The adoption of green building systems and technologies is now widespread among California’s premier office buildings. As measured by our Green Building Barometer, 54% of Class A office space in the state is now classified as green (defined as either Energy Star or LEED certified). This achievement is a striking improvement over the situation just three years ago, when only 26% of Class A space was certified green.
With the construction of new office buildings at an all time low, the increase in green space largely reflects the upgrading and certification of existing buildings. LEED certification is becoming almost mandatory for Class-A office buildings in the financial districts of the major cities:
In San Francisco the Transamerica Pyramid recently achieved the highest level of certification with LEED Platinum status.
Building codes in the state are now greener, so that where new construction does occur, green certification is now very likely to follow, such as at the Tustin Centre in Orange County.
The adoption of greener operations in commercial buildings is being aided by new tools and technologies that help building owners to go green. For example, in October the City of San Francisco and the Business Council on Climate Change published a Green Tenant Toolkit for commercial buildings. The toolkit uses many of the green leasing tools and strategies developed by the California Sustainability Alliance, and is part of a suite of initiatives that also includes green financing packages and legislative changes designed to encourage greener buildings.
Green buildings first emerged in the late 20th century and are consistently being recognized within today’s market as positive additions to the real estate industry. Greater energy efficiency not only increases a building’s value by reducing the property’s carbon footprint, but also saves on overall operating costs. Despite the obvious environmental and economic savings, the real estate industry is currently lacking a consistent mechanism to account for energy efficiency characteristics in the process of determining property value. This gap leads to imprecise and often inconsistent valuations of commercial properties.
A green real estate appraisal standard would help close this gap by measuring the efficiency and sustainability value of commercial properties, thereby attaching increased asset value to higher-performing buildings. This would encourage banks to release capital for more energy efficiency projects, since it would be easier to assess property value based on money and energy savings. Since capital costs are the main barrier for efficiency upgrades and retrofits, creating a standard and getting banks on board would assist in creating new sources of funding in the efficiency arena.
A building performance data tracking system would also give appraisers a resource for comparable projects. Stakeholders from energy, financing, appraisal, and real estate service industries are currently lacking consistent data about the monetary and energy efficiency benefits of higher performing buildings. A green appraisal standard will provide these stakeholders with a consistent methodology to assess properties’ energy efficient and sustainable features in determining market value. This improved standard and data system would also provide incentives for greater investment opportunities into efficiency. Since green building has become such a positive trend, why not add standards that will boost funding sources for efficiency projects and bolster green jobs?
Currently, the U.S. Green Building Council, Natural Resources Defense Council (NRDC) and the Real Estate Roundtable’s Sustainability Policy Advisory Committee (SPAC), have made it a top priority[1] to establish a green real estate appraisal standard. Through a public comment process, they continue to press the Obama Administration to use their existing legal authority to establish these green standards.
Let us know what you think about a green appraisal standard.
Thomas Properties Group ranks first in environmental performance among publicly traded real estate companies in North America by the Global Real Estate Sustainability Benchmark (GRESB).”
The GRESB initiative was created in 2009 to assess the environmental and social performance of public and private real estate investments. The overall goal is to reduce the real estate sector’s carbon footprint while creating shareholder value.
With a #1 ranking in North America, it is no surprise that Thomas Properties Group has also received the coveted 2011 Calibre Environmental Award. This award, presented by the Calibre Committee in concurrence with the International Interior Design Association, seeks to recognize the outstanding commitment to environmental stewardship of organizations that are not only an integral part of the design community but also have a profound impact on society as a whole.
TPG’s mission is “to make a positive and profitable contribution toward a sustainable future.” By following this mission, TPG has continually been at the forefront of sustainability development by focusing on their product, customers, and investors to reduce operating expenses, reduce carbon footprints, and improve occupant productivity. In 2008, TPG received our Sustainability Showcase Award, which recognizes leaders that are paving the way towards California’s clean energy and low carbon future.
Thomas Properties Group is committed to greening their entire portfolio of existing buildings and new developments, and continues to coordinate green efforts companywide with the help of Daniele Horton, the company’s full-time Sustainability Manager. Daniele is one of our Green Building Advisors, sits on the USGBC-LA Board of Directors, and chairs its Existing Buildings Committee. We are proud to have her as part of our team and want to congratulate Thomas Properties Group on receiving the much deserved GRESB #1 US ranking and the 2011 Calibre Environmental Award!
With the new year well underway, now is a great time to review the state of green building in California. The good news is that California is closing in on the important “50% of Class A office space being green” mark. The not-so-good news is that there is still a long way to go in order to improve the sustainability of Class B and C office buildings.
As of November 2010, 48% of Class A office space in California was certified green (i.e., EnergySTAR® and/or LEED certified—equating to approximately 100 million square feet of office space, and a nearly 100% increase from the 26% of Class A office space that was certified green when we introduced our barometers in October 2008.
Unfortunately, the adoption of green building practices for Class B and C office buildings is markedly lower, at least in terms of such practices being recognized through certification. As of November 2010, 7.4% of Class B office space was certified green as compared to just 2.7% in 2008. Similarly, green Class C space has more than tripled from 0.2% in 2008 to its current level of 0.8% . However, despite this growth, the green base still remains small, and more needs to be done to promote the type of initiatives that allow lower-class buildings to earn green certification.
Differences between Class A, B & C office buildings are due to multiple factors including:
Many Class A buildings are built to higher specifications, with advanced levels of design and systems that are inherently more energy efficient
Potential lessees of Class A space are more frequently looking for green space
Class A space owners and property managers have better access to capital for investments
Ownership of many Class B and C buildings is generally split among many investors
Investors in Class B and C buildings typically have shorter investment time horizons
Finally, for higher-end buildings, the reductions in utility costs resulting from green improvements are more likely to make a significant impact on building operating expenses.
Looking back, it is rewarding to see significant increases in the proportion of certified green space occurring during a time period with historically high vacancy rates and a severe economic recession. With the economic situation improving, we can now look forward to many further advances in the greening of commercial buildings.
As the green building movement gains momentum, there is a growing recognition by the financial markets of the magnitude of potential investment opportunities in the sustainable building and construction sector.
A recently published research note by Canaccord Genuity concluded that the adoption of green practices is a significant trend that is likely to become the norm in the global building and construction industry. In recent years, the percent of non-residential building that is “green” has increased rapidly – growing from less than 1% in 2000 to 10%-12% in 2008 – and is expected to reach 20% or more by 2013. Mc-Graw Hill Construction recently estimated that market spending for green building in the U.S. will reach $135 billion by 2015.
The demand-side, supply-side, and regulatory factors driving this transformation include:
the proliferation of green building standards, such as LEED®, ENERGY STAR® and ASHRAE
the realization of financial benefits, including lower energy costs, higher rents and lower vacancy rates
legislative mandates such as green building codes, and incentives such as tax credits, accelerated permitting and equipment rebates
the continuing volatility of energy prices
There were several key developments in 2010 that helped to maintain the momentum of the green building movement:
ASHRAE 189.1. The American Society of Heating, Refrigeration and Air-Conditioning Engineers introduced “a new standard for the design of high-performance green buildings” that is expected to result in a 20% or more improvement in energy performance over the standard it replaces. The release of a new standard by ASHRAE is an important development because ASHRAE standards are often referenced in building codes.
International Green Construction Code. In March the International Code Council (ICC) launched the International Green Construction Code. This is a green version of the existing ICC codes, which are widely used to define local and state building codes. The ICC collaborated with ASHRAE and the US Green Building Council on the development of the new code, and it is expected to have a significant impact on standardization of building codes at both a national and international level.
The report also highlights the momentum being gained by green retrofits to existing buildings. Existing buildings comprise a much larger market than the new construction market, and several researchers have estimated the potential for retrofit investments could run into hundreds of billion dollars. Spending on energy efficiency has been held back by the recession, but is expected to rebound strongly in the coming years, as building owners respond to regulatory pressures and tenant demand for sustainable workplaces.
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