Greening your commercial portfolio
No longer if, but when
When central air conditioning was first introduced into commercial properties in the 50’s and 60’s, savvy property owners embraced the new technology; seeing it as an investment and an opportunity to make their properties more attractive within a competitive marketplace. Others laughed at the concept; some even called it a fad. Soon after, properties lacking this innovation quickly became outmoded, their values dropped, and property managers watched in horror as their top tenants headed for the doors.
So in today’s economy, with utility costs and operating expenses skyrocketing to unprecedented levels, and the proven benefits (both human and financial) of high-performance building, would any savvy business owners put themselves at a disadvantage in the market place by ignoring what many have begun to deem the Green Revolution?
A paradigm shift
Several years ago, following the completion of EcoVillage Townhomes, D-A-S Construction Co. began preparing for an increased demand in green building construction. The level of upfront teamwork and collaboration between project team members was unprecedented at the time. The basic principals of green building lent themselves naturally to the “exceed their expectations” mentality of D-A-S. The techniques used on green building projects allowed for the completion of a building that was all-around superior to conventional methods.
Over the past three months, D-A-S has seen a significant increase in the number of requests it receives from clients and prospects alike regarding green building. It seems education is the number one request from building owners and managers. LEED can be confusing for a lot of our clients, so we have been working on reporting tools and educational programs that will help them.
The most critical component of green building requires a change in the centuries old way we approach construction. No longer is the Design g Bid g Build method most effective. The worst thing a building owner can do is approach us with completed construction drawings in hand and say “make this green.” To truly construct or renovate a building to its maximum performance and efficiency, contractors, suppliers and sub trades are brought to the table during the design phase of the project to contribute their collective knowledge and insight. The project team works in coordination with architects and engineers to integrate building systems, each bringing value to the team through their individual and collective expertise and knowledge. You wouldn’t ask your mechanic for advice on your investment portfolio, so why would you expect your architect or contractor to know the best way to get the most performance out of your HVAC system. Let the experts do their jobs!
Of course, the owner plays a vital role in going green as well, as the projects profiled in this
issue of BXM will attest. Green is definitely something that involves the entire construction spectrum.
They are gaining on you
Since LEED launched in 2000, the number of certified (winning LEED points) and registered (going for LEED points) projects has grown by as much as 700% a year. Certified and registered LEED-NC projects grew 62% and 72% respectively, but the square footage skyrocketed more than 500% during the same period. LEED-EB projects are also on the rise, and it’s likely these numbers will grow on a similar scale as new buildings, aided in part by projects like the Clinton Climate Initiative’s Large Building Retrofit project, which in 2007 committed $5 billion to make existing buildings around the world more energy and resource efficient. If the USGBC has its way, the roughly 1,100 LEED-certified commercial projects in existence at the end of 2007 will grow nearly a hundredfold to 100,000 by the end of 2010.
Within downtown Cleveland alone there are dozens of projects in development seeking LEED certification, including the Flats East Bank project, which is a pilot LEED for Neighborhood Development project. Recently Richard E. Jacobs Group announced a partnership with Hines to build a LEED certified, 21-story office tower on Public Square in downtown Cleveland. Within the past several months D-A-S has been negotiating construction services for two proposed LEED projects in other parts of town.
Correlate this to the introduction of air conditioning into commercial real estate, and you can easily assume that other property owners around the state will soon begin modifying their buildings to meet similar standards if they expect to maintain or attract new tenants. If you’re going to continue competing for tenants during the Green Revolution, you’re best served by planning for the future.
The ROI of going green
I don’t know a single building owner who wouldn’t opt for green vs. conventional if he/she knew it wouldn’t increase first costs. A recent study by the NAIOP Research Foundation, Yudelson Associates’ Green Building Incentives That Work: A Look at How Local Governments Are Incentivizing Green Development, 2007, found that the most significant barrier to the rapid growth of green buildings is a perceived cost increase. In reality, however, many studies have indicated green premiums in the range of 1% to 2% achieve a moderate level of sustainable design, generally equivalent to a LEED Silver rating.
Although the studies show average premiums of 1% to 2%, closer analysis of the data shows that a significant number of projects—often in excess of 50% of the population—report no increase in cost over the budget to incorporate sustainable features. Remember, every building is unique. The sooner you get your project team integrated into the design, the better for maintaining your budget without compromising the features you’d like to include.
Many studies document energy savings for green buildings averaging 30% compared to conventional buildings, with greater savings available for more sustainable retrofits. A recent study by Compass Resource
Management, Towards a Green Investment
Fund–Opportunities & Issues (February, 2007), based on buildings in Canada and the U.S., found that relative to baseline energy standards, energy savings for LEED buildings averaged 24% at the Certified level, 33% at Silver, 47% at Gold, and 60% at Platinum.
According to Johnson Controls, a modern HVAC system alone could cut energy costs by 5% to 15%. For a 200,000 square-foot
office building, a 30% savings could translate into
annual savings of $135,000, based on typical utility charges of $2.25 per square foot. The information supporting the growth of green within the U.S. is unprecedented.
Tenants will pay more
A recently released study by Burnham-Moores Center for Real Estate at the University of San Diego found that commercial property customers are willing to pay an average of $2.45/sf extra for renting or an average of $15/sf extra for buying an industry-certified green office building. The study found that the higher rents and purchase prices for green buildings were offset by lower energy bills. It found that operating expenses from energy costs at buildings that earned the U.S. government’s Energy Star rating averaged $1.27/sf per year, a 30% savings over other buildings, which averaged $1.81/sf. According to the report, which relies on data from 2006, “The added value of the real estate is now exceeding the extra costs associated with going green,” says Norm Miller, director of academic affairs at Burnham-Moores. “I couldn’t have said that five years ago. And
the costs are getting cheaper.”
How to get started
Obviously, now’s the time to begin incorporating “green” into your operating plans. To do this effectively you’ll need some education. Just about every trade organization in the industry is offering educational opportunities–take advantage of them. Also consider contacting your architect and/or contractors to see how they may be able to assist you in going green. D-A-S offers a variety of educational opportunities to its clients including pre- and post-construction green building reporting. Just about every organization in our industry is offering educational opportunities–take advantage of them and you’ll easily begin to establish yourself as an invaluable resource to the project team.
Some to consider:
US Green Building Council, and its Ohio subgroups: the
Cincinnati Chapter, organizing groups in Columbus and Toledo, and
the Cleveland Green Building Coalition
BOMA (Building Owners & Managers Association)
NAIOP (National Association of Industrial and Office Properties)
E4S (Entrepreneurs for Sustainability), Cleveland
The Green Academy, Cuyahoga Community College
Let’s face it, green building will eventually become the standard way of constructing within the US. Savvy developers and property managers are jumping to be the first to offer prime green real estate in hopes of capitalizing on an initial offering in the market place. Will you be one of those savvy building owners? BXM
For fast information go to: www.bxmagazine.com/iReplyDirect
Lori Alba is the director of marketing for D-A-S Construction Co. and co-chair of
the company’s Green Building Committee.She can be contacted at lalba@dascon.com.
These statistics put the growing
green trend into perspective:
Many cities and states are incentivizing companies that build to certain high performance standards, according to the NAIOP’s Green Building Incentives That Work: A Look at How Local Governments Are Incentivizing Green Development, 2007. They offer everything from priority permitting to rebates.
NAIOP has issued a policy that encourages developers/owners to employ green technologies.
The AIA’s Local Leaders in Sustainability–Green Incentives examines incentives for green building, highlighting best practices like Cincinnati’s 100% tax exemption for LEED buildings, Cuyahoga Falls’ density/floor area ratio bonuses, and Hamilton’s inclusion of green roof space as landscaping/open space in return for achieving levels of green building, Expedited permitting is also winning raves.
The feds recently extended the energy efficient tax deduction for commercial property through 2008 and increased the incentive from $1.80 sf to $2.25 sf for buildings that save at least 50% of the HVAC energy of a building that meets ASHRAE standards.
A preliminary study has found Energy Star and LEED buildings command higher rents of 2% absolute and 6% adjusted. Wait for it.
The value of green construction will increase to $60 billion by 2010, says McGraw-Hill Construction Analytics in its SmartMarket Trends Report 2008.
By 2009, 80% of corporate America is expected to be engaged in green at least 16% of the time, and 20% will be engaged in green 60% of the time, says McGraw Hill Construction’s Greening of Corporate America SmartMarket Report, 2007.
The green building products market is projected to be worth $30-$40 billion annually by 2010, says the Green Building Alliance.
The American Solar Energy Society reports 8.5 million Americans currently hold “green collar” jobs. Its Green Collar Jobs Report: Renewable Energy and Energy Efficiency, predicts that as many as one in four workers will be working in renewable energy or energy-efficiency industries by 2030. BXM
