For several years now, the USGBC (U.S. Green Building Council) has taken steps to increase the number of LEED certified buildings in the United States.The “green initiative” has since been taken up by government officials from the President on down to city and town mayors.Several federal buildings have converted to LEED and new facilities are being built to LEED standards. Most of the reasons for this involve Energy & Water Management Savings.
While many facility owners might like to help the environment, however, the main concern to most is cost. What’s the cost? What’s the ROI? Yes, your mayor may be pushing toward a greener city. Green buildings and operations may, in time, become a city (if not federal) mandate.That isn’t so now, so what can you, as a business owner, get out of “greening” your facility?
“The payoff from wise green investment is easy to justify, even if it’s based on purely profit motivations.”– Does Green Pay Off?[pub. date: July 2008]
In July 2008, individuals from CoStar and Burnham-Moores Center for Real Estate published a study on the economical benefits of having a green building.The study compares U.S. based Energy Star and LEED-certified office buildings to standard U.S. office buildings.
According to the study, which spans the 4th quarter of 2005 to the 1st quarter of 2008, the overall benefits for investing in greener buildings are cumulative, but intriguing.For instance, over that five-year period, Energy Star facilities showed a consistently higher occupancy rate, often as much as 6% higher than standard buildings.While LEED facility occupancy rates dropped in the 2nd quarter of 2006, they quickly rose again.By the 1st quarter of 2008, they also showed a 6% higher occupancy than standard buildings.
One can safely assume that the higher occupancy rates can be attributed, in part, to consumer knowledge.More tenants are becoming aware of the benefits of better air quality, higher productivity rates, etc. and actively look for greener buildings.In fact, they’re willing to pay for them.Energy Star buildings show roughly 6% positive impact on selling prices, while LEED facilities show almost 10% positive impact on price per square foot.
Many believe that LEED certification mandates nation wide are inevitable in the future, and the high number of local, regional state and federal incentives for going green certainly supports the theory.As well, many cities already have mandates slated for the future.Of course, as pointed out by Does Green Pay Off?. if this should happen the marginal costs of matching the mandated certification level would be zero because there would be no alternatives.
“As an alternative to new construction, developers and landlords have increasingly targeted existing office properties in advantageous urban locations for complete renovations in order to deliver a seemingly new Class-A product while saving time and money by utilizing the existing structure to the greatest extent possible.”- Building Retrofits: A Business Case for Going Green? [pub. date: 2009]
In early 2009, Kellogg School of Management published an article on how much green building has altered the commercial real estate market.Building Retrofits makes a strong case for retrofits and renovation of existing buildings (rather than new construction) to reach LEED certification, citing proven benefits such as higher tenant rates, hiring occupancy rates, lower operating expenses and/or exit cap-rate premiums.
However, the author warns that the facility owner should consider a few things before jumping on the green building bandwagon, stating, “Ideal candidates for full building renovation must be…”:
Finally, the potential costs must be weighed against the potential short-term and long-term values.
While considering your own facility for LEED certification, keep in mind the possibilities of mandates.With those mandates may come penalties for buildings that don’t meet the standards of various localities, which means staying a standard building may, eventually, become more costly than “greening up”. As well, if you own a standard office building and have a low occupancy rate, it may be that your location has a high demand for green buildings.
If you’re looking at LEED certification and aren’t sure what needs to be done, contact GreenEfficient® to look over your facility. Look through the USGBC website and LEED requirements to become more informed.It may not be as costly as you think.