Green building

Investing in Sustainable Design

New technologies help developers and tenants save the environment - and money.

By Ken Pientka |

Many commercial building owners and investors favor green, and now they are discovering that buildings designed with sustainable features are another reason to prize the color of money. Attracted by lower operating and maintenance costs, corporate tenants are recognizing green office buildings' value, an important factor in today's competitive real estate marketplace.

Sustainable design capitalizes on technological advances to provide less toxic building materials, highly efficient heating, ventilating, and air-conditioning systems, low-consuming electrical and water systems, and designs employing natural light, landscaping, and building orientation to improve energy and occupant efficiency.

Green buildings first were promoted primarily for environmental reasons. Designs involved high initial capital costs, specialized teams, and uncommon equipment and building practices. Government agencies, universities, and nonprofit organizations were early adopters of sustainable design, using subsidies and grants to offset more-expensive building costs and recouping the return through long-term occupancies.

Today, sustainable design is moving into the mainstream as more corporate tenants and owners, as well as speculative building developers, discover the value created when minor upfront capital costs and short payback times increase lease rates along with tenant attraction and retention. In short, sustainable design makes sense.

Sustainable-Design Benefits

Today's sustainable-design buildings offer a host of advantages to building owners and developers: reduced life-cycle and operating costs, increased energy and water efficiency, decreased environmental impacts, and occupants' increased comfort and quality of life. Each of these benefits addresses building owners' and users' bottom lines.

Reduced Liability. Sustainable design creates a healthy indoor environment for building occupants, offsetting a trend toward increased insurance claims related to poor indoor air quality and sick building syndrome. Increasing fresh-air intake, improving air filtration and ventilation effectiveness, and carefully selecting materials and finishes that minimize volatile organic compound off-gassing create a healthier environment for building occupants. Eventually, insurance companies may offer premium reductions for certified green buildings.

Increased Comfort. Green building occupants are more attentive and learn faster than counterparts in typical office buildings. Increased natural light, employee-controlled temperatures, and advances in glazing and lighting systems, combined with thoughtful regard to building orientation and footprint, provide a working environment that promotes creativity, employee collaboration, and improved productivity.

More-satisfied and productive employees also are less likely to be absent. The economic potential is compelling: For example, if the average cost for employee salaries is $150 per square foot per year, a 1 percent improvement in employee performance achieved through sustainable design represents a $1.50 psf per year savings - roughly equal to the building's average psf annual energy cost. Because employee annual salary and benefit costs far outweigh a building's annualized energy, operations, and maintenance expenses, productivity gains can positively affect a business's bottom line.

Business Success. Indoor environmental quality affects many aspects of business success, such as customer satisfaction, innovation capacity, work quality, employee morale, job satisfaction, employee retention, and operational efficiency. Numerous studies support the idea that a more comfortable and pleasant working environment creates an uplifting atmosphere for building occupants.

Saving Money

Economics certainly prevail in weighing the options of adding sustainable features to a building. Commercial real estate tenants, brokers, developers, and appraisers need to educate themselves on sustainable design's true costs in today's marketplace. Innovative construction materials and techniques and mechanical system advances, while possibly more expensive upfront, can reduce a building's lifetime operating costs significantly.

When analyzing green economics, commercial real estate professionals should consider long-term operating and maintenance costs. These factors are beginning to affect leases, insurance rates, loans, and other real estate practices as tenants, owners, banks, and communities recognize energy efficiency's value.

Sustainable design can provide the following economic benefits.

Increased Market Demand. Growing industry evidence asserts that sustainable-design buildings can obtain higher lease premiums or be more competitive in an otherwise tough market, as more corporate tenants, particularly class A triple-net tenants, become aware of sustainable design's cost savings. This competitive advantage already is creating a new market for green office space. Savvy brokers and leasing agents aware of green buildings' potential should look for opportunities in their markets to capitalize on this advantage.

Lower Operating Costs. Technological advances during the last 10 years in areas such as glazing, lighting, and HVAC help improve performance and lower buildings' operating costs. Along with attracting tenants, this benefit also raises a building's value to potential investors.

Lower operating costs increase a property's net operating income, creating a higher valuation and possibly sales price. As appraisers begin to incorporate green office buildings' value into appraisals, better capitalization rates may result, thus providing significantly higher returns.

What Constitutes Sustainable Design?

Thorough sustainable design addresses a gamut of topics from site design through water and energy efficiency, material and resource conservation, indoor environmental quality, and construction techniques. The goal is to properly balance sustainable features and their costs to give building owners the best overall performance. Listed below are sustainable-design buildings' common features that commercial real estate professionals should be aware of to help market green buildings and determine their sale and lease values.

Advanced Lighting Systems. Advances in lamp, ballast, and fixture technology produce more light with less energy. Good lighting design uses as little as 0.5 to 0.75 watts psf of floor space, compared to lighting loads of 2.5 to 3 watts psf in older buildings. Furthermore, sensors that measure indoor light levels can raise and lower artificial lighting in response to changing outdoor conditions, and occupancy sensors turn lights off when not needed.

Lower lighting levels also translate into cooling cost savings as air conditioners do not have to remove the heat created by excess lighting. Indirect lighting systems save energy and improve light quality by dispersing available light and reducing glare.

High-Performance Glazing Systems. Daylighting - allowing abundant natural light indoors - enhances interior light quality and reduces energy demands. Glass in sustainable-design buildings is selected with consideration given to visible light transmittance, heat loss and gain, ultraviolet ray transmittance, and color. High-performance glazing systems admit more light while simultaneously rejecting a higher percentage of solar heat gain, resulting in better daylighting and reduced cooling loads.

Building geometry, location, orientation, glazing, and private office placement can optimize daylight while minimizing heat gain or loss. Other factors to consider include window orientation and proximity of glass to ceilings and work surfaces.

Ventilation Systems. Advanced ventilating and mechanical systems increase air-flow effectiveness, provide plentiful fresh air, and reduce exposure to biocontaminants such as microbial diseases, fungi, and molds using high-efficiency filtration systems. Improved ventilation also removes indoor pollutants generated by the off-gassing of materials such as carpet, adhesives, sealants, furniture coverings, and paints and varnishes, as well as reduces carbon dioxide levels.

Reduced Water Consumption. Many cost-effective options can reduce water use by up to 30 percent. Toilets now use 1.6 gallons per flush versus 3 to 5 gallons per flush on older models. Sensor-operated faucets and urinals help save water and improve sanitary conditions. Waterless urinals now are used in many Western markets where water is scarce. Also, selecting drought-tolerant outdoor landscaping can eliminate site irrigation needs.

Storm Water Control. Containing storm water on site and allowing it to filter into the ground reduce lake and stream runoff pollution and help recharge local aquifers. Sustainable-design developers use features such as rain gardens, green roofs, pervious pavement, and low-profile curbing to help control storm water.

Materials Selection. Building and finish materials are selected with regard to renewability, recycled content, manufacturing processes, packaging, and shipping (i.e., using materials that are locally manufactured or harvested). Sustainable-design practices also incorporate less-toxic building materials and furnishings. Carpets and floors, paints and varnishes, furniture, and other materials carefully are researched prior to specification. Life-cycle cost analyses of materials also are conducted to compare not only a system or material's first cost but also to consider its cost over the building's entire life span. An increase in the manufacturing of such products has reduced their costs while increasing selection and quality.

Bottom Line: Black Ink

Sustainable design doesn't come from employing piecemeal changes that create minor reductions in resource use and total life-cycle costs. Building investors, owners, and developers can benefit the most from sustainable design if they work with designers and builders that take a holistic approach to programming, planning, designing, and construction. Simultaneously considering design, construction, and interlinked issues, such as site and climate, building orientation and form, lighting, and thermal comfort, optimizes all aspects of a project. In the end, an integrated approach often creates multiple benefits, allowing many sustainable buildings to cost minimally more than standard buildings.