Green reality

Tenants have cast their votes, deciding
that the time for “green” is now.
“As tenants and their advisers become more green-savvy, developers and landlords
will follow the their leads,” says Brian
Hooker, associate with CB Richard Ellis in
Atlanta. “This will lead to green real estate
dominating the commercial landscape.”

Smart Business learned from Hooker how
tenants can benefit from environmentally
conscious real estate.

What is green real estate?

Green real estate consists of property
where the design, construction and operations are crafted to reduce the negative
impact on occupants and the environment.
With respect to tenants, buildings can create
health hazards due to poor air quality.
Properties can also produce air and water
pollution, generate solid waste and use significant quantities of energy and water. New
buildings can also lead to the destruction of
natural habitats.

The United States Green Building Council
(USGBC), a private organization, developed
a measurement system for green buildings.
The system is called LEED (Leadership in
Energy and Environmental Design), and it
awards points in various categories to both
new construction and redevelopment projects. Real estate becomes LEED certified by
achieving a minimum number of points.
Facilities can earn more points and receive
higher levels of certification — silver, gold
and platinum.

Let me make one distinction: Property can
be green through smart choices in how it is
built, but only becomes LEED certified if the
developer secures a third-party evaluation
based on LEED standards.

What are some unique characteristics of green

Most green buildings aren’t that unique to
the naked eye. On the outside, a few have on-site power generation, such as solar panels.
Internally, some may contain an above-average level of natural lighting.

The building and remodeling process really
sets green facilities apart from traditional
ones. Architects, engineer and property managers must shape site characteristics,
energy performance, water management and
indoor environmental quality to meet specific performance standards. Procedures for
appropriate materials use, reuse and recycling also play a role in construction. Soon,
today’s unique green features and processes
will become standard.

How do these differences affect tenants?

We’ve all heard that green real estate saves
in energy costs. As a general rule, $1 in additional rent brings $1.20 in energy cost savings. However, without effective advisers
helping with negotiations, tenants may not
realize these savings because landlords try to
retain the majority of expense reductions.

In addition, healthy, well-lit, pleasant office
spaces have been proven to increase productivity. Preliminary studies have shown that
green buildings can reduce absenteeism by
15 percent and employee turnover by 7 percent. Such gains from increased productivity
will ultimately eclipse benefits from cost savings and can be realized with or without
LEED certification.

Going green also boosts a tenant’s image,
especially when LEED certification is
achieved. This may help some businesses in
their marketplace today and, in the future,
many businesses will likely require green initiatives from their trading partners. Also, all companies can use green as a selling point
when recruiting today’s environmentally conscious young talent.

Green facilities do come at some additional price to occupants and a few compromises in design. Tenants can usually expect a
slight premium on base rental costs. However, experienced green practitioners can
help find ways to offset this premium.

What are some of the opportunities and challenges in these types of facilities?

Green real estate has limitless opportunities, especially here in the Southeast. We’ve
seen very little market penetration, as developers and owners have almost unanimously
taken a ‘wait and see’ approach.

The main challenge is awareness, especially among tenants. The majority of the occupants who have pushed for green real estate
have done so because of senior leadership
mandates, irrespective of case-specific benefits. Why? Because most tenants are not
aware of benefits beyond the notion of ‘doing
the right thing.’ With further awareness, more
tenants will add practical, measurable green
features to their real estate requirements.

How does the reality of green real estate differ
from the hype?

There’s a misconception that green real
estate costs significantly more to develop.
This runs contrary to the USGBC’s recent
assertion that basic levels of green do not
cost more. The reality is that the broad-based
acceptance of green materials has brought
their pricing in line with traditional materials.
There are cost differences that come with
achieving LEED certification, which can be
minimized by working with green advisers.

Companies should also know that the
USGBC has provided an option that allows
tenants to deploy green design and processes
in their spaces to become LEED Certified
Interiors (LEED CI), even within buildings
that aren’t LEED certified but meet a few
basic requirements.

BRIAN HOOKER, associate at CB Richard Ellis, specializes in
helping tenants to reap the benefits of green office and industrial
properties, whether in a single location or across an entire portfolio. Reach him at [email protected] or (404) 923-1210.