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Cost-Savvy Execs Expect Greener Buildings Without Big Price Tags: Survey
OAKLAND, Calif. -- Commercial real estate executives are increasingly seeking greener office space -- and are less inclined to pay premiums for it, according to a recent survey by CoreNet Global and Jones Lang LaSalle.
"They are less willing to pay a premium for sustainable space because they understand that is doesn't cost the owner more to make that space efficient," said JLL Senior Vice President Michael Jordan.
Jordan and CoreNet Global Vice President Eric Bowles detailed the findings of the survey in a teleconference Monday, the same day the study was presented at a CoreNet summit in Orlando, Fla.
More than 400 commercial real estate executives were surveyed in September and October in the study for commercial real estate services giant JLL and CoreNet, the leading international trade group for corporate real estate and workplace executives. Results were compared with those obtained a year earlier in a similar study.
The survey this fall found that more commercial real estate executives than ever — some 69 percent compared with 47 percent in 2007 — have "embraced sustainability" and view it as a critical issue, said Bowles.
In addition, 40 percent identified sustainability and energy as major factors in their companies' location decisions, and another 36 percent said those attributes are "tie-breakers" when considering competitive sites.
While the importance placed on green office space has increased, so have expectations of obtaining high performance work environments without paying high prices.
Forty-two percent of the executives surveyed this year said they are willing to pay a premium — typically of 1 to 5 percent — to lease green work space, and 53 percent said they would pay a premium to retrofit property they own to increase efficiency. In the 2007, 77 percent of those surveyed said they were willing to pay a premium for environmentally friendly space.
Jordan and Bowles attributed the change to execs becoming more savvy about the costs and benefits of building sustainability, rather than a reflection of tough economic times.
More executives now approach location decisions with the expectation that "sustainable buildings should be cheaper to use and (therefore) cheaper to rent," Jordan said.
And for owners of commercial real estate, the internal dialogue about green office space goes something like this, "I don't have to pay extra. If I design it better up front, I can deliver it cheaper," Bowles said.
Decision-makers about locations also strongly consider employee satisfaction and productivity in evaluating worksites, the survey showed.
And looking ahead, Bowles and Jordan said they expect companies' workplace strategies to further drive the demands for green office space and "the flight to quality" in commercial real estate.
The survey showed that 40 percent of the firms queried are charting "sustainability data" — chiefly the costs and benefits associated with energy efficiency — and 30 percent are collecting data in some form related to green workspace.
The top three measurements involve energy, employee health and productivity, and employee satisfaction, Jordan said.
With such measurements becoming more prevalent, the commercial real estate industry should expect greater demands for eco-friendly building services as the desire for green work environments goes beyond the basics of bricks-and-mortar issues — and extends to support services and maintenance for office space, Bowles and Jordan said.
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True, but....
While this article represents the stated perceptions and attitudes of "commercial real estate executives" with respect to the "cost of green", there is discussion missing regarding tangible energy efficiencies (not just the green feel-good stuff).
I'm not going to claim vast knowledge of all the factors that promote a cost effective sustainable work environ. But I do know that, in reference to energy efficiency, technologies that produce the most favorable energy profiles typically require an initial cost premium, sometimes significant.
For example, the DOE has identified that ~40% of all energy used in the US is for HVAC or space conditioning. I addition, the DOE identifies that Ground Source Heat Pump (GSHP) systems are the most efficient applications for HVAC energy use.
GSHP systems aren't cheap, in fact they can be quite pricey when you consider the cost of the Earth-Coupling (Closed or Open systems). But the true payback is that savings in energy costs outweigh system installation costs within 7-10 years (typically) with a very significant dollar value. Change all the light-bulbs you want with a 1-year payback, they're just a drop in the bucket when you start talking about energy efficiency of Heating and Cooling spaces. Cost savvy is debatable when you consider this in the long term. Yes, better design for better value, and you shouldn't have to pay more if amortized correctly but, as with many of the LEED system points, Pennywise-Poundfoolish is a potential I see from the comments in this report.
Dan Nelson
IGSHPA Accredited
www.northeastgeo.com
Environment, technology and
Environment, technology and buildings are converging to take commercial real estate beyond the old steel and concrete mentality. It's time to wrap all the green building initiatives around 'intelligent building' technology. Think of it as a unified real estate solution...a new and necessary approach to commercial development and redevelopment projects. This thinking needs to begin on day-one and be incorporated into siting and design, and beyond. Remember that buildings need to be not only environmentally friendly and safe for tenants from a health standpoint, but they also need to be more operationally efficient and secure - from a wireless communications standpoint - for both tenants and the public safety organizations that serve them in times of emergency. A high-functioning wireless infrastructure also contributes to environmental sustainability and productivity gains for the owner. Expectations of today's tenants are higher than ever before - and they need to be informed about the real value of smarter, greener buildings.
R. Shepherd
Not Fully Understood Buildings and Envelops
As we move to greener buildings we are going in a new direction that currently lacks the long history of experience that has aided designers and constructors. One example is the critical insulation and air quality relationship that can cause water condensation inside an attic/plenum space. We generally can anticipate and avoid this problem today with 'old' building standards of design and construction. The building cost of well-designed and properly-constructed green buildings will be higher than the previous buildings until we get further up the learning curve on green buildings. At that time we will completey experience all the benefits of green buildings.
David Graham, P.E.
North Texas Association of Facilities Engineers
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