November 2nd, 2015
Green Building: The Value Beyond Operating Costs
In previous blogs I have written that the DOE and EPA are actively seeking data on energy-efficient building upgrades in manufacturing and commercial real estate, but the focus has predominately been on building operating costs. Until now.
A recent – and compelling – study published in the September 2015 issue of the Journal of Portfolio Management took it a step further by also looking at occupancy rates, tenant satisfaction, rent premiums and probability of lease renewal in green-certified buildings compared to non-green buildings. And the results were promising.
After examining more than 58 million square feet of Bentall Kennedy’s North American office portfolio, an international research company found that:
• Net effective rents, including the cost of tenant incentives, average 3.7 percent higher in LEED-certified properties in the U.S. than in similar non-certified buildings;
• Rent concessions for LEED and BOMA BEST buildings in Canada are on average 4 percent lower than in similar non-certified buildings;
• Occupancy rates during the period were 18.7 percent higher in Canadian buildings having both LEED and BOMA BEST certification, and 9.5 percent higher in U.S. buildings with Energy Star certification, than in buildings without certifications, and;
• Energy consumption per square foot was 14 percent lower in U.S. LEED-certified properties than in buildings without certification.
The View from Here is that operating costs are just one part of the green building story. Developers and building owners must also be concerned about construction costs vs. potential rental income and occupancy. Data, like in this study, will help them justify the use of more energy-efficient, sustainable alternatives.
At the end of the day, sustainable energy-efficient construction has to generate payback. And between real-life studies and the EPA’s modeling tools, we’re beginning to get a holistic picture of the value of green building practices.
What’s your view? Email me directly at Eric.Jackson@Quanex.com.