IMG. Comparing Green Building Certifications from the Developer s Perspective

Transcription

1 Comparing Green Building Certifications from the Developer s Perspective Prepared for the 10 th Joint Research Centre Workshop of the EU Delegation in Russia 26 June 2012

2 Executive Summary Changing Perceptions of Green Currently, only 9 buildings are LEED or BREEAM-certified in Russia. Organizational challenges to green include openness to front-end, crossdisciplinary synergy among actors. Learning barriers lead to industry-wide misinterpretations about green. Higher energy costs and changing regulation causing interest to grow. Choosing a Green Certification System First, consult with shareholders to determine priorities. Select criteria to achieve targets. Pick rating system to match criteria. Implement building management system to maintain and improve performance. Benefits of Green Certification During crisis, investors shifted focus to green to reduce risks; developer interested shifted to optimize returns and as source of differentiation. Green development is consistent with best asset management practices. Green buildings more stable during crisis, with higher rents and occupancy. Green is tool to reduce project risks. Comparing Green Certification Systems LEED (US) focused on energy efficiency. BREEAM (UK) focused on renewable energy and site selection/land use. DGNB (DE) newest system, focused on project performance and efficiency. BREEAM most popular system in Russia, standard used for Sochi venues.

3 Perceptions of Green Certifications

4 Number of Certified Buildings IMG Barriers to Development of Green Buildings in Russia Russia Lags in Development of Green: Only nine buildings in Russia have received LEED/BREEAM certification, versus 40 in Turkey, 46 in Poland, 49 in Brazil, 107 in India, 195 in China. Barriers to Green Buildings: Organizational Challenges: Front-end, cross-disciplinary planning not within norms. Underdeveloped industry structures, such as recycling or commissioning agencies. Learning Barriers: Russian project teams unfamiliar with LEED/BREEAM requirements; standards incongruent with Russian reality. Majority of developers have little knowledge of sustainable development practices, lack training to implement China India Brazil Poland Turkey Russia 25% Sources: gbci.org, greenbooklive.com Awareness of Sustainable Development 0% 8% 67% Not aware LEED BREEAM Little Knowledge Personal Interest Extensive Knowledge Source: Ernst & Young Transaction Real Estate Advisory Services, Moscow

5 Need for Green Growing, Yet Industry Misperceptions Persist Rising Energy Costs Raising Green Demand Price of electricity for industrial consumers reached parity with USA in Heat tariffs for residential consumers is increasing at a faster rate than inflation, as domestic energy rates are brought up to full market rates. Industry Misperceptions of Green Developers assume front-end costs for green buildings are higher than in reality % perceived cost increase; 2-10% actual cost increase. Uncertainty in quantifying demand. Up-front costs complicate payback: Certification/registration fees; Energy modeling and commissioning; Higher soft costs, including consultant and designer fees. Up-front costs mask lifecycle savings: 2% increase in up-front costs in support of green, on average, result in lifecycle savings of 20% of total construction costs (Kats, 2003). Source: Energy Efficiency in Russia: New Opportunities, December 2011 Source: Ernst & Young Transaction Real Estate Advisory Services, Moscow

6 Legislative Changes Increasing Attractiveness of Green Over 50 regulatory acts enacted since 2009 to reform energy savings legislation and encourage development of energy-efficient technology. Public Sector Reforms: Reduce consumption 15% by Energy audits every 5 years, starting in Budget-funded entities to pay for energy resources based on individual metering. Residential Sector Reforms: All new buildings will be subject to energy-efficiency requirements, including posting each building s efficiency rating publicly. Individual metering starting in mid Sanctions for buildings that ignore the law, such as withholding commissioning. Federal Programs to Support Energy Savings: Co-financing provided by government for equipment installation. State information system to tract performance of energy-efficiency programs. Bank guarantees provided to ensure low interests rates for energy-efficiency projects.

7 Benefits of Green Certifications

8 Financial Returns from Green Certification Economic Slowdown Triggered Flight to Quality: Shift towards green development as source of differentiation: Investors sought less risky assets in which to invest; Developers perceived green as a means to optimize returns and reduce life-cycle costs. Developers feel that green is right thing to do, but consider higher quality and best asset management associated with green buildings to be more beneficial than ecological factors. Financial Returns of Green Certification: If planned from beginning, cost increase of 2-10% to go green. Lower cap rates/higher prices (3-8%) for green projects. Faster absorption rates, increased occupancy by 3.5%. Free marketing and public relations. Benefits to Tenants from Green Certification: Improves attractiveness of building to high-quality tenants, as multinationals are required to occupy green-certified space. Reduced absenteeism and higher productivity and retention. Lower maintenance/operating costs passed on to tenants. Buffer against increasing regulation and utility costs. Source: A. Shilova, 2012 Source: McGraw-Hill Construction

9 Project Risk Management from Green Certification Inadequate planning and execution most significant causes of budget overruns on development projects: Highest cost overruns associated with projects that lack appropriate technical and organizational specifications and plans from the beginning. Increased soft project costs, lost revenue due to project delays, and missed opportunities during market upturns result from insufficient project planning. Green certifications help improve project performance: BREEAM and LEED green certification systems place heavy emphasis on a high level of collaboration among project participants, requiring front-end planning. Synergies among LEED/BREEAM credits require multidisciplinary teams to forecast target number of credits, expected costs and interaction of building systems from an early stage in the development process. Results of synergy are increased performance of entire building and more timely building completion. Front-end planning helps to achieve more synergies and increases achievement LEED/BREEAM points. Front-end planning results in lower certification costs and higher quality in planning, design and construction. Higher quality in planning, design and construction results in higher probability of on-time completion and lower likelihood of performance problems. Source: BK. Ceylan, 2012

10 Selecting a Green Certification

11 COMPETING GREEN CERTIFICATION SYSTEMS

12 GREEN CERTIFICATION SYSTEMS: AN OVERVIEW Benefits of Green Certification for Developers: Green certification, though voluntary, enables developers to stay ahead of mounting regulation. Green certification is important for marketing a property to potential investors and occupants. Obtaining a green certification for a building future-proofs the asset into compliance with legal obligations, mitigates obsolescence, allows the building to compete at the top-end of the market, and assists in attracting customers. Caveats Regarding Green Certification Systems: Green Certification systems supplement, not substitute, regulatory minimums. Developers must know local building codes and regulations in addition to green. Russia now in process of developing own standards for sustainable, green construction and energy efficiency; seen as step towards modern, transparent building regulations. Most Green Certification systems are privately owned and promoted. Though many standards overlap, direct comparisons of effectiveness between system is difficult.

13 CHOOSING A GREEN CERTIFICATION SYSTEM TO USE Process of Selecting a Green Certification System to Use 1. Consult with shareholders to determine priorities and develop sustainability targets. 2. Select most appropriate criteria to achieve targets. 3. Pick rating system that best matches criteria. 4. Once building is constructed, implement building management system to maintain and improve performance.

14 Comparing Green Certifications

15 COMPARISON OF GREEN CERTIFICATION SYSTEMS Compulsory Assessor Notifications, Reports LEED BREEAM DGNB No Yes Yes End of design phase (optional) Completion End of design phase (optional) Completion During or in completion of design phase (optional) Certification Timing Completion End of design phase (precertification) Completion Reporting Method Digital Paper Paper Number of Certified Buildings Completion During or in completion of design phase (precertification) Completion Total: 10,921 Total: c. 200,000 Total: 229

16 LEADERSHIP IN ENERGY EFFICIENT DESIGN (LEED) Background: Country of origin: USA Founded: Certificates: 10, (now 3 rd version) 6 whole variants: New construction; existing buildings; core and shell; commercial interiors; homes (residential); neighborhood development. 6 topics: Sustainable sites; water efficiency; energy & atmosphere; materials & resources; indoor environmental quality; innovation & design. Cost to obtain: $2,250 - $27,500 Major focus: Energy efficiency. Pros: Cons: Highly customized ratings criteria for different types of building projects. High compatibility with international technical standards. Adapted only for socio-economic realities of the USA, stringent documentation. LEED Rating # of Points Certified Silver Gold Platinum 80

17 LEADERSHIP IN ENERGY EFFICIENT DESIGN (LEED) LEED in Russia: Certificates awarded in Russia: 6 Deutsche Bank IBIT Relocation, Moscow (Gold) Frito-Lay Manufacturing Plant, Azov (Silver) Hamilton Standard Nauka, Tver (Silver) SKF, Tver (Gold) Siemens Headquarters Russia, Moscow (Gold) 15 projects in Russia are registered for future certification, including: GE Energy, Kaluga; Ducat III, Moscow; VTB Arena, Moscow; EcoOffice, Skolkovo; Galeria, St. Petersburg; Techopolis, St. Petersburg. SKF Factory, Tver (LEED Gold ) Siemens Headquarters Russia Moscow (LEED Gold )

18 BRE ENVIRONMENTAL ASSESSMENT METHOD (BREEAM) Background: Country of origin: UK Founded: 1990 Certificates: c. 200,000 4 whole variants: New construction; refurbishment; communities; in-use 9 topics: Management; health and wellbeing; energy, transport; water; materials; waste; land use and ecology; pollution. Cost to obtain: GBP 1,170 GBP 3,650 Major focuses: Pros: Cons: Renewable energy, recycling, site location. Tied to construction/engineering standards of the UK, designed for highquality construction in British tradition. Customizable; various schemes adapted for specific countries and projects. Very stringent requirements with no allowance for deviation, complex system, high cost of approvals. BREEAM Rating % Score Unclassified < 30 Pass 30 Good 45 Very Good 55 Excellent 70 Outstanding 85

19 BRE ENVIRONMENTAL ASSESSMENT METHOD (BREEAM) BREEAM in Russia: Certificates awarded in Russia: 3 Japan House, Moscow (In-Use, Good) Sponda Oyj, Moscow (In-Use, Good) Ducat Place III, Moscow (International, Very Good) About 25 projects in Russia seeking BREEAM certification, including: Arcus III (Clearlink Development) White Gardens (AIG/Lincoln) BREEAM playing significant role in construction of Olympics facilities in Sochi 10 game venues for the Olympics will be developed to BREEAM standards. Special BREEAM Bespoke scheme developed specially for Olympics projects. Ducat Place III, Moscow Arcus III, Moscow Olympic Games Venues, Sochi

20 German Sustainable Building Council (DGNB) Background: Country of origin: Germany Founded: 2009 Certificates : variants: 6 topics: New construction and existing buildings. Ecological quality; economical quality; socio-cultural and functional quality; technical quality; quality of the process; quality of the location. Cost to obtain: EUR 1,600 EUR 20,000 Major focuses: Life cycle performance, project quality. Pros: Cons: DGNB in Russia: Second-generation system based on both German (DIN) and European (EN) norms. System already largely compatible with Russian SNiPs; high degree of flexibility. New system; no certification has yet been awarded in Russia. No projects have yet been certified in Russia. DGNB Rating % Score Bronze Silver Gold 80

21 PERSONAL BACKGROUND

22 Questions? For further information, please contact: Stephen E. Terzolo, LEED Green Associate Investor Relations Manager Investment Management Group Business Center Old Arbat Kaloshin Pereulok, 4, Building 1 Moscow Russian Federation Office: Fax: