The Green Wave...not the Tsunami it used to be

Where do we want to start when it comes to the “Green Wave”?  Five years ago it was a overwhelming force that seemed to coat every corner of commercial real estate.  All new buildings were going to be green (if not LEED Certified).  There was even talk of requiring existing buildings to be retrofitted to meet certain guidelines.   But the popular push has lost its momentum, even though it is a substantial factor in commercial real estate.

Green initiatives have two significant factors; first they lower building emissions which helps the environment but most importantly to many people they can save building owners a significant amount of money in the long run.

When you hear about green initiatives you were hear different view points and rankings.  Two of the most popular are ENERGY STAR ratings and LEED Designations.

Energy Star: This federal program has been around since 1992 and focuses on energy saving products and more recently houses and commercial buildings.

According to the ENERGY STAR web site: Energy prices have become a hot news topic and a major concern for consumers. ENERGY STAR provides solutions. ENERGY STAR provides a trustworthy label on over 60 product categories (and thousands of models) for the home and office. These products deliver the same or better performance as comparable models while using less energy and saving money. ENERGY STAR also provides easy-to-use home and building assessment tools so that homeowners and building managers can start down the path to greater efficiency and cost savings.

Two Centre Square has recieved the Energy Star Rating

In 2010, Two Centre Square, a 91,000sft office building in downtown Knoxville that is managed by Cushman & Wakefield|Cornerstone received its ENERGY STAR rating.  It’s only the second privately owned building in downtown to received the ranking.   The building implemented a variety of energy-saving features to improve the building’s efficiency. 

Some of these improvements include:

• Replacing magnetic ballasts and T-12 lamps with efficient T-8 lamps.
• Replacing original cooling tower with a highly-efficient 215-ton replacement.
• Installing compact fluorescent lamps in place of incandescent floods lights.
• Installing motion sensors in common areas to control lighting.
• Installing variable frequency drives (VFD) on the HVAC equipment.
• Replacing the pneumatic thermostats & controls with programmable controls.
• Providing set backs for heating and cooling with push-button override for after hour occupancy.

Cushman & Wakefield|Cornerstone's Director of Development & Property Management, Ryan Cazana who oversaw the program, says while these improvements save money in the long run they just make good environmental sense.  “Energy use in commercial buildings and manufacturing plants accounts for nearly half of all energy consumption in the U.S.  Plus these facilities are also responsible for nearly half of U.S. greenhouse gas emissions which contribute to global warming.”

These capital improvements will save tenants in the building over the long run, while lowering the building’s carbon emissions at the same time.  The payback for these improvements is less than three years thanks to lower operating expenses.

LEED: Leadership in Energy and Environmental Design

LEED is the internationally recognized green building certification system developed by the U.S. Green Building Council.  LEED provides third-party verification that a building was designed and built using strategies aimed at improving performance across all the metrics: energy savings, water efficiency, CO2 emissions reduction, improved indoor environmental quality, stewardship of natural resources and sensitivity to their impacts.

LEED certified buildings reduce energy use on average by 28% as compared to conventional buildings.  Since the launch of LEED in 2000, more than 4,500 buildings have achieved LEED certification. 

Not everyone is pushing to receive LEED certification.  In fact, many buildings are built to LEED guidelines but don’t go after the plaque.  The cost to have an outside firm come in and document your building & design process can be cost prohibitive.  

Nissan Nashville Headquarters

LEED-designed

For example, Nissan’s 240,000sft corporate headquarters outside of Nashville is designed to meet Gold standards for LEED but does not have the designation.  Nissan says the cost of getting the designation would have exceeded two million dollars, instead they decided to take that money and put it into the building to even further improve the buildings efficiency.  The good news is the cost of to certify a building is becoming less and less of a factor as more firms become capable of providing the certification needed.

But since the beginning of the recession the pace of green-designed buildings has slowed.  For one, development in many areas is a trickle of its former pace.  Fewer buildings built means fewer green buildings.  Another factor is many tenants are no longer placing heavy emphasis on being in a green-designed building. Prior to 2008, every request for proposal I received from a major company included a requirement, or at least information, about the building's green features.  In the last six months I have worked with no less than six Fortune 500 companies, not one of them has mentioned green-design or LEED certification in their negotiations.  Corporations are focused on the bottom dollar and the motivation to pay a little extra for LEED buildings just isn't there. 

Statistically, according to McGraw-Hill Construction, national construction projects dropped between 16% and 20% in both 2009 and 2010.  For LEED-designed buildings, there were 10,498 registered projects in 2009, and only 3,071 in 2010.  While programs show the LEED initiaves are popular developers just aren't willing to absorb the initial extra investment required with the economy in its current condition. 

There is no doubt that green initiatives will continue to be popular and you will see more and more new buildings follow these guidelines as it gets less expensive to implement and the rewards continue to grow.  But in the end everything follows the James Carville quote, "Its the economy, stupid".  Amazing how that quote is just as effective now as it was 20 years ago when it was first spoken.