City and state laws on carbon emissions are having tangible impacts on commercial real estate, making it more important than ever for companies to stay ahead of the regulatory curve, according to panelists at iGlobal Forum’s webinar on carbon emissions and CRE.

The regulatory landscape in states like New York, California and Washington has been changing for years. From emissions caps to incentives for green infrastructure, companies need to know how environmental legislation is impacting their assets, says David Amerikaner, special counsel at Duane Morris and a member of its real estate practice group.

“It’s a dynamic field and it's important to track it to know what’s coming,” said Amerikaner.

For example, the requirements to access commercial property-assessed clean energy (CPACE) financing are often aligned with legislation local governments institute to encourage green construction and retrofits, said Rachel Davis, senior vice president of partner management and originations at Petros PACE Finance.

Plus, owners are looking to maximize CPACE capital to fund projects amid a challenging interest rate environment, forcing them to meet stricter building requirements, Davis added.

“Folks are looking at this really seriously and saying, ‘maybe we need to reconsider our design so we can maximize that [financing],’” Davis says. “We're seeing that in numerous markets across the country.”

Energy efficiency upgrades also impact the value of a property—and whether or not it will sell. Madison International Realty’s ESG Manager Katie Cappola recalled attempting to sell an asset to a buyer who paused the deal to wait for the results of the building’s energy audit and decarbonization plan.

“I think that was something that made this all very real for our deal teams and asset management, to see a buyer come back and say that there’s going to be an adjustment here,” Cappola said.

And office tenants are turning to buildings with special certifications—such as Fitwel and WELL—putting pressure on owners to provide healthy, eco-friendly properties, said Scott Lemoine, lead ESG advisor for North America at Measurabl, a ESG data analytics, measurement and reporting platform for the real estate industry.

“Tenants, corporate tenants and corporate occupiers are pursuing specifically certified properties and certified spaces,” Lemione said. “We're seeing an uptick more than ever.”