Myths and Realities of Greening New and Existing Buildings. Manasc Isaac

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1 of Greening New and Existing Buildings Edmonton Real Estate Forum 2009

2 What is a green building? Does it have to be coloured Green? Does it have to be ugly? Does it have to be expensive to operate? Will tenants buy into green buildings?

3 Myth: Only new buildings can be considered Green buildings. Even though a building may be built in a Green manner, it may not be operated in an environmentally friendly manner. There are a number of Green building certifications that apply to the operation of a building (shall we name a few?). Green operation certifications look at areas such as energy efficiency, water reduction, indoor environment and waste reduction.

4 Myth: Green buildings cost more to operate Many new high performance buildings are designed to use 25 to 50% less energy than required by current codes. Energy costs in most typical commercial office buildings makes up 1/3 of the operating costs. By becoming more energy efficient organizations can reduce operating expenses resulting in an increase in net operating income.

5 MYTH: considerable focus has been on greening office buildings, does it make economic sense to green industrial and retail projects? Retail thrives on a pleasant environment for foot traffic. Being in a green building, whether it is owned or leased by the retail business, is a positive addition to a companies image, with the potential to increase sales and revenues. Commercial real estate firms like Oxford Properties Group have even started looking at their greenhouse gas (GHG) emissions with the goal of reducing their emissions by 20% by 2012.

6 MYTH: Considerable focus has been on greening office buildings, does it make economic sense to green industrial and retail projects? Industrial building offer better value for the Owner/User. Currently, a majority of industry focuses on the efficiency of their manufacturing, not their building. Many large companies have started to change their buildings. (GAP Inc, San Bruno, CA / Herman Miller Holland, MI)

7 Industrial building also offer the same benefits for those working inside. Improved air quality, natural day light. Designing a good building should not be restricted by its use.

8 MYTH: Tenants have to pay more to be in a green building. Market cases have shown that depending on the building, tenants will pay a 5-10% premium. However it is key to note is that most tenants are only concerned with the Gross amount they are paying (Net + Operating costs). Landlords that can reduce their operating costs have the opportunity to ask a premium on their net rent with out affecting the overall amount the tenant pays. While remaining competitive with in the market. The opportunity is definitely there.

9 MYTH: Tenants have to pay more to be in a green building. For Example Building A Conventional Rent $20/sq ft O&M $10/sq ft Gross $30/sq ft Building B LEED-Core & Shell - Gold Rent up $24/sq ft O & M $ 6/sq ft Gross is still $30/sq ft All cases are unique, but this presents opportunity! In reducing your operation costs you may be able to capture more profit in rent.

10 Paper presented at American Real Estate Society Conference April 19, Pricing Sustainability: An Empirical Investigation of the Value Impacts of Green Building Certification by Franz Fuerst and Patrick McAllister 3 main points discussed in this report: 1. Certified buildings offer a bundle of benefits to occupiers relating to business productivity, image and occupancy costs. 2. Due to these tenant benefits certified buildings should lead to higher rents and lower holding costs for investors. 3. Certified buildings may require a lower risk premium.

11 State of Green Business 2009 by Joel Makower and the editors of greenbiz.com

12 MYTH: Private enterprise will lead the charge on green buildings. Leaders, Lemmings, and Lollygaggers - Public Pressure - Policy Mandates - External Precedents

13 MYTH: Private enterprise will lead the charge on green buildings. Leaders, Lemmings, and Lollygaggers

14 MYTH: Everyone knows what a green building is or should be. REALITY: It is an ambiguous and subjective term. Green?

15 MYTH: Everyone knows what a green building is or should be. REALITY: It is an ambiguous and subjective term. What is old shall be new again!

16 MYTH: there is a green agenda to all of this Annual energy consumption for office buildings Conventional Office building [not that there s anything wrong with that ] [1.8 to 3.5 GJ/m2] 50% less energy NOW [.9 GJ/m2] 60% by 2010 [.72 GJ/m2] 70% by 2015 [.54 GJ/m2] 80% by 2020 [.36 GJ/m2] 90% by 2025 Carbon Neutral by 2030 [no fossil fuel energy to operate]

17 for more information manascisaac.com ecoammo.com stantec.com sustainablebuildings.ca