Why Green Building Has Staying Power
Oct 31, 2007 5:15 PM, By Beth Mattson-Teig
Exclusive research shows that corporations and
developers are rising to meet the new demand for energy efficiency.
For those skeptics who were convinced that green building was a
mere passing fad, a new survey by National Real Estate Investor
and its sister publications may prove otherwise. The survey
reveals that not only is green building gaining momentum as a
commercial real estate strategy, but it is also vying for status as
the new industry standard.
In fact the exclusive survey, which drew responses from 218 corporate
users and 166 developers of commercial real estate, reveals that 52% of
corporate respondents and 39% of developer respondents currently own,
manage or lease at least some “green” properties.
Even more compelling is the fact that the focus on sustainable real
estate is clearly on the rise with 84% of corporate users and 77% of
developers expecting to own, manage or lease at least some green
properties five years from now [Fig. 1].
“I think there is a tremendous amount of momentum for sustainable
development,” says Tom Bisacquino, president of the National Association
of Industrial and Office Properties (NAIOP). “The cost of energy is
growing exponentially, and many feel that energy costs will continue to
rise. So the business case for developing green is getting stronger and
stronger.”
Generally, the “green” label in commercial real estate applies
loosely to a growing list of sustainable building practices, ranging
from energy-efficient lighting and air purification systems to recycled
carpet. Specifically, green buildings are being measured by emerging
industry standards such as Energy Star and the U.S. Green Building
Council’s Leadership in Energy and Environmental Design (LEED) rating
system.
Energy Star is a joint program of the U.S. Environmental Protection
Agency and the U.S. Department of Energy that focuses on energy
efficient products and practices. Buildings that earn the Energy Star
designation use about 35% less energy than average buildings. More than
3,200 buildings totaling nearly 575 million sq. ft. carry the Energy
Star seal of approval.
In contrast, the LEED program promotes a whole-building approach to
sustainability by recognizing performance in five key areas that include
human and environmental health, sustainable site development, water
savings, energy efficiency, materials selection and indoor environmental
quality.
Survey results support the premise that corporations and developers
are embracing green building practices. Respondents expect that green
building ownership and management will increase dramatically in just a
few short years.
Corporate users anticipate that the amount of green facilities they
own or lease will more than double from 9% to 21% in the next five years.
Developers also expect the volume of green properties in their
portfolios to take a similar jump from 9% to 20% by 2012 [Fig. 2].
“I think that 21% is pretty conservative,” says Randy Knox, Adobe’s
senior director of global facilities services at Adobe Systems Inc. in
San Jose, Calif. “I think green building is really starting to snowball.”
Adobe is the only company in the world to occupy three platinum-level
LEED buildings, totaling 960,000 sq. ft., the highest rating offered by
LEED.
The software giant plans to roll out more green design elements and
pursue LEED certification for commercial interiors within its 2.7
million sq. ft. portfolio of leased space. “We do a lot of development
work around the world, and we are looking at taking this certification
process global,” Knox says.
A snapshot of respondents shows that nearly half of corporate users
(48%) own or lease more than 150,000 sq. ft. of space, while 47% of
developers own or manage more than 150,000 sq. ft. of space.
Respondents are most likely to be involved in office and retail.
Among developers, 55% own or manage retail, followed by office (48%) and
mixed-use and hospitality (35% each). On the corporate side, 51% of
respondents own or lease office space, followed by industrial (42%) and
retail (25%) [Fig. 3].
Green gains momentum
One key indicator about the speed with which green building is taking
hold can be found in attitudes toward the site selection process. About
half of respondents — 46% of corporate users and 51% of developers —
consider green design either important or extremely important.
Only 17% of corporate users say green design is not at all important
in the site selection process, while just 10% of developers say it is
not at all important to their company for current or future development
[Fig. 4].
Corporations ranging from Bank of America to Best Buy are
incorporating green building as part of their real estate strategies,
and developers are clearly responding to the rising demand for these
facilities. “Tenants understand that energy savings go straight to their
bottom line, and they also are concerned about the environment they are
creating for their employees,” says Jerry Lea, a senior vice president
at Houston-based developer Hines, an Energy Star partner since 1999.
About 18 months ago, Hines adopted a strategy to LEED-certify all new
office projects in which it has an ownership stake. Currently, the
developer has more than 50 buildings that are either LEED-certified, pre-certified
or registered for certification.
In September 2006, Hines launched a joint venture with CalPERS to
create a Green Development Fund with more than $120 million in equity
that focuses solely on developing LEED-
certified office buildings. “The competitive nature of the business
is such that developers will continue to ratchet up and green building
will become more prevalent,” Lea says.
Hines is not alone. Major commercial real estate developers across
the country have implemented similar strategies. “We want to do
sustainable development for 100% of the work that we do,” says Dan Young
Dixon, director of national design for Opus Architects and Engineers, a
division of Minnetonka, Minn.-based Opus Corp.
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