A new study by the Real Property Association (RealPAC) and its partners found that green buildings have higher asset value than conventional buildings. This conclusion was reached following interviews with developers, owners and occupiers of green office, industrial, retail, residential and educational buildings in Canada, the U.K. and the U.S.
Green Value is the title of the study and a term defined as 'the net additional value obtainable by a green building in the real estate market.'
"What is important about our study is that it is aimed at the private sector. It provides evidence to use with our members that green building design and retrofit is worth doing." said Michael Brooks, CEO of RealPAC. With increased knowledge about green buildings and a desire for improved corporate governance, Brooks foresees "a major push by Fortune 500 companies who will want to be in an ultra low emmission building, a building with pedigree whether it is LEED (Leadership in Energy and Environmental Design or GoGreen (green building certifications).
A private sector participant in the study SAS is just completing a Class A office building that will be the first LEED certified green building in downtown Toronto. Among its many innovative features are drains on the roof that feed rain water to a cistern in the basement. Weather permitting, the building can operate independently from the municipal water system by using its own water resevoir. It also has a pressurized fresh air plenum beneath its floors that will allow employees to adjust airflow to their workstations. (Click here for a live CAM of the SAS building)
Stuart Bowden, Senior VP of Finance and Operations at SAS provides a convincing rationale for their decision to 'go green.' "SAS is spending no more than it does to lease space at BCE Place. It has doubled the square footage available to the company and built the most technically advanced building in the country."
SAS has received no financial incentives from any Government but 'superb political support' for its efforts from Toronto's Mayor Miller, Councilors Brian Ashton Head of Economic Development and Pam McConnell.
Bowden added that the new SAS building is 96% leased before completion. Tenants have taken ten-year leases that are 66% above those in the local market and there is 'too much demand' for remaining the space.
The building was advertised with the tag line "This space is fresh" and promoted with a value added proposition regarding the environmentally friendly features. According to Bowden, "It made it very easy to market the building".
The SAS experience reflects findings in the Green Value report. It found the higher value of green buildings is because they earn higher rents or prices, secure tenants and buyers more quickly, lower tenant turnover, cost less to operate and maintain, attract government inducements for environmental stewardship and they benefit the occupants.
The most significant factor according to Green Value is the 'benefit to the occupant' of a green building. The report references a 2004 Turner Construction survey of over 800 owners and associated consultants that found green buildings outperformed conventional buildings in seven categories the top three of which were social benefits.
From a business perspective, 80% of a building occupants operating cost is staffing while only 10% is building operations of which 1% is energy. Green Value showed there are significant cost savings from increased productivity, higher academic performance, improved morale, lower absenteeism, better health and well-being of green building occupants. A study cited in Green Value of 11,000 workers in 107 buildings showed an 1% increase in productivity, a saving of $3 per square foot per year.
According to Green Value green buildings are not a lot more expensive to build than conventional buildings. They have a construction cost premium of nil to 14% for an experienced green builder and up to 20% for an inexperienced one. The additional construction cost is offset by the increased value of having a green building and green buildings are expected to last longer.
There are only 12 case studies included in the GreenValue study. In Canada the buildings are; Green on the Grand in Kitchener Ontario, the SAS Building in Toronto, Ottawa Paramedics Building in Ottawa, Vancouver Technology Park in Victoria, B.C. and Mountain Equipment Co-op in Montreal. All these buildings are relatively new and primarily owner occupied. None of these buildings has been sold since constructed, the acid test for market value.
Due to dramatic growth in requests for green building certification more data to strengthen the business case for green buildings can be expected. Membership in the Canada Green Building Council who issue LEED certificates has gone from zero in January 2003 to 800 in April 2005. In addition are applicants to BOMA for a Green Globe green building certificate. Green Globe is lower cost than LEED and offers a process where existing building owners can incrementally improve the 'environmental status' of their building.
Twenty-one Green Value recommendations cover everything from improved accounting and appraisal practices, to better communication among green building experts and the need for changes to building codes. Although there is no formal process currently in place to follow-up on the recommendations, there is a 'Green Real Estate Conference' and 'National Green Building Show' to be held at the Ottawa Congress Centre in April 2006 sponsored in part by RealPAC, the Public Works Department of Canada and other interested parties where the Green Value report can be discussed.
Green Value can be downloaded from the Real Property Association (RealPAC) website.