The green building movement is gaining momentum in the office development sector as more users realize that high-performance buildings make economic sense: they use up to 50% less energy than conventional buildings and command above-market rents and sales prices.
Developers are starting to recognize that the added costs of high-performance products can result in big savings. The recent completion of a 97,000 sq. ft. research building in Toronto for telecommunications giant Nortel Networks is a prime example. Installing R5-rated energy-efficient window panes instead of the standard R2-rated glass added $291,000 to construction costs, but it enabled the developer to install a smaller heating and cooling system, resulting in a net savings of over $1 million. The special glass will save the owner $47,000 annually in energy costs.
Many Fortune 500 companies and real estate developers and owners have adopted green standards for new buildings, because inhabitants prefer them. “People who work in these buildings love them,” because they feature lots of natural light, healthy indoor air quality, and consistent thermal comfort, says Rob Watson, senior scientist for the Natural Resources Defense Council. Employees working in these buildings are healthier and happier, resulting in higher productivity and less absenteeism, says Watson.
It's no wonder then that interest in green projects is growing and more developers are applying for LEED (Leadership in Energy and Environmental Design) certification. LEED is a voluntary program run by the U.S. Green Building Council that rates a building's level of environmental friendly features based on an industry-wide consensus of “best building practices,” says Nigel Howard, USGBC vice president for LEED. The criteria address land use, environmental safety, ecological impact, and resources conservation.
Over the first three years of the program's existence, LEED only certified 155 buildings, but 175 buildings will complete the process in 2004 alone. An additional 1,800 have registered with the USGBC, according to LEED spokesperson Taryn Holowka. While 63 million sq. ft. housed within those 1,800 projects is in government-owned space, the majority, 95.5 million sq. ft., is privately owned office space.
Although green buildings are on the rise, Alan Whitson, founder of a Newport Beach, Calif.-based firm that provides education seminars in green construction, says the biggest challenge is to dispel the myth that green buildings cost too much. Progressive builders have learned to develop a holistic approach to building green, figuring in high-performance features from the outset and calculating costs over the entire project, rather than treating green components as add-ons, says Whitson. The cost of LEED buildings is 2% higher than conventional buildings, according to a recent study by Washington, D.C.-based Capital E, a consulting firm.
Green buildings help developers compete for tenants. John Mooz, a vice president at Houston-based Hines, says that the company's environmentally friendly 33-story Calpine Center was 85% leased when it opened in November 2004, even though the Houston office market was suffering from a vacancy rate of 20%.
Unfortunately, Mooz says, while developers and owners like Hines are apt to adopt green building standards because they have a long-term stake in a building's performance, “developers in the merchant building community just want to build quickly and sell.”