PURSUIT OF SUSTAINABILITY BRINGS MANUFACTURING BACK INTO TOWN

Transcription

1 PURSUIT OF SUSTAINABILITY BRINGS MANUFACTURING BACK INTO TOWN A Cushman & Wakefield Global Business Consulting Publication INSERT CLIENT LOGO

2 PURSUIT OF SUSTAINABILITY Brings Manufacturing Back into Town Environmentally friendly products have gained widespread adoption by consumers in recent years. At the same time, companies have focused on increasing the efficiency with which these products are made, leading to the success of energy efficiency programs such as Energy Star (a U.S. Environmental Protection Agency program). As more consumers consider not only the products that companies make, but also how and where those products are made, companies are increasingly incorporating holistic sustainability goals such as LEED (Leadership in Environmental and Energy Design) certification into their industrial facility planning process. Through experience with this process, Cushman & Wakefield (C&W) has found that companies would be well-advised to include site selection among the top activities driving LEED certification. In other words, careful consideration should be given not only to how the building is designed, but also to where the building is located, in order to achieve targeted LEED credits. In some cases, as this paper will describe, location considerations based on sustainability principles including LEED criteria are driving manufacturing facilities back into town after decades of expansion into less urban locations. This paper provides an overview of tactical considerations to integrate LEED principles into the facility-siting process. It provides an overview of LEED and its prevalence among industrial facilities and outlines LEED s connection to the site selection process through lessons learned on a recent project. It also describes how LEED principles encourage industrial facilities to locate in dense or urban areas. While this paper s focus is on new industrial construction, similar criteria apply to new developments in various other commercial property types. It is C&W s hope that, by outlining LEED s connection to industrial site selection in a practical sense, corporate, economic development, real estate, and regulatory stakeholders may better understand the relationships between environmental sustainability goals and corporate industrial location decisions, and the associated obstacles that must be overcome. Location choices drive LEED certification. PURSUIT OF SUSTAINABILITY BRINGS MANUFACTURING BACK INTO TOWN A Cushman & Wakefield Publication 1

3 FIGURE A: POSSIBLE LEED CREDITS PER CATEGORY LEED 2009 FOR NEW CONSTRUCTION AND MAJOR RENOVATIONS RATING SYSTEM Energy and Atmosphere Sustainable Sites Indoor Environment Quality Materials and Resources Total 110 FIGURE B: LEED CERTIFICATION LEVELS Water Effi ciency Innovation and Design Process Regional Priority Credits LEED Overview and Prevalence Among Industrial Facilities LEED is a voluntary, consensus-based, third-party certifi cation program established by the U.S. Green Building Council (USGBC) in It is the most commonly used sustainable building rating system in the United States, though other programs such as Green Building Initiative s Green Globes program are also used. LEED-accredited buildings are becoming increasingly prevalent within the commercial real estate industry, and LEED specifi cations may also be found in local community building codes and industrial sites and parks. 1,2 LEED is a credit-based system, with credits awarded for meeting criteria related to environmental sustainability. The maximum credit total that can be achieved is 100, with ten incremental bonus credits available to capture based on regional priorities. The categories within the credit framework vary among LEED activity type and/or rating system (e.g., New Construction, Existing Buildings, Neighborhood Development), but in any case, the more credits a project is able to accumulate, the higher its LEED-certifi cation level. Figure A illustrates the categories and associated available credits in the LEED New Construction framework, and Figure B shows credit requirement totals associated with the various certifi cation levels. The signifi cant difference in credit totals between LEED Certifi ed and LEED Platinum translates to a greater level of planning required toward becoming certifi ed at a higher level. PURSUIT OF SUSTAINABILITY BRINGS MANUFACTURING BACK INTO TOWN A Cushman & Wakefi eld Publication 2

4 Since LEED s inception in 2000, the overall number of LEED-related activities (defined as each action, event or project occurring within a building) has grown to 276, Less than 1% of those activities are categorized under the use type manufacturing. 4 After considering the lower number of industrial manufacturing facilities in the U.S. (350,000) relative to other commercial buildings (4.8 million), C&W finds that the relative prevalence of LEED activities in manufacturing facilities is lower than its prevalence in other commercial buildings (0.5% and 6%, respectively). 5 Stated otherwise, based on high-level estimates it seems to be less likely that LEED certification is pursued for a manufacturing facility than for other facility types. Yet it also appears that LEED activity has room to grow, regardless of facility type. Figure C shows the significant growth already achieved over the past decade. 6 LEED Certified manufacturing facilities are generally less likely than other Leed Certified facility types. CUMULATIVE LEED ACTIVITY COUNT FOR EXISTING BUILDINGS AND NEW CONSTRUCTION 60,000 50,000 40,000 30,000 20,000 10, Those unfamiliar with the LEED ratings system may question its relevance to location choice. After all, what does environmentally sustainable building design have to do with its geographical placement? A significant amount, it turns out. A review of the LEED criteria suggests that up to 30 LEED credits can be influenced by the location of the facility.7 These 30 credits can account for the majority of credits required to achieve LEED Certified and can make or break attainment of a LEED Platinum rating, all through thoughtful consideration during the site selection process. FIGURE C: 2000 LEED Relevance to the Industrial Site Selection Process Figure D provides an overview of the LEED credits that are influenced by site selection. PURSUIT OF SUSTAINABILITY BRINGS MANUFACTURING BACK INTO TOWN A Cushman & Wakefield Publication 3

5 FIGURE D: LEED CREDITS INFLUENCED BY SITE SELECTION LEED 2009 FOR NEW CONSTRUCTION AND MAJOR RENOVATIONS RATING SYSTEM CATEGORY CREDIT I CREDIT NAME Energy & EAc2 On-Site Renewable Atmosphere Energy Sustainable Sites SSc4.1 Alternative Transportation Public Transportation Access Sustainable Sites SSc2 Development Density & Community Connectivity Regional Priority Credits Energy & Atmosphere Materials & Resources RPc1 Regional Priority Credits POSSIBLE CREDITS C&W SUMMARY OF CREDIT REQUIREMENT 7 Establish and use on-site renewable energy systems and take advantage of local utility net metering. 6 Reduce pollution and land development impacts from automobile use. 5 Develop urban areas with existing infrastructure, protecting greenfi elds and preserving habitat and natural resources. 4 Provide an incentive for the achievement of credits that address geographically specifi c environmental priorities. EAc6 Green Power 2 Engage in at least a two-year renewable energy contract to provide at least 35% of the building s electricity from renewable sources. MRc5 Regional Materials 2 Use building materials or products that have been extracted, harvested or recovered, as well as manufactured, within a specifi ed distance of the project site for a minimum of 10% or 20%, based on cost, of the total materials value. Sustainable Sites SSc1 Site Selection 1 Do not develop portions of sites that would have an environmental impact. Sustainable Sites SSc3 Brownfi eld Redevelopment Sustainable Sites SSc5.1 Site Development Protect or Restore Habitat Sustainable Sites SSc5.2 Site Development Maximize Open Space TOTAL 30 1 Rehabilitate damaged sites where development is complicated by environmental contamination. 1 Conserve existing natural areas and restore damaged areas to provide habitat and promote biodiversity. 1 Promote biodiversity by providing a high ratio of open space to development footprint. Up to 30 LEED credits can be infl uenced by site selection. PURSUIT OF SUSTAINABILITY BRINGS MANUFACTURING BACK INTO TOWN A Cushman & Wakefi eld Publication 4

6 Incorporating LEED Credits into the Site Selection Process Consideration of how the 30 location-variable credits apply to the facility siting process is where theory and principles connect to practical application and project outcomes. A review of the detail suggests several key property and location attributes that, if accounted for during the property search, will maximize the amount of LEED credits a new development is able to achieve. Those property and location attributes include: Development density and community connectivity; Access to public transportation; Brownfield development and site suitability; and On-site renewable energy generation potential and/or access to renewable power. 8 The profile of a property with these attributes is generally very different from the types of properties upon which industrial facilities are typically constructed. Companies locating new industrial facilities tend to prefer greenfield properties that are removed from dense populations and offer predictable development timelines, lower one-time and operational costs, and limited extraneous factors. In contrast, a property which maximizes LEED credits tends to have been previously developed and is located in a more urban environment exhibiting higher one-time and operational costs, as well as less predictable development timelines. These opposing property characteristics create a tension among location criteria for manufacturing projects with LEED certification goals; it can be difficult to find a site and surrounding community that offers an optimal combination of these traits. Successfully navigating this tension as it applies to specific properties is the key to optimal project outcomes. Properties that maximize LEED credit potential are generally very different from the types of properties upon which industrial facilities are typically constructed. PURSUIT OF SUSTAINABILITY BRINGS MANUFACTURING BACK INTO TOWN A Cushman & Wakefield Publication 5

7 Method Products: Bringing LEED to Life One company with whom C&W recently partnered, Method Products (Method), placed a high priority on pursuing all location-variable LEED credits. Method wanted to best position its new liquid soap manufacturing and distribution facility to achieve LEED Platinum certification. Pursuing LEED Platinum certification for a manufacturing facility is a rare priority and one that only a handful of facilities worldwide have achieved. In fact, out of all LEED new construction manufacturing projects, only nine have been certified Platinum, with only two of those being in the U.S. 9 As background, Method, a Founding B Corporation, has social and environmental improvement as a formal and legal organizational objective (a B Corporation is a corporate structure that requires social and environmental benefits to be provided in addition to for-profit goals). Method s goals for the facility exemplified its social and environmental improvement objectives. As Adam Lowry, Method co-founder and Chief Greenskeeper describes, We wanted to build our manufacturing facility within a community that could benefit positively from its presence. The world is urbanizing rapidly, so cities in particular are in need of businesses that can help revitalize their economies and communities. Building a world-class sustainable manufacturing facility gave us the opportunity to demonstrate how business can contribute to urban revitalization, community building, and the world around us. C&W s challenge was to translate Method s unique social and environmental improvement goals, as well as the criteria specified within the LEED framework, into a process by which communities and sites were to be identified and evaluated within an ambitious timeline. Based on supply chain considerations, the project search area began in the U.S. Midwest. In the process of evaluating 150 sites and buildings across five states for project suitability, several themes emerged: Remediated urban land with rail access proved to be quite rare. Brownfields were available, but they generally presented significant and/or uncertain timeline delays due to ongoing or planned environmental clean-up efforts. No suitable existing buildings were available to facilitate efficient and practical refurbishment. As is typical in many site selection projects, only a few properties appeared to meet the majority of project requirements, while a substantial number of properties marginally met project requirements. In the end, after thorough evaluation of a select few finalist sites and communities, a site represented by The Chicago Neighborhood Initiative in Pullman Park, Chicago, Illinois was chosen. It presented the best combination of LEED-attainment potential, a suitable and predictable development timeline, a strong community development partner, and the urban setting Method desired. In addition, the City of Chicago and State of Illinois played a key role by embracing and supporting the project and company, bringing the appropriate representatives, agencies and resources to bear. Building a world-class sustainable manufacturing facility gave us the opportunity to demonstrate how business can contribute to urban revitalization, community building, and the world around us. Adam Lowry Method co-founder and Chief Greenskeeper PURSUIT OF SUSTAINABILITY BRINGS MANUFACTURING BACK INTO TOWN A Cushman & Wakefield Publication 6

8 LESSONS LEARNED LEED activities have experienced significant growth in recent years as organizations look for ways to demonstrate their commitment to environmental sustainability. LEED certification is not easily achieved, nor prevalent, among new industrial facilities, especially at higher levels of LEED certification. Location choice has significant influence on LEED credit potential, regardless of property use. The types of properties and locations that maximize LEED credit potential are generally very different from the properties and locations upon which industrial facilities are typically constructed. This difference creates a tension among location criteria that requires careful navigation. Careful advance planning and integrated, purposeful approaches to location strategy, facility design, site selection and development are needed in order to achieve targeted LEED credits. Conclusion As more corporations pursue sustainability goals within their supply chain and facilities, achieving LEED certification can be a meaningful differentiator and an indicator of an organization s commitment to the environment and local community. Local communities, in turn, can help attract sustainability-oriented investment by demonstrating support for the considerations associated with LEED certification, particularly as related to site selection and development. Thoughtful consideration of C&W s lessons learned through its partnership with Method on a recent project by all entities involved in corporate location decisions may help to increase the likelihood of environmentally sustainable new development, particularly in urban brownfield locations in need. In the words of Adam Lowry, We hope our facility serves as a model for what manufacturing and urban renewal can look like in the 21st century. 1 USA Today, In U.S. building industry, is it too easy being green?; 2 LEED for Neighborhood Development Projects Overview; 3 As of August, 2014; Green Building Information Gateway (GBIG); 4 As of August, 2014; GBIG; 5 Fast Facts on Energy Use; LEED-related buildings not in the U.S. are included, which do not significantly impact results 6 As of August, 2014; GBIG; Based on LEED 2009 for New Construction and Major Renovations Rating System; LEED v4 for Building Design and Construction Rating System total is similar. 8 An additional attribute based on the LEED v4 for Building Design and Construction Rating System is access to demand response programs. 9 USGBC website; C&W analysis based on data prior to 2014 PURSUIT OF SUSTAINABILITY BRINGS MANUFACTURING BACK INTO TOWN A Cushman & Wakefield Publication 7

9 HOW C&W GLOBAL BUSINESS CONSULTING CAN HELP C&W Global Business Consulting specializes in corporate location decision solutions for industrial manufacturing and distribution facilities. Often complex and technically challenging, industrial facility location decisions frequently need to assess supply chains, logistics, labor, site requirements, utility infrastructure, permitting, incentives eligibility, and site development in an integrated and holistic fashion. C&W Global Business Consulting s singular focus is to lead and drive such assessments, tailored to the unique business issues of each individual client, resulting in defensible, data-driven, optimized location solutions. Whether exploring if facilities are in the right locations to maximize shareholder value, or evaluating investment and operational cost structures in new geographies, or determining the best site to enable attainment of timeline, workforce availability, incentives, and desired ongoing and one-time costs goals, C&W Global Business Consulting s deep experience helps clients minimize project risk and ensures that industry-leading methodologies and tools are applied in an unbiased fashion to significant and often infrequent multi-functional corporate initiatives with large capital outlays. Please contact us for more information about how C&W Global Business Consulting can partner with you to successfully navigate your industrial location questions. For more information, please contact: Matthew Poreba Consulting Manager Global Business Consulting +1 (301) matthew.poreba@cushwake.com Andy Mace Managing Director Global Business Consulting Supply Chain Solutions +1 (717) andy.mace@cushwake.com Debra Moritz Executive Managing Director Leader Global Business Consulting & Specialty Practice Groups +1 (312) debra.moritz@cushwake.com HOW LEED BRINGS MANUFACTURING BACK INTO TOWN A Cushman & Wakefield Publication 8

10 Cushman & Wakefield is known the world-over as an industry knowledge leader. Through the delivery of timely, accurate, high-quality research reports on the leading trends, markets around the world and business issues of the day, we aim to assist our clients in making property decisions that meet their objectives and enhance their competitive position. In addition to producing regular reports such as global rankings and local quarterly updates available on a regular basis, C&W also provides customized studies to meet specific information needs of owners, occupiers and investors. Cushman & Wakefield advises and represents clients on all aspects of property occupancy and investment. Founded in 1917, it has 250 offices in 60 countries, employing more than 16,000 professionals. It offers a complete range of services to its occupier and investor clients for all property types, including leasing, sales and acquisitions, equity, debt and structured finance, corporate finance and investment banking, appraisal, consulting, corporate services, and property, facilities, project and risk management. This report has been prepared solely for informational purposes. The information on which this report is based has been obtained from sources we believe to be reliable, but we have not independently verified such information and we do not guarantee that the information is accurate or complete. Cushman & Wakefield, Inc. All rights reserved. Cushman & Wakefield, Inc Avenue of the Americas New York, NY HOW LEED BRINGS MANUFACTURING BACK INTO TOWN A Cushman & Wakefield Publication 9