a new company, Jones Lang LaSalle Facility, jointly with Sanyo Electric Co., a comprehensive home electronics company. This new company provides a system of real estate facility management which employs Sanyo's original environmental management system.

Shirakawa says that although the concept of sustainability has not yet taken root in the real estate industry, she doesn't feel any particular resistance to the concept. "Even if customers are not familiar with the word 'sustainability,' they can understand an explanation of its aims. Most customers have a deep-seated understanding of the concept of "Mottai-nai (not being wasteful)," and this makes more sense to them than simply giving efficiency first priority.

Jones Lang LaSalle Japan has four major businesses, further divided into seven business lines. The Corporate Solutions business is expected to be the first to succeed in offering sustainability-related services. The Facility Management business line is engaged in the operation and maintenance of real estate facilities, and can make practical proposals that enhance their sustainability. The Project Management business line can also bring a sustainable perspective to its building and development consulting services, as it is in charge of the overall management of construction projects including detailed examination of tenders and selection of contractors.

The Jones Lang LaSalle Hotels business line offers advisory services for hotel sector and giving advice on acquisition and sales. Sustainable criteria will probably be more important in this process in the near future. Shirakawa anticipates this trend, saying, "Our company offers services as products, not goods. We are always thinking about how we can add new dimensions to our goal of incorporating sustainability into our way of doing business. We believe every business will eventually get involved with sustainability issues."

Sustainability in Real Estate - from Japanese Companies to the World

Jones Lang LaSalle Japan was established in 1985. At first, the company had only two divisions and a handful of staff. It has grown rapidly since then, and now has about 430 employees. Behind this growth is the fact that, as a global real estate service company, Jones Lang LaSalle Japan was required by its multinational clients to offer the same services it provides outside Japan. The company has expanded its divisions in answer to these clients' demands, and has taken advantage of its growth in the field of comprehensive real estate services to attract overseas companies that had business bases in Japan or were planning to expand to Japan. Currently the company is reaching Japanese multi-national companies. In this case, having a sustainable viewpoint will be a great advantage, Shirakawa says.

"While some manufacturing companies are seeking to make environmental improvements even in their supply chains, the real estate industry is just starting to get interested in sustainability. This we see as a business opportunity. We hope we can be ready to provide the services that various types of companies require as they start shifting their approach towards sustainability."

To achieve this and also create a sustainable company, staff members need a good understanding of sustainability. Then they can develop sustainable corporate real estate by making convincing suggestions to clients. The real estate industry now has a responsibility to become an important player in the effort to solve global issues and seek sustainability, by reducing greenhouse gas emissions and so on. Jones Lang LaSalle's efforts have enormous potential for influencing Japanese companies' attitudes.

(Written by Yuko Kishikami)