09 April 2011

The bean counters are finding that green buildings make economic sense.

CB Richard Ellis (the world's largest property manager) finds that going green pays
Tom Bailey Jr. McClatchy-Tribune Regional News Mar. 26, 2011

Pity the polar bear and its melting habitat, but corporate America just doesn't much care anymore.

Several years ago U.S. business was more altruistic about converting to green, sustainable enterprise to help save the world from environmental collapse, David Pogue said Friday at the University of Memphis's first Conference on Sustainable Real Estate.

Then the market crashed.

"Firms went from sustainability to survivability," said Pogue, CB Richard Ellis's national director of sustainability.

And there's the good news for the climate.

Forget the cute penguins losing their ice, the bean counters are finding that green buildings make economic sense.

That's important because the highest consumers of energy and highest producers of carbon emissions are not cars, but buildings, conference officials said.

CBRE manages 750 million square feet of property in the United States, making it the world's largest property manager.

The company set a goal four years ago to become carbon neutral within four years.

It'll soon run its numbers for 2010 to determine whether it achieved success.

But CBRE surveys and researchers in the field are finding that corporate America's investment in sustainability is a strong, growing trend, not a fad.

To gauge whether green buildings make economic sense, CBRE conducted a survey involving 156 of its green buildings in 10 large U.S. markets. The buildings were either certified LEED (Leadership in Energy and Environmental Design) or achieved an Energy Star label.

"It's a pain in the butt to get LEED certified," Pogue said. Achieving LEED costs $100,000 on average, takes a year and demands the focus of a management team.

The survey found that the green buildings were 3.4 percent more occupied than general market buildings. Pogue described the difference as a "small but discernible improvement of occupancy rates."

The survey also found that tenants pay an average 1.46 percent more in rent for green buildings. Pogue noted the survey did not cherry-pick the newest buildings for the green category.

Surprisingly, rent at the Energy Star-labeled buildings were 4.8 percent below market, he said. But the LEED buildings commanded 7.38 percent above market in rent.

Pogue cited another office-building survey that found the amount of LEED certified square feet in the nation's top 25 U.S. markets doubled over the past two years.

In New York City, 10.1 percent of the square footage is now LEED, and it's 25 percent in Los Angeles, 35 percent in Houston and 37 percent in Denver.

The number of LEED buildings in those cities may be 1 percent, but significant, bigger ones have gone green.

Converting a building to LEED certification adds $5.6 million on average to its worth, Pogue said.

Having LEED buildings is almost an economic must in some places, such as downtown Boston. There, 20 of downtown's 22 primary buildings are already LEED. "In certain markets, if it's not LEED you will lose" tenants, rent revenue and value, Pogue said.

Of all the sustainability research in commercial real estate, the "holy grail" focuses on corporate attitudes and action, Pogue said.

He said he has one client in the tobacco industry. The company is conscious about being viewed as "the bad guy," and is concerned about the ability to hire talent.

The company is interested in converting to sustainable buildings so it can at least get off some "bad guy" lists and keep its stock from taking hits, Pogue said.

Studies also show that large publicly traded companies are taking more action in sustainability, while smaller, privately held firms generally are less concerned, he said.

Energy efficiency and sustainability are now a business unit of CBRE, and the company gets paid for it.

"Four years ago, it was altruism," Pogue said.

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