I am not sure about you, but I feel like I can't go anywhere without hearing about green building. Don't get me wrong, I am all for innovating the process to conserve the environment. I just can't help but wonder how long the "Green Movement" will last and what part will stick around for the long term.
Environmentally friendly is not a new concept. I can remember when recycling was introduced and when I used recycled notebook paper for the first time. How about the grandmother who wraps the presents with newspaper, isn't that "green?" Granted, many resources that have been widely taken for granted are becoming more expensive and in time may just disappear. Thus we have a need to come up with new technologies and innovations for things like energy, but isn't that what we have always done? We have a problem and find a solution.
I attended a local development event recently and a heavy debate erupted as to whether or not the costs of green building could be recouped in an office building. On one hand, you have the developer saying it is almost impossible to rent at a higher rate. The tenants do not understand the costs savings, nor can they see a discount or savings on their bill each month that would equal the amount of increased rent. On the other side are developers who say they can't lease their space to large fortune 500 companies or the government without meeting the green building certifications.
So, is green always more expensive? Not necessarily says Peter Morris. Morris states that reasonable levels of sustainable development can be incorporated into most building types at little or no additional cost. In a report published by Buildings, the average return on the initial investment for a LEED-certified building is 2.6 years. The LEED-certified buildings also had annual net savings of more than $170,000. LEED-certified is the lowest LEED level a building can earn.
I have always heard the lower the level, the lower the investment cost. Just in case you are wondering, according to Beth Anderson to obtain LEED-silver, the building would cost an additional 3.5%, gold would be an additional 4.5% and platinum would be an additional 11.5%. What are the benefits of pursuing a higher level of LEED designation?
A study performed in California yielded results of the following energy savings based on current LEED buildings.
Certified 28%
Silver 30%
Gold 48%
Is it worth pursuing the higher LEED levels? I believe that is still up for debate but there are many facts that support building a certified or silver LEED building results in costs savings in energy. With the increase of fuel costs, everyone is looking for ways to save on energy. Another fact that has fueled the demand for LEED buildings is the occupancy rates.
Occupancy rates, as well as rental and sales rates, are typically higher in a LEED building (or energy efficient) versus a building that is not energy efficient. In the last two years, there has been a 70% increase in the rent charged per square foot in LEED buildings. The increase represents a premium of 36% over a non-LEED building (AIA.org).
Consumer buy-in has become a major factor in the green movement. LEED buildings also have a 4.1% higher occupancy rate than the non-LEED buildings. The chart below highlights some of the difference between LEED and non-LEED as well as Energy Star and non-Energy Star.
Financial Metrics for Green versus Conventional Buildings
Building type Occupancy rate Rental rate per ft^2 Sale price per ft^2
Energy Star Certified 91.5% $30.55 $288
Non-Energy Star peers 87.9% $28.15 $227
LEED certified 92.0% $42.38 $438
Non-Leed peers 87.9% $31.05 $257
Source: CoStar Group, "Commercial Real Estate and the Environment"; All Figures are as of first quarter 2008.
Does this mean you should go green? I think that decision rests very much in how you want to serve the market. The estimated green construction for this year will only amount to about 2% of the total construction for the year, but by 2010 it is estimated to be as much as 10%. In dollars, that would be equivalent to $29 to $57 billion (CNN Money).
No matter what side of the fence you are on, I feel that LEED is here to stay. Over time, the requirements or rules may change, but some form of our current Green Movement will remain.
Kim Albritton helps small business owners reach their dreams. Too often business owners get tied up in day to day activities and are only able to work on putting out fires. Her goal is to make business simple so that business owners can realize their entrepreneurial dreams and reach the goals they had when they originally started their business. You can read more about Kim at http://www.growAECprofits.com.
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