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GREEN is GR$$N

Posted by David Osborn. in Green Buildings on April 4, 2008

Do GREEN activities provide a compelling return on investment?  For for those people who believe that operating efficiency and conservation lead to financial return, the answer is a resounding YES.

The CoStar Group, purveyor of the country’s most comprehensive commercial real estate database, recently completed an in-depth study of over 350 million commercial square feet, comprising 1,300 buildings assessing the costs and revenues generated by GREEN buildings against BROWN properties of equal size, location, occupancy, and construction dates. The surprising results clearly demonstrate the financial benefits of going GREEN. According to the CoStar study,LEED1 buildings earn over $11 per square foot more than non-LEED comparables and have a better than 4% higher occupancy rate and earn nearly $2.50 more per square foot per year.   While the Energy Star2 building results were not as compelling, these facets of return were clearly higher overall.
Commenting on the findings, Andrew Florance, president and CEO of CoStar said, "The information we\'ve discovered is very compelling.  Like all good science, we discovered it by accident. “…Green buildings are clearly achieving higher rents and higher occupancy, they have lower operating costs, and they\'re achieving higher sale prices."

Some interesting findings respecting Energy Star rated buildings from 2006 to 2008

  • Energy Star buildings use 50% less energy than non-Energy Star buildings
  • Law firms comprise the largest number of new lessees.
  • The occupancy rate differential GREEN vs. BROWN increased significantly.
  • The direct rental rate differential GREEN vs. BROWN increased 46%.
  • Sales prices GREEN vs. BROWN continue to enjoy a $61 per square foot differential.
..and respecting LEED rated buildings:
  • The occupancy rate differential GREEN vs. BROWN continues to expand
  • The direct rental rate differential GREEN vs. BROWN nearly doubled.
  • Building sale prices GREEN vs. BROWN enjoy a $171 per square foot advantage.
Of course, going GREEN with LEED and Energy Star rated building programs can be costly - costing between 2% and 7% higher than their BROWN brethren. Despite this cost differential, the return on investment in terms of higher rents, higher occupancy, lower costs and high revenues clearly outweigh the cost of the initial investment.   While this is not necessarily new news, the study clearly demonstrates that the positive financial impact of GREEEN is expanding year to year as more and more owners and managers seek out Energy Star programs and LEED certification. 

Clearly going GREEN will have you going GR$$N. 

1.  LEED: A US Green Buildings Council sponsored certification program - Leadership in Energy and Environmental Design - which establishes a point system of credits for property’s that achieve overall sustainability. Points are awarded for activities that lead to or promote GREEN results such as use of local materials, biodegradable practices and environmentally sensitive designs with multiple tiers of certification (Silver, Gold or Platinum ) for both new and existing buildings.
 
2.   Energy Star: An EPA-sponsored program for benchmarking energy-efficient properties. While neither as comprehensive nor as task-specific as LEED, ES outlines easy steps that a property owner can take to make his property more energy efficient, including ambient light usage, electric light management, off-hours energy protocols, widow replacement resulting in 40% less energy usage and over 30% carbon footprint reduction.

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