How Green is Your Building?

It’s no secret that the real estate industry is a major user of natural resources and thus, has one of the largest carbon footprints of any industry sector.  In fact, a recent report released in the United Kingdom and produced by property advisors GVA Grimley, assessed the carbon footprints of the country’s 10 largest cities based on total overall commercial space.  It’s an illuminating report, even for those of us “on this side of the pond,” because it is indicative of a growing awareness among the real estate sector that issues such as sustainability and renewable energy sources such as solar are not just a passing trend.  With the U.K and many other countries committed to reducing greenhouse gas omissions, the green movement is there to stay.   

This fact was brought home to me in another recent report, “The Greening of U.S. Investment Real Estate – Market Fundamentals, Prospects and Opportunities” which was issued late last year by the research division of global institutional property manager, RREEF.  The report concludes that “green building is fundamentally altering real estate market dynamics” and that, through a combination of revamped building codes, federal and local government regulation, tenant demand and peer pressure, there will come a redefinition of what constitutes “institutional-quality” real estate. 

This report – and I expect others like it now in the works – points out that this redefinition is already be taking place.  Data analyzed by RREEF suggest that buildings meeting LEED and/or Energy Star standards consistently outperform other buildings in attracting tenants – space stays dark for less time and vacancies are less -- and in commanding higher rents per square foot than non-green conventional buildings.  Admittedly, most of these buildings are newly constructed and thus, more appealing, from a tenant perspective.  But, over the next few years, we expect more existing buildings to be retro-fitted to higher green standards and thus, to compete with even newly constructed product.

So, as the real estate industry becomes more aware of the economics of green, the bifurcation of the “institutional-quality” real estate market is likely to become complete.   This should leave many property owners today thinking: “How Green is my Building”?

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[MasterPlan Capital]

I tell all my developer clients: “ Conserving resources equals saving money”