Communicating the Value of Green Buildings

Presenters
Steve Kokes Coates Kokes Portland, OR steve@coateskokes.com Peter Andrews Melvin Mark Brokerage Co. Portland, OR pandrews@melvinmark.com Andrew MacKinnon Colliers International Victoria, BC andrew.mackinnon@colliers.com

Its a Brave New World

Trends
Number of green consumer packaged goods doubled between 2005 and 2007 - 5933 released in 2007 alone 36% of consumers almost always buy green - polled in January 2008 - vs. 12% in August of 2006
Source: Mintel, a Chicago-based consumer research company

Trends
55% of US consumers consider the environment the most important issue facing the country.
Source: BuzzBack Research, New York, May 2008

Its the building stupid

In the United States alone, buildings account for: 70% of electricity consumption, 39% of energy use, 39% of all carbon dioxide (CO2) emissions, 40% of raw materials use, 30% of waste output (136 million tons annually), and 12% of potable water consumption.

Stats from USGBC website

Energy is Now More Important

Heightened public awareness around global warming makes energy the Big Kahuna issue of sustainability. Its the low hanging fruit. Its easily measurable.

 Most CFOs believe sustainability can lead

so clearly this is an

to cost savings, increased revenues, greater

customer retention and a competitive advantage,

opportunity that can

not be ignored. The question each of us should

ask is whether we are taking an aggressive enough position, given the rapidly approaching

tipping point of this issue.

Lauralee Martin Global Chief Operating and Financial Officer Jones Lang LaSalle

Communicating the Value of Green to Prospective Tenants

Green Building as a Mega-Trend

2007 green building construction starts exceed $12 billion 90 million square feet in 1000+ projects LEED certified Another 8,000 projects registered

Green Building as a Mega-Trend

Citigroup committed $50 billion to environmental projects Goldman Sachs committed $1 billion to alternative energy in 2005 and exceeded this by 50% by 2007 Hines creates first green fund of $120 M in equity Co-Star study 4.1% higher occupancy $11.33 per square foot

Here in Portland
More than 1 million sq. ft. of LEED certified product coming on line over next 2 years

Park Avenue West Tower

MachineWorks

One Waterfront Place

Is Green Building Becoming a Priority?

If so, how do we market, differentiate and properly describe these properties to prospective tenants?

A Changing Product
Reduces occupancy cost Lowers absenteeism Increases productivity Fosters a healthier work environment

What is LEED?
A process that: Uses integrated design and other best practices. To produce product that will - be more efficient - decrease maintenance - use fewer resources - increase productivity

What is LEED?
A hierarchical system: Certified Silver Gold Platinum But even at the same level, no two buildings will be exactly alike

Top Four Tenant Issues

Location Rate Tenant Improvements Timing

The Value of Green Buildings to Tenants

Fulfills a philosophical commitment Increased productivity: better lighting quality improved thermal control improved air quality a new value system

What Are the Costs of Doing Business?

For most businesses 90-95% of their costs are human
salaries benefits training healthcare

People 10 employees @ $100,000/year (average FTE cost) HR total cost $1,000,000 (95% of total cost) Standard Existing Building 2,500 sf @ $20/sf (average existing buildings) $50,000 (5% of total cost) High Performance Building 2,500 sf @ $32/sf (average existing buildings) $80,000 (8% of total cost) Total: $1,050,000 (100%) Productivity per SF $1,000,000 x .03 = $30,000/year gain divided by 2,500 = $12/sf per year Increase in Revenue $2 M x 1.03 = $60 K increase

Simple Questions Show the Way

Average annual employee cost? Average annual absenteeism rate? Average annual turnover rate? Estimated turnover costs to replace an employee? Average occupied square footage per employee? Average annual health-related complaints due to conditions related to the workplace and estimated annual cost of dealing with these issues?

What Can Brokers Do to Become More Educated

Read Sustainable Industries Journal Urban Land Institute USGBC website Attend seminars Find specialists in architecture/ engineering/construction, etc.

The Value of Green for Owners

Definition of Value
Value: the rate at which you produce a result Its about work and productivity, not efficiency

How a Building Gets Green Work Done

View a building or buildings as a system InputsProcessOutputs Increasing productivity throughout the system

The 3 Rs

2007 Sandia Corporation

The Ways of Measuring Value

Monetarily: NOI, IRR, costs, revenue occupancy rate, rental rate Environmentally: quality of life or survival?

Environmental Value
Addressing the Commons shared resources of carbon, energy, air and water Beyond code compliance Obligations versus warranties

Addressing the Commons

Market Mechanisms: Infrastructure incentives Carbon markets Transferable development rights

Infrastructure

sewer

roads

electrical

water

Carbon Markets

http://go.worldbank.org/DM8TFS9FP0

Transferable Development Rights

Staff Contact: Darren Greve TDR Program Manager 206-263-0435 206-296-0192 Fax 206-296-0200 TDD darren.greve@kingcounty.gov

Beyond Compliance
Green building codeperformance path Zoning and density approval process Triple bottom linepeople, prosperity, place

Green Building Code

Changes to the BC Building Code, Effective September 5, 2008

Achievement of an EnerGuide Rating System rating of 77 is an acceptable solution that provides an alternative to compliance with the insulation table for residential buildings.

Zoning and Density Approvals

Bill 27 BC Legislature

Development Cost Charges (DCC) To exempt DCCs for small-unit housing unitsfor: - for-profit affordable rental housing; - a subdivision of small lots designed to result in low greenhouse gas emissions; - development that is designed to result in low environmental impact.

Triple Bottom Line

Copyright 2008 Palgrave Macmillan Ltd.

Obligations vs Warranties
Green leases District energy Positive action rather than avoidance of negative action

Green Leases
Standard operating procedures - energy conservation Definition of rights, duties and Privileges between landlord and tenant - indoor air quality - waste - carbon

District Energy

District Energy St. Paul

Positive Action
Traditional Neighborhood Design: Compact Walkable Mixed use Habitat uses on-site Bio-filtration beds/retention ponds

The New Value Chain

Future proofing Life cycle analysis Proactive restoration Cradle to cradlesystems approach

Communication Tips
Make green more than trendy beyond branding benefit Highlight value versus current market appeal Target appropriately to the value chain of your client

Communicating the Value of Green

Legacy

Community Relations and Image

Eco + Luxury

The Casey

Appeal to the Financial Motivations

Describe the Less Tangible Benefits

Utilize the Language of the Industry

Metaphors, Analogies and Equivalents

Stories and Backstories

developer A for-profittogether a putting

LEED Platinum building

is really unusual.

And at the end of the day,

any more to build and the

it didnt really cost us energy savings

significantly increases the

value of the building.

Gary Christensen Christensen Development Corp.

Encourage Them to Talk to Others

Provide Specifics/Support

Building orientation, design elements and material choices increase

energy

by more than 30% over conventional buildings

efficiency

Dont be Afraid to Talk About Your Philosophy

Conveying What Youve Done is Good but do it in a Humble and Understated Way

Awards Lend Credibility

Pursuing Earned Media in Addition to Paid

Would you like some fries with that?

The more sustainability is aligned with the overall positioning of your company the more effective the appeal will be.

Integration is Key

Donts
Promise an immediate and higher margin than will be delivered Get long-winded Imply that the audience is doing it all wrong but if they infer that on their own, thats OK.

Avoid Greenwashing

Greenwashing
Skepticism is at an all time high Greenwashing Index (greenwashingindex.com) Specifically avoid messaging that: - misleads - overstates - is vague - leaves out significant contradictory information

You Can Tell When People Get it

And When They Dont.

Consider the Downside

Lower tenant satisfaction Declining reputation Early obsolescence

Resources
www.sustainablelifemedia.com Green Marketing by Jacquelyn A. Ottman www.betterbricks.com www.coateskokes.com

Thank You!

Q+A