GREEN BUILDINGS

Strategies

To overcome the barriers to greening California’s leased office space, the Alliance’s Advisors recommended the following market transformation strategies.

Increase Demand-Pull

Encourage organizations that lease significant amounts of office space to establish and adopt green lease criteria, sending a clear signal to building owners and real estate investors that their properties will not be eligible unless they meet these specifications.

Very large tenants such as the State of California and Fortune 500 companies play a significant role in market transformation. If enough large tenants specify LEED®, ENERGY STAR or other types of green buildings to be a precondition to a leasing decision, developers will take steps to assure that their buildings meet these criteria so that these tenants are not precluded from leasing in their building.

Green Large Portfolios

Leverage the collective market power of large owners and large tenants to accelerate transformation of the state’s inventory through whole portfolio approaches.

Green building market transformation will be led by a handful of market leaders that collectively hold significant market power. Both very large owners and very large tenants have the power to alter the supply and demand dynamics of the state’s green real estate market.

Employ Incremental Strategies

Enable large owners and large tenants to immediately commence greening portions of their portfolios, developing realistic criteria for various segments of their portfolio.

The path to greening a building can be incremental – the important thing is to begin and commit to the process. Key market participants should not wait until they can perform whole building or whole portfolio retrofits. They can start with modest measures while building the capacity to launch a more comprehensive initiative. Buildings that are difficult or costly to retrofit should consider starting by adopting green operating practices. Importantly, even buildings of fairly recent vintage can achieve significant incremental energy efficiency benefits.

Leverage Ancillary Markets

Increase the green building value proposition by finding and creating value in ancillary markets.

The role of ancillary markets in precipitating green building market transformation should not be overlooked. For example, the green building decision may be significantly impacted by the ability of both owners and tenants to reduce their operating risks and access reduced insurance premiums for green buildings, materials and operating practices.

Demonstrate the Green Building Value Proposition

Reinforce the links among green building design and measures, green building market values, owner and tenant operating costs, and tenant workforce comfort, productive and health.

The direct link between energy and water efficiency retrofits and reduced utility costs is well understood. However, while there is increasing evidence that green buildings are deemed to have higher market values, documented evidence of the full economic benefits of green buildings – through higher capitalized values, lower vacancy rates, and lower operating costs – remains lean. The higher value of green buildings needs to be continually documented and widely communicated throughout the market transformation process.

Green Tenant Guide

More and more, property managers and owners are seeking green building certification for their leased office spaces. But making an investment in sustainability without considering a tenant’s behavior can undo some of the benefits of a green building. How do property managers and organizations ensure that their tenants and employees make the most of their green space?

One of the most challenging aspects of a sustainability program is encouraging good employee behavior. This challenge is often related to poor communication, lack of motivation, and barriers within the employee environment. In order to overcome these issues, property managers and organizations can implement a few best practices to encourage their tenants and employees to embrace green actions.

The Alliance has developed a set of tools to help guide organizations through the process of greening their operations and staff behaviors. Intended to be an ongoing reference, the Green Tenant Guide aims to walk organizations through planning and implementing their sustainability program. Readers will learn how to work with organization leadership, property managers, and staff to set clear and feasible goals, establish buy-in and excitement among employees, define metrics, and measure and communicate results.

Click to explore the Green Tenant Guide.

Barometer

The commercial sector in California presently consumes a whopping 38% of the state’s total electricity and 25% of its natural gas resources. Office buildings alone consume 10% and 6% of the state's electricity and natural gas resources respectively.

California has set some of the most aggressive green building policies in the nation, and to help track the state’s progress the Alliance has launched a Green Building Barometer, which will report the percentage of rentable building area certified green through LEED® or ENERGY STAR®. California is already making substantial progress: in April 2009, 35% of Class A commercial buildings were certified some level of “green” – whether LEED® or ENERGY STAR® – in CoStar Group’s real estate market database. One year later, this number jumped to 43%, meaning nearly 188 million square feet of rentable building area (RBA) in Class A commercial buildings in California is now certified “green”. Progress was substantial in Class B and C properties as well; but, there is much more to be done in those sectors, as less than 5% of the state’s 916 million square feet of RBA in Class B and C properties was certified green as of April 2010.

Some energy industry practitioners point to Assembly Bill 1103, which triggers the disclosure of a building’s energy performance under certain circumstances, as the catalyst for some of this increase in activity.

Check back here for periodic updates on the Green Building Barometer, as well as for information about policies and programs that appear to be driving green building growth in various regions of the state. In addition, watch out for timely marketing insights from the Alliance’s Advisory Committees and other key market participants.

Green Building Features

Explore the drawing below to find out what features make this building green -
and to view resources on how to green your own building.

Illustration by Fuscoe Engineering, 2008

Green Leases Toolkit

Green Leases Toolkit 2.0

The Green Leases Toolkit 2.0 is a comprehensive package of tools designed to help building owners and tenants develop approaches for minimizing the energy, water and waste impacts of existing commercial building space.

Developed by the Alliance in consultation with the Alliance’s Green Building Advisory Committee, a key objective of the Green Leases Toolkit 2.0 is to create a meaningful dialogue between tenants and landlords that ultimately leads to implementing cost-effective green building measures.

The Toolkit contains a suite of leasing guidelines and templates designed to facilitate an effective dialogue between owners and tenants to better define each party’s goals and objectives around environmental sustainability, as well as create more transparency throughout the process.

These tools and templates incorporate all aspects of the leasing process, from establishment of leasing criteria to final lease terms, and include sample policies, goals, checklists, tools and techniques to help owners and tenants establish a strong dialogue and commence the path to green leasing.

Click to explore the Green Leases Toolkit 2.0.

Office space maximizing natural daylighting

Green Leasing Report

In May 2009, the Alliance released the results of a study examining the current state of green commercial buildings in California and challenges and opportunities for the accelerated adoption of green leasing in California’s existing office space.

Titled Greening California’s Leased Office Space: Challenges and Opportunities, the report provides information to policymakers and market participants about the pivotal role green leasing plays in achieving the resource efficiency, environmental, and societal benefits of green buildings. The report outlines the constraints on green leasing and recommends changes that need to be made to policies, programs, and practices in order to establish green leasing as standard practice in California.

Challenges

90% of California’s commercial office space is leased, and the greening of this space is constrained by several challenges, notably:

Real estate owners not economically motivated to invest in building retrofits as the financial benefits flow to tenants;
Tenants may be less inclined to adopt conservation measures as financial benefits can accrue to other tenants and/or the building owner;
Imbalanced benefit distribution or ‘split incentives’ on core and shell retrofits, between the building owner and tenant. These retrofits (usually the responsibility of the owner) often have long financial payback periods. These costs, if they cannot be passed to tenants, discourage the building owner from making such capital investments; and
The ever-growing range of standards, concepts and protocols requires negotiating a unique balance of benefits and burdens for each leased property, which consequently adds time and complexity to the lease transaction.

Opportunities

Green leasing can be a key strategy for greening existing office space. In order to boost the market adoption of green leasing, the report concludes that owners and tenants who are motivated to find mutual benefits can collaborate to significantly improve the resource and environmental performance of California’s existing building stock.

The Alliance, in consultation with its Green Building Advisory Committee, recommends a broad range of strategies for accelerating green leasing in California – from establishing consistent statewide standards and definitions of “green”, to documenting and publicizing the costs and benefits of green buildings (also known as the green building value proposition), implementing building labeling, and modifying state and local policies, ordinances and utility programs to recognize the different needs and interests of landlords and tenants under various types of lease structures.

Green buildings are a growing segment of California’s overall building stock. In late 2008, LEED® and ENERGY STAR rated buildings accounted for 10% of California’s total office space. 6 months later, they comprised 13% of the state’s total office space – a 30% increase. They feature prominently in class A buildings (35% of all class A buildings in California), but implementation in lower grade properties is more limited (class B and C, at 3.6% and 0.2% respectively).

To download the full report, click here.

Image source: Thomas Properties Group

Videos

The Competitive Edge: Commercial Green Building in California

The Alliance’s Green Building program has created several videos explaining issues surrounding green building in California and demonstrating the green building value proposition. Select one of the videos below to start watching:

The Competitive Edge	The Competitive Edge: Commercial Green Building in California – Featuring case studies from Adobe Systems and Thomas Properties Group, this video explains green building concepts, highlights the types of green building measures that are most effective in California, and illustrates the green building value proposition.
Alliance Advisors	Alliance Advisors Discuss Green Building – In this video, members of the Alliance's Green Building Advisory Committee share their thoughts and perspectives on green building.
Rosario Marin	The California Green Building Initiative – At the 2008 Sustainability Showcase Awards, Keynote Speaker Rosario Marin, former Secretary of the California State and Consumer Services Agency, chair of Governor Schwarzenegger’s Green Action Team, and U.S. Secretary of the Treasury, discusses transforming the market through implementation of California's Green Building Initiative.

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