By Amy Erixon, Toronto
Whether or not you believe in Global Warming, as real
estate professionals we all can appreciate the value of controlling operating
expenses for the benefit of both our tenants and owners. But hard data
has been elusive concerning the long term net economic proposition of “green
building” design and operations; leaving the sale of these attributes difficult
on their merits and more in the category of “politically correct” or “risk
mitigation”. The good news is, if you know where to look, broad based,
longitudinal data is beginning to become available to quantify those benefits
to owners and users of real estate.
At a recent RealPAC sustainability committee meeting Nils
Kok, Associate Professor at Maastricht University, a Berkley visiting Scholar
and co-Founder of GRESB (Green Real Estate Sustainability Benchmark) presented
the results of the Benchmark study, commenced in 2007 and involving over 30,000
buildings on four continents. Perhaps not surprisingly, North America
(full of energy producers) is not at the forefront of this movement,
politically or professionally. However, even in North America energy
producing companies are six times more likely to be a “green
building” than Banks or major Law Firms, the largest tenant groups in Class A
office buildings. (Makes you wonder what the energy producers know but
are not telling the rest of us).
Statistically, Buildings consume 74% of all energy
consumed in North America and Europe, and roughly half of that is from
commercial uses. Bottom line is energy matters to the building industry
and controlling it can make a major impact on occupancy costs. Here
are a few of the Key findings from the Study:
·
After 30 years, less than 10% of the standing
inventory is Green rated
·
Green-rated buildings between 2007 and 2010
achieved, compared to the universe:
o
3% higher rents
o
7% higher net effective cash flow
o
13 % higher transaction values
·
$1 of energy savings translated into $0.95
higher rents and $13 psf higher value
·
Green-rated buildings had measureably higher
occupancy levels and lower volatility of returns (note 75% were rated
"Class A" vs. 25% of the general sample)
I was surprised by three things in the study, first that
only 11 US states have more than 7.5% of their office inventory certified. These states are the obvious California,
Washington, Oregon, Massachusetts and Colorado but also included conservative
bastions of Texas, Lousiana, Georgia and Virginia with Minnesota and Illinois
rounding out the list. Second, I was surprised by the overall average age of
the building stock in the hands of institutional investors, green buildings
averaged 25 years of age and sample pool averaged 53, although taking
renovations into account the sample was only marginally older at 26 years (this
is measuring by number of buildings, not square feet). Lastly, to date
the finding is that although tenants will pay more for better performance
(platinum status vs. gold for example), investors are not so willing.
Gold LEED standard has been the sweet-spot for achieving surplus value in
institutional portfolios.
The purpose of Nils' visit was to make a plea to Canadian
institutional investors to participate in the benchmarking study. There
is no broad inventory currently of Canadian buildings with Green ratings. With
less than 10% of the global building inventory certified "Green"
broader participation is very important to substantiating the accuracy of the
Data, and measuring our own performance in energy efficiency design.
