Innovation

Forest City Enterprises is a commercial real estate company headquartered in Cleveland, OH. The company founded in 1920 has spent considerable efforts in innovating the way they do business within commercial real estate development. The business of real estate - developing living, working, and recreational spaces - is not new, or cutting edge, but the ways in which Forest City does this work is leading in sustainability initiatives. Forest City through its core values of sustainability and stewardship, has integrated sustainable design and business practices in order to strengthen its company culture and business outcomes.

Forest City refocused its company’s operations and strategic objective on sustainability initiatives beginning in the early 2000s. Jill Ziegler, who is their current Director of Sustainability and Corporate Responsibility, was the company’s first hire in sustainability in 2007. Ms. Ziegler recounted that the company had begun their efforts with developing LEED-certified buildings and filing corporate responsibility reporting, but that a project commissioned by the city of Denver for the Denver airport is what refocused the company on further developing their sustainability practices. Upon completion fo the project, Forest City realized that they had a new model for real estate development, which they have continued to develop.

Sustainability in real estate development is not a tangible product, as other innovations, but is a prime example of how established companies can innovate the ways in which they work to adopt more responsible practices. It allows a traditional company to remain competitive in an environment that does not necessarily see many innovations over time. In the case of Forest City, this is a competitive advantage over many other real estate development firms.

Inspiration

The beginnings of Forest City’s sustainability initiatives began with a project they that they were bidding on in the early 2000s. The company was hired to help redevelop the Denver airport. The city of Denver expressed that they wanted the work to be a sustainable effort, which pushed Forest City to adopt new ways of doing business to accommodate the work. Forest City realized, through this work, that this could be a new model for how they do business and that sustainability and corporate responsibility could extend beyond LEED-certified buildings.

Since this project, Forest City has continued to innovate on their integrated sustainable real estate development practices. In addition to building LEED-certified buildings, they re-develop old buildings that have been neglected, employ local contractors to do the work in the communities in which they are working, employ women and minority-owned business, and even provide job training to allow small businesses to develop skills needed to perform work.

Overall impact

While Forest City has done considerable work to adopt more sustainable business practices in their work, they have not found a tangible way to quantify the business impact. What they recognize, though, is that their work has allowed them a “seat at the table” when municipalities and other corporations are looking for work to be executed sustainably and responsibly. They recognize that their work has allowed them to be a leader amongst other firms and that they are respected for this work.

Business benefit

Ms. Ziegler contributed that it is “difficult to directly link and quantify business value in relation to our sustainability efforts”. However, through embedding the core values of sustainability & stewardship, community involvement, and entrepreneurial spirit into the company’s operations and culture, Forest City has evolved its business model.

In traditional financial terms, Forest City’s refocus on its core business and core values means that their investment strategy capitalizes on demographic trends towards core urban markets fostering place-making and vibrant communities. Building the business led to strong fundamentals during 2016 including Net Operating Income (NOI, revenue less operating expenses) growth of 4.3%, and favorable occupancy trends, mall leasing spreads, and office leasing spreads. Key objectives include high quality assets in high-barrier markets/products, strengthening the balance sheet and operating metrics, reducing development to assets, and improving operating margins and reducing overhead.

Despite the inherent difficulty in realizing financial benefit from sustainability efforts within a REIT (Real Estate Investment Trust), Forest City shows indirect financial gain and increases in intangible value (brand, seat at the table).

Social and environmental benefit

In terms of benefit to society, Ms. Ziegler recounted a story that ideally summarized this impact. She described a project she managed in Washington D.C. called The Yards. The city had commissioned a community of live, work, and play. The work started with the development of a community park where future residents could walk, run, and enjoy time with their families. They then built residences and storefronts around the community. Ms. Ziegler explained that the work was completed by local contractors and that Forest City provided training to the contractors so they could complete the work, rather than hire larger, less local firms. Forest City even trained the employees of the grocery store that they built. What was most rewarding to Ms. Ziegler was that a friend of hers moved into the community and uses the facilities that Ms. Ziegler put so much hard work and heart into developing.

Interview

Jill Ziegler, Director of Sustainability and Corporate Responsibility