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EMISSIONS & ENVIRONMENTAL IMPACTS OF COMMERCIAL REAL ESTATE K E Y I N D U S T R Y T R E N D S I N F L U E N C I N G T O T A L E M I S S I O N S : GHG emissions from commercial real estate buildings stem mainly from the energy or gas used for space heating and cooling, water heating, lighting, and powering appliances. Propane, natural gas, or oil are often used to power water boilers, cookers, and heating systems. This contributes to buildings being one of the biggest carbon polluters. Constructing and furnishing buildings also contributes greatly to overall GHG emissions. Although the overall energy intensity of building operations improved in the early 2000s and 2010s due to the availability of energy-saving appliances and efficient air conditioning units, progress has slowed in recent years and remains off track for meeting the 1.5 degree Celsius Paris-aligned goals. In the process of aligning with sustainability goals, commercial real estate companies and investors will mainly consider the 'operational' greenhouse gas (GHG) emissions across their building portfolio or the emissions that occur over a building's lifetime from energy use and maintenance. Firms with more advanced sustainability agendas will consider indirect emissions sources across the supply chain and address the 'embodied' emissions of real estate, which include the GHG emissions generated through the transport and production of materials used to construct and furnish buildings. Unlike operational carbon emissions, which can be reduced over time with building energy upgrades and the use of renewable energy, embodied carbon emissions are locked in place as soon as a building is built. Increased demand for electricity: Higher average temperatures and extreme weather fluctuations with impacts on health and ability to work are driving the demand for more cooling than ever before, resulting in increased emissions. In addition, improved global standards of living and workplace conditions have upped the demand for new construction and thermal comfort, leading to higher electricity usage. Global building floor area expected to double by 2060: The growth in the average floor area of buildings associated with urbanization, rapid population growth, and economic growth has outpaced the improvements to the carbon intensity of buildings, causing absolute emissions from buildings to continue rising. The more floor area there is, the more heating and cooling is necessary per square foot. Low retrofitting rates: The rate at which existing buildings are being retrofitted to improve their energy efficiency and reduce their emissions is relatively low, despite the potential benefits of such improvements. COVID-19 Pandemic: The COVID-19 pandemic was a huge disruptor of the commercial real estate sector, and will continue to play a role in real estate trends for years to come as companies look to downsize and question their need for permanent office or commercial spaces at all. Now, as landlords and commercial real estate companies are in greater competition for tenants, commitments to sustainability and ESG can be a differentiating factor. In addition, despite initial data showing a decline in direct and indirect emissions from buildings in 2020 due to the pandemic rendering commercial building spaces useless for some time, the emissions rate has seen a full rebound to pre-pandemic levels in 2022. Sustainability & Energy Management Simplified

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