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Your Bottom Line

You can afford to build green: The true cost is much lower than you think

Doug Gatlin / U.S. Green Building Council

E vidence that green buildings do not have to cost a penny more than their conventional

counterparts continue to pile up, as do the studies that validate significant ongoing operational cost savings for both new and existing green buildings. And these studies are extending beyond time and material into such factors as building valuation, and health and productivity of building occupants.

The most commonly cited reason for building own- ers and operators not going green is the perceived higher first costs. A 2007 study by Davis Langdon notes, “It is clear from the substantial weight of evidence in the marketplace that reasonable levels of sustainable design can be incorporated into most building types at little or no additional cost. In addi- tion, sustainable materials and systems are becom- ing more affordable, sustainable design elements are becoming widely accepted in the mainstream of project design, and building owners and tenants are beginning to demand and value those features.”

tenants are beginning to demand and value those features.” Franchise Tax Board Headquarters Photo by John

Franchise Tax Board Headquarters Photo by John Swain, courtesy of HOK

In fact, key players in real estate and construction regularly misjudge the costs and benefits of green

buildings, a new study by the World Business Council for Sustainable Development (WBCSD) reports.

Respondents to a 1,400-person global survey

estimated the additional cost of building green at

17 percent above conventional construction, much

higher than the true cost difference of about 1 to

2 percent. At the same time, survey respondents

estimated buildings’ greenhouse gas emissions at

19 percent of world total – half the actual number

of 40 percent.

While experienced users of the Green Building Council (Leadership in Energy and Environmental Design) LEED Green Building Certification System are finding it possible to build at Silver and Gold LEED levels for the same cost as conventional buildings, most

studies are finding that certification adds only 1 or

2 percent of the overall budget to the construction

cost. LEED registration and certification fees are negligible, averaging around $3,000 to $5,000 per project, depending on size and whether it is a new or existing building. (New construction requires more information to be reviewed by USGBC, so the fee is slightly higher than for existing buildings.) Registra- tion is essential for projects pursuing LEED certifica- tion and provides access to a variety of resources, including LEED Online, a project management tool that teams use to prepare documentation.

Investments in building commissioning, energy model- ing and additional professional services pay dividends as risk mitigation strategy for owners. In fact, building commissioning (a quality control process ensuring that all HVAC, plumbing, electrical and security systems are

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operating as intended) provides one of the most cost- effective ways to ensure lower energy use and cost once the building is operational.

According to Texas A&M University, the commis- sioning process typically reduces energy costs in existing buildings by about 20 percent, compared to buildings that do not go through routine com- missioning. While these might add to the project budget, they end up saving money in the long run and are also best practices for building design, construction and operations.

When Adobe Systems Inc. earned platinum LEED certification for its existing headquarters complex in San Jose, California, which company leaders thought was already high performing, they were surprised to learn that some of the building systems were not running as efficiently as they could. By pursuing LEED certification, they uncovered energy waste, subse- quently saving over a million dollars annually. In fact, modifications to the programming of a garage fan

In fact, modifications to the programming of a garage fan Adobe Systems, Inc. Tower San Jose,

Adobe Systems, Inc. Tower San Jose, California

alone reduced energy consumption enough to save $98,818 yearly without sacrificing air quality!

Managers of LEED-certified buildings regularly report energy and water savings between 30 and 50 percent over their noncertified counterparts.

Savings From Ongoing Operations

Once the project is operational, buildings recoup added costs within the first one to two years, a blip compared with the typical lifespan of a building, which can often exceed 100 years. LEED-certified buildings use significantly less energy and water than a conven- tional building. Managers of LEED-certified buildings regularly report energy and water savings between 30 and 50 percent over their noncertified counterparts, yielding large savings in operational costs.

But beyond the obvious implications of reduced util- ity costs, the business case for green buildings as financially sound investments is strengthened when you consider LEED-certified buildings’ increased worth. Several building projects recently submitted to USGBC show an average savings of more than $1.50 per square foot in operational expenses as a result of management improvements and equipment upgrades conducted to earn LEED certification. In investment properties, this translates into an at- tractive increase in net operating income (NOI) that delivers increased profitability year after year.

The role of green building practices and features is boosting the value of real estate and has appraisal experts taking notice. According to Theddi Wright

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Chappell, the managing director and national practice leader of National Green Building & Sus-

tainability Practice Valuation Services for the Capital Markets Group of Cushman & Wakefield of Washing- ton, Inc.: “There is no doubt the market is looking more closely at issues such as energy efficiency and

a building’s carbon footprint in making investment

decisions. Buildings that do not measure up in these two areas alone are losing favor among investors and in many instances are being considered less attractive investments long term. Even though data

may not currently exist to prove up a value premium

for sustainable properties, there is a growing belief

in the valuation community that if a building is not

energy efficient and high performing, there is a

much greater likelihood its value will be discounted

in the coming years.”

its value will be discounted in the coming years.” Oxford - Metro Centre Photo by Shai

Oxford - Metro Centre Photo by Shai Gil, courtesy of HOK

Overall, building a new building or upgrading an existing building to LEED standards offers a remarkable return on investment (ROI). Cost-benefit analysis on 10 buildings recently awarded LEED certification shows an average ROI of 29 percent for green investments. How’s that for the bottom line?

The Other Side of the Equation

One of the costliest aspects of a building is the health of the people inside. A study conducted in 2000 by

the Harvard School of Public Health and the Polaroid Corporation found that employee absences cost com- panies billions of dollars annually. In a study by Wil- liam Fisk, green buildings were found to add between $20 billion and $160 billion in increased worker productivity every year. According to many facility managers overseeing LEED-certified buildings, these buildings yield significant productivity and health benefits, including heightened employee productivity and satisfaction, fewer sick days and less turnover. Case studies further demonstrate that employees who work inside the buildings are more productive and report greater satisfaction with their workplaces, specifically identifying sunlight, views of nature and heightened thermal and acoustic comfort.

Other Strategies

The most effective way to reduce higher costs is by getting an experienced project team in place and prac- ticing the principles of integrated design. Integrated design engages users and operators during the design process so projects are able to integrate better design and understanding of building features and functions.

To stay on track, according to Davis Langdon’s study:

• Begin documentation early and maintain it as you go.

• Update and monitor the LEED checklist regularly so you have a clear picture of your progress.

• Use energy- and cost-modeling tools to drive decisions at the design phase, not to validate decisions at the construction phase.

The best response to the question, “How can you afford LEED certification?” may well be, “You can’t afford not to!”

Existing Buildings

LEED has been a successful tool not only for greening new buildings but for improving the efficiency and healthiness of existing buildings. The commercial

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buildings market in the United States is vast and aging. Spanning more than five million individual facilities and comprising 70 billion square feet, U.S. commercial buildings–including offices, retail facilities, schools and public buildings–are on average more than 30 years old. Many could benefit from the use of green operations and maintenance strategies addressed in the new LEED for Existing Buildings: Operations and Maintenance (O&M) certification system.

Launched in January 2008, LEED for Existing Build- ings: O&M is a tool for maximizing efficient operations in existing buildings. It identifies and rewards best practices across the spectrum of building manage- ment issues, including energy and water efficiency, resource conservation, recycling, environmentally preferable purchasing and green cleaning. LEED for Existing Buildings: O&M also serves as an outline for implementing improvements and provides a reference to the technologies and strategies that help you on your journey toward sustainable facilities operations.

USGBC also provides independent third-party verification of green performance levels in buildings that pursue LEED certification. Prevalent in the new construction arena, LEED certification is now gain- ing popularity among existing buildings, as owners seek to quantify the performance of their buildings in a range of key areas such as carbon emissions,

buildings in a range of key areas such as carbon emissions, Winrock International Photo by Craig

Winrock International Photo by Craig Dugan, courtesy of HOK

sustainable site management, water conservation and indoor environmental quality.

LEED for Existing Buildings: O&M is the result of major revisions to the LEED for Existing Buildings certifica- tion system, which was first launched in 2004. The new version has a clearer focus on green operations as opposed to construction, making it a more useful tool for implementing sustainability across the board in an organization’s facilities. The other goals of the new system are streamlined reporting requirements for earning LEED certification, and increased focus on measured environmental outcomes.

The journey toward sustainability begins with creat- ing a plan for improving existing facility performance and operations practices. The collection of measures, known as credits in the LEED for Existing Buildings:

O&M certification system, can be used as the basis for this plan. This can be done at the level of a single building or can be applied to dozens or even hundreds of buildings across a portfolio. LEED for Existing Buildings: O&M includes credits that address green cleaning, materials and resources, energy and water efficiency, and indoor environmental quality. Many of the items can be implemented quickly at no cost and will garner immediate environmental benefits. Others can be implemented over time as part of a compre- hensive upgrade plan. To learn more about LEED for Existing Buildings: O&M, visit www.usgbc.org.

Doug Gatlin is vice president for market develop- ment at the U.S. Green Building Council, overseeing the family of LEED rating systems in all major com- mercial market segments, and managing overall cus- tomer relations for LEED and the council’s new pilot initiative, the Portfolio Program. He has 16 years’ experience in energy and environmental policy and has worked on climate change response strategies and voluntary pollution prevention programs.

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