Future Cities Designed to Be Healthy, Resilient, and Sustainable

An Interview with Billy Grayson

Photo by Vladimir Kudinov on Unsplash

Billy Grayson is the executive director of the Urban Land Institute (ULI) Center for Sustainability and Economic Performance in Washington, D.C. The ULI Center for Sustainability and Economic Performance is dedicated to creating healthy, resilient, and high-performance communities around the world. Through the work of its Greenprint, Building Healthy Places, and Urban Resilience programs, the Center provides leadership and support to real estate and land use professionals to invest in energy-efficient, healthy, resilient, and sustainable buildings and communities.

Why do you care about sustainability?

Weird question — why wouldn’t everyone care about sustainability? Without sustainability, we can’t live happy, healthy lives on earth. If we don’t make progress on sustainability, life on earth will get progressively worse for everyone. Philosophically, I also believe we have a responsibility to future generations to leave the Earth in as good a condition (if not better) than we inherited it.

How do you think about Corporate Social Responsibility?

I believe there is a strong business case for companies to integrate sustainability into their business strategy — being an environmentally and socially responsible company means that you are more efficient, more transparent, more on top of your data, and building goodwill (and brand equity) with customers, regulators, and the communities in which you operate. All of these things help businesses grow, increase their profits, and build a company for long-term success. To take one example, companies that care about climate change will be working to zero — a path that includes energy efficiency, water efficiency, waste efficiency, and systems to reduce the lifecycle environmental impacts of their products and services. This focus drives a company to cost-effectively improve efficiency and eliminate waste in their operations, which reduces materials and operating expenses and make them more profitable in both the short term and long-term.

How do you define risk?

Risk is anything that could hurt companies’ long-term profitability. Risks could be near-term and quantifiable, or longer-term and tougher to calculate. At ULI, we have been doing a lot of work to understand climate risk in real estate investments — this is a really challenging set of risks to tackle because the probability of the risk is difficult to estimate, and the time frame for these risks to materialize is outside of many investors’ investment horizons. At the same time, with increasing severity and frequency of extreme weather events and the long-term impact of sea-level rise and higher goal surface temperatures, we know the risks associated with climate change are tremendous, and getting bigger over time. While we think the physical risks of climate change are significant, we think that the medium-term impact of these risks will be felt in other ways — the increasing cost of insurance and availability of coverage, the increasing investments by cities in hardening their infrastructure to extreme weather events (and associated property taxes), and shifting customer demand as people look to move away from higher-risk geographies to safer ground.

What is your approach to energy efficiency?

We recommend a staged approach to energy efficiency, starting with low and no-cost strategies — more aggressive management of the start-up and shut-down of building systems, low-cost automation of building systems (programmable thermostats, lighting occupancy sensors, etc.) and tenant and resident education and engagement around the benefits of energy efficiency. For behavior change strategies for energy efficiency, the payback is immediate and the ROI is infinite, so it is hard to say no to these “investments”.

We also believe it is really important to make the right investments in energy efficiency at the right time in a buildings’ lifecycle — when buildings are being bought or sold (or built), this is when capital is usually cheapest, and the investment horizon is the longest — making major investments to upgrade a buildings’ envelope and major mechanical systems is much easier to justify at this time because even with a relatively long “payback”, the ROI for these projects is strong and the investments are usually cash-positive from day one, as they increase the net present value of the building.

What is your approach to water conservation?

Water conservation is often tougher to tackle in real estate than energy efficiency because water is “cheap”, many building types do not use a lot of it, and the investments to improve water efficiency are hard to sell to some tenants based on previous bad experiences (like low-flow sinks and showers). But tackling water efficiency follows the same strategy as energy efficiency — first tackle the no-cost and low-cost strategies (from tenant/resident education campaigns to low-cost investments like sink aerators and low-flow toilets and urinals), then make more capital intensive investments at the right point in a buildings’ lifecycle. Water efficiency can also be driven by better monitoring technology and automation, from cooling tower water meters to drip-irrigation moisture sensors for landscape water efficiency.

What is your approach green design and construction?

The best buildings are designed to be healthy, resilient, and environmentally sustainable, but also to be a place that is a joy to live, work, and play. The most sustainable buildings are integrating health and wellness into their base building design and tenant fit-outs and amenities, they are being built in locations and with materials ready to meet the climate challenges of their geography, and they are working to get as close to net-zero energy, water, and waste as possible. Green and healthy certifications can help drive this effort (like LEED, WELL and Fitwel, the Living Building Challenge, and ENERGY STAR), but may not be necessary if the architect, general contractor, owner, and tenants are committed to tracking the sustainability strategy for the building during construction, and ongoing in operations.

What is your approach to waste management?

Reduce, reuse, recycle.

How do you think about emissions reduction goals?

I think they are great — but they should be set in a way that is fair, clear, transparent, and applies to all buildings in a market (new and existing, public and private). The best programs will also integrate emissions trading programs into the policy, so that building owners will look for the most cost-effective opportunities to drive emissions reductions across the city, rather than forcing some buildings to make investments that may be uneconomical for them. Setting penalties for noncompliance is also important, but setting these in a way that is clear, relatively far out, and severe enough to deter non-compliance is important. Building owners and investors need time to integrate these fines into how they value a building, and how they calculate and plan for major investments to improve energy efficiency.

What are the challenges associated with sustainability, and how do you overcome those challenges?

In real estate, the biggest challenge to sustainability is the “split incentive” — once tenants or residents have moved into a building, an owner has little incentive to improve the buildings because all of the benefits go directly to the tenants (in lower operating expenses/utility bills. While tenants have an incentive to improve a buildings’ performance, they don’t have control over investments in major building systems, and they may not want to make longer-term investments (especially if their lease is only for a year or two.) One way to overcome this challenge is through leases that allow landlords to recover some of the cost of an investment in energy efficiency from the tenant over the lifetime of their lease. The tenant will get a net lower utility bill after the investment, and the building owner will be able to recoup their investment over time (with interest) from the tenants as part of their lease.

What trends are you seeing in your industry related to sustainability?

There is an evolving interest from real estate at getting better at assessing and mitigating the long-term risks of climate change — major real estate owners recognize that the increasing frequency of extreme weather events and longer-term impacts of climate change could have a tremendous impact on the long-term value of their buildings. Developers and investors are using more sophisticated climate models to decide where to build and invest, and investing in strategies to make their existing buildings more resilient to the impacts of climate change.

Real estate is also starting to look at how they can make new and existing buildings net zero carbon over time. With global and city regulators setting targets to be carbon neutral by 2050 (or in some cases sooner), building owners are looking for strategies to go beyond deep energy efficiency and take their buildings all the way to net-zero. This requires a renewed focus on renewable energy and energy storage, as well as looking for strategies to make buildings all-electric.

What do you see on the horizon related to sustainable initiatives?

1. Embodied carbon and the circular economy.

2. How sustainability handles the transportation revolution (micromobility, autonomous vehicles, shared rides, EVs, etc.).

3. Sustainability strategies that also help address the city’s renewed focus on social equity, diversity, and widening inequality.