Volume
20, Number12
January
2009 Copyright
© 2009 CRITERIUM ENGINEERS
The Engineering
Advisor is intended to enhance your
knowledge of technical issues relating to buildings. For additional information on any subject,
please feel free to call us. Our
commitment is to provide you with timely, accurate information.
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PAYING FOR GREEN |
One cannot help but notice – every
magazine and every professional publication these days has at least one
article on green building technology.
After the 2008 energy roller coaster, it seems appropriate to put some
of this into perspective. As building
inspection engineers, we will tend to focus on existing buildings, but much
of what follows applies to new buildings as well. |
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What Are
Building Owners Doing? |
In 2007, and again in 2008, the Building Owners & Managers
Association (BOMA), Real Estate Media and the U.S. Green Buildings Council
(USGBC) conducted a survey of real estate investors, owners and
managers. As evidence that the subject
is gaining attention, 87% of the respondents in 2008 said that the greening
of their portfolio was a high priority, versus 81.5% in 2007. In terms of putting their money where their
mouth is, in 2008 80.6% said that their firms had allocated funds toward
sustainable practices versus 63.9% in 2007, and 86% said that they would
spend the same or more next year. In
terms of what they are doing, 90% report employing some kind of energy
conservation measures, 88% recycle, 82% have some kind of water conservation
program and 62.2% have indoor air quality (IAQ) programs. All are up from 2007 except IAQ, which
remained about the same. While all this points to the increasing role of sustainability in
existing buildings, not everyone is convinced that green technology makes
economic sense. The evidence that
tenants are demanding it is anecdotal and inconclusive for the most
part. And there remain skeptics who
wonder whether it is worthwhile or necessary.
Still, if such measures involved little or no cost, there would appear
to be no reason not to include them in the normal operation of all buildings. |
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Changes in
LEED Certification |
Before describing some of the approaches that are being used to fund
green initiatives, it is worth taking a quick look at the status of the
Leadership in Energy and Environmental Design (LEED) initiatives as
promulgated by the USGBC. As of this
writing, more than 77,000 individuals have gained LEED Accredited
Professional (AP) status, including 17 Criterium engineers. The program is becoming mainstream and
several key changes are scheduled for implementation in 2009. Two of the more significant from our
standpoint are: 1.
True Life Cycle Assessment –
The credit weighting system employed in the past did not always correspond to
those measures that have the greatest effect.
Thus, it was often possible to pick up credits for actions that were
relatively meaningless. This is being
corrected in 2009. 2.
Regional Considerations –
Actions in one part of the country may have less impact than in other areas. Issues such as whether energy demand is higher
for heating or cooling and whether water supplies are adequate or limited all
should (and eventually will) factor into the rating of buildings. |
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Making the
Numbers |
For the property
investor, owner or manager, the financial return is, and will always be,
paramount. Funding sustainability must
be looked at from many perspectives.
No single path to supporting a financial investment will likely result
in a significant return on investment.
But if multiple strategies are considered, the payoff is clearly
attainable, depending on the variables affecting the investor. We attempt to list some of these
considerations below. |
|
Financial Incentives |
One of the first
things to consider when considering green retrofits is the availability of
local, state or federal
financial incentives. The USGBC lists
a total of 179 such incentives around the country. These may be found on its website at http://www.usgbc.org/DisplayPage.aspx?CMSPageID=1852 |
|
Reduced Operating Costs |
The savings
produced by green technologies are real.
A study by the New Buildings Institute found that median energy use of
121 LEED-certified buildings was 24% below that for the national building
stock. The U.S. General Services
Administration found green buildings had 26% less energy usage and 13% lower
overall maintenance costs. According
to a survey by Turner Construction of industry executives, the median payback
period was believed to be 7
years. However, with many green
technologies costing little or nothing to incorporate, the reality is often
quite different. |
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Financing Opportunities |
In 1999,
researchers working for Pacific Gas & Electric and the U.S. Environmental
Protection Agency concluded that reductions in energy costs of 20 to 30% can
improve net operating income by 2 to 5%.
If such measures were incorporated into the appraisal and lending
processes, higher property valuations would necessarily result. Capitalizing the value of “green” is just
now entering the financing process resulting in higher cap rates or an
improved ability to service the loan. |
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Strategic Planning |
Once the decision
has been made to employ green technology, the building owner/investor should
carefully consider all the technologies available. Some gains may be accomplished at little or
no cost. Some technologies may actually compete with each other. It is important that decisions not be made
on a salesperson’s representation of savings or one person’s pet project but on
an overall look at the way a building interacts with its occupants and
tenants. |
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Improved Marketability |
In the first
non-anecdotal study that we know of, by the end of 2007, occupancy rates were
about 3% higher (91 vs. 88%), rental rates were $2.50 more ($29.00 vs.
31.50), and sales prices were about $40/SF higher in Energy Star versus
non-Energy Star buildings. The results
are based on a survey of Class A office buildings by the |
|
Improved Productivity |
Studies in
schools have shown that students learn more in spaces that are comfortable
and well lit. Studies in the
commercial environment are more limited, but in 2007, Capital E Analytics
estimated that where green technology is employed, lower absenteeism, fewer
headaches, greater retail sales and easier reconfiguration of space resulted
in savings 10 times the energy savings alone, |
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Income Generating Opportunities |
All the above
measures are designed to reduce or offset the costs of green building
systems. It is also possible to use
this technology to improve the bottom line.
At least two Real Estate Investment Trusts (REITs) are using their
significant roof areas – warehouses in the case of ProLogis and shopping
malls in the case of Developers Diversified – to install photovoltaic solar
panels. The energy generated will
reduce operating costs for both the owners and tenants and also produce
rental income. |
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According to a survey by
Turner Construction, the number one factor discouraging the construction of
green buildings is the “cost and documentation for LEED certification.” As we can see, green construction can work
and be profitable. Recent developments
at the Environmental Protection Agency suggest that green construction may
also become mandatory. A knowledgeable
consultant should be able to put all these factors together and assist with
the process of making green buildings part of our built future. |
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1-800-242-1969 |