Most of us think of SUVs as the No. 1 energy hogs, but they represent only 3% of North American CO2 emissions, while 38% is from buildings. And when you add the embedded energy of materials (8%) the figure jumps to 46%. Buildings account for 72% of electricity use, 39% of energy use and
14% of water consumption.
Our built environment is a huge opportunity for energy efficiency improvement.
Green buildings outperform their non-green peers in occupancy and rental rates and, as a result, have significantly higher building valuations. LEED (Leadership in Energy and Environmental Design) buildings command rent premiums of $12.25 per square foot over their non-LEED peers, enjoy 4.1% higher occupancy and sell for $184 more per sq. ft., a CoStar Group study says.
This finding should catch the attention of building owners, property managers and pension fund managers. CoStar Group, the largest U.S. commercial real estate information company, tracks 44 billion square feet of space.
CoStar is not alone in its findings. LEED buildings use 24% to 33% less energy than comparable non-green buildings, according to a New Buildings Institute study.
A 2008 study sponsored by the U.S. Green Building Council shows that green buildings cost an average of 2.5% more up front and generate more than 10 times that amount in savings over the building’s life. Benefits over non-green buildings include:
z 8-9% lower operating costs, including up to 33% lower energy costs. The threat of rising oil prices is a significant factor (world oil prices have already hit $75 a barrel in this recession). Green buildings also have lower water consumption and treatment costs. During this recession, lower operating costs are something tenants deeply appreciate and is no doubt one reason landlords can charge premium rental rates for green buildings.
* Greater tenant attraction, retention and shorter vacancy: 3.5% higher occupancy rates.
* Higher return on investment (ROI): up to a 30% premium in dollars per sq. ft.; 7.5% higher market values and 6.6% higher ROIs.
* Easier to access investment capital and insurance discounts due to lower risk of indoor air quality problems, reduced energy costs, smoother operations and higher tenant satisfaction
* Increased employee satisfaction. From a tenant’s point of view, building costs are small compared to employee salaries. On average, the annualized cost for personnel are 10 times greater than the office space and 100 times greater than the energy costs. Access to windows, increased daylight, fresh air and micro area environmental controls significantly boost employee satisfaction.
* Enhanced marketability: The highest-standard green buildings enjoy high levels of free publicity and marketing opportunities.
Canada is home to some of the world’s green buildings thought leaders. Two upcoming events are noteworthy:
Enermodal, one of Canada’s leading LEED engineering companies, is opening its new headquarters in Kitchener tomorrow. The building, named A Grander View, will use 90% less energy than the average Canadian office building. The company is seeking a LEED platinum rating, the highest a building can achieve.
The World Green Building Council, based in Canada, is hosting a leaders summit on Sept. 23 in Toronto. Speakers include Frank Biden, a campaign advisor to his brother, U.S. Vice-President Joe Biden, and the architect who designed the world’s greenest building. For property managers, investment professionals and real-estate-investing pension fund managers who want to better understand how green buildings can improve their returns, this is a great event to attend.
-Jim Harris, Power points, Financial Post