Green buildings, growing assets

GREEN VALUE

A major collaboration into the study of building value by building green

REPORT

CONTENTS PAGE

FOREWORD 1

INTRODUCTION 2

EXECUTIVE SUMMARY 3

CONCLUSION 6

RECOMMENDATIONS 6

BARRIERS 6

RECOMMENDATIONS

General 8

Financial 9

Social and environmental 10

Building industry 11

WHAT IS A GREEN BUILDING? 12

REVIEW OF LITERATURE 15

THEORETICAL LINKAGES TO VALUE 15

THE ROLE OF VALUATION 17

CASE STUDIES AND INTERVIEWS 25

GLOSSARY 50

BIBLIOGRAPHY 52

Edited by Dr. Ross DaviesLEED is a Registered Trademark of US Green Buildings Council.Other trademarks are the property of their respective owners.

FORWORD

1

Buildings have a profound impact on thequality of our lives and the world aroundus. They can enrich our communities,health and well being, as well as supportand enable business. They are a visiblestamp of our culture on the environment.

Environmental sustainability matters toBritish Columbia. As an example, in 2010,we are hosting the world's first sustainableWinter Olympics and we plan to encouragesustainable green building practices, allbased on strong business principles.

Green Value is part of the journey towardssustainability. It looks at the financial valueof green buildings and how they contributeto a sustainable community, balancingeconomics with the environment.

It’s my hope that this report spursdiscussion on what our future sustainablecommunities should look like, and how we can get there.

Hon. Barry PennerMinister of EnvironmentProvince of British Columbia, Canada

Worldwide, it was the public sector thatlargely led the move towards green buildings.But as sustainable practices gradually moveto the general marketplace, they increasinglyhave to meet the challenge of viability.The green movement must thus address the targets of the real estate and financialsectors who buy, sell, finance, audit andcreate saleable real estate value.

This means that green buildings mustsatisfy independent scrutiny, or thebusiness sector may not accept them.Green Value was thus crafted to assesswhether sustainable practices make money or not.

In total it has taken two years for thisstudy, from concept to completion. Itconcludes that while evidence is as yetthin, sufficient exists to say that greenbuildings do indeed make money.

Change is not easy. But to all thedevelopers, investors, owners, lenders,appraisers, valuers, agents and especially,occupiers, the conclusion is that you ignore green buildings at your cost. Greenbuildings can provide financial benefit.

I want to thank RICS’ partners in agreeingto the need for, sponsoring and supportingthis study. Stakeholders and input coveredthe government and private sectors inthree countries and two continents. Itwould also have been impossible withoutthe those with completed green buildingswho answered our research team’spersistent questions. I especially thank the team, and the Boards that backed this. More work will sensibly follow.

Green Value shows that sustainability isnot simply an ethic, it’s good business.

Chris Corps BSc MRICSVictoria, Canada

INTRODUCTION

2

A link is beginning to emerge between the market value of a building and itsgreen features and related performance.This is the picture presented by newresearch in Canada, the United States andthe United Kingdom based on case-studyinterviews, supported by a review of bestpractice and existing publications. Ourfindings are contrary to a widely held viewthat green buildings provide a questionableadvantage to builders, developers, investorsand landlords. Yet a link between marketvalue and green practices is now evident,the nature of which will become clearer as the industry works to quantify thefinancial and non-financial benefits ofgreen buildings.

Green is good for asset value.This, contrary to a view frequently held by many builders, developers, lenders andsome valuers/appraisers, is the picture that emerges from new research.

These conclusions came throughinterviews with developers, owners andoccupiers at green office, industrial, retail,residential and educational buildings acrossCanada, the United Kingdom and theUnited States. The findings are also borneout by an extensive review of academicand industry literature.

That green buildings are healthier places inwhich to live and work is widely accepted.So, too, are the environmental benefits,because green buildings consume fewernon-renewable resources, produce lesswaste and air emissions, and cause lessdisturbance to site ecology.

With this new research, however, greenbuildings are also shown to improve assetvalue. Green buildings can:

• Be quicker to secure tenants

• Command higher rents or prices

• Enjoy lower tenant turnover

• Cost less to operate and maintain in most cases

• Attract grants, subsidies and otherinducements to do with stewardship of the environment, increasing energyefficiency and lessening greenhouse gas emissions

• Improve business productivity foroccupants, affecting churn, renewals,inducements and fitting out costsamongst others

• Resulting from business productivitybenefits, benefit occupants more thanthe underlying asset cost or value.

Because comparatively few green buildingshave been completed, however, the extentof value benefit is still hard to quantify.So, too, is the effect on market value ofgreen building rating systems, as well asthe degree to which the benefits of greenbuildings go to the occupier rather thanthe owner or developer.

Several studies show that the extra cost of building green is fairly small. These go a long way to allay concern that greenmeans higher cost, but generally do notshow whether the increased cost is offsetby improvements in value. This will nodoubt stimulate a further and moreholistic review of the overall business case for green buildings.

While there is evidence to show that value exists, the business case can beimproved. Many green developments have been completed too recently toprovide conclusive evidence, or to have had detailed post-occupancy analysis.A lack of comparative data is compoundedby the secrecy surrounding financial data.

Nonetheless, the number of greenbuildings is increasing exponentially,which is good for the environment, andgood for the encouragement of furthergreen building by adding to the industry’sknowledge-pool and helping to bring downany incremental cost.

In Canada, the number of members of the Canada Green Buildings Council(CaGBC) has gone from zero in January2003 to 800 in April 2005. Projectsregistered for CaGBC’s Leadership inEnergy and Environmental Design (LEED®)green building rating system double ortriple each year.

In 2000 there were none, but by 2004, 74.

Member organizations registered with the United States Green Building Council(USGBC) rose from 264 in 1999 to 5,516in 2005. The number of buildingsregistering for USGBC LEED® certificationrose from 624 in 2002 to 2,080 in 2005,while the number achieving certification inthat time has gone up six fold, from 38 to237. Total construction in progress exceedsthese numbers considerably: the impetus is undeniable.

EXECUTIVE SUMMARY

3

TOWARDS TRUER VALUE:THE MARKET VALUE OF AREAL ESTATE ASSET, ITSGREEN FEATURES ANDRELATED PERFORMANCE

Dramatic though these figures may be,this report shows that they serve only asan indicator of an even greater growth in the number of green buildings. Somedevelopers and owners do not seekcertification with official green ratingschemes, and many developments werebuilt before the ratings scheme wasestablished. Others ‘shadow’ LEED® by using it as an aid to design anddevelopment, thereby avoiding thecertification cost, perhaps not recognizingthe value certification offers.

The cost of green buildings is one of thechallenges to the wider adoption of greenrating systems that has to be surmounted.Certain rating systems are more efficientthan others, but despite recent papersassessing the low incremental costs ofLEED®, discussion continues as to whethersome rating systems are burdened less byphysical cost than by process. Yet whilecost remains a matter of debate, the morethe enhanced value exceeds the increasedcost, the higher the incentive to go green.That is the focus of Green Value.

The spread of green buildings, alreadyexponential, would be even greater weremore builders and developers to offer and to promote green alternatives toconventional homes, offices and otherplaces of work. In England, this study foundevidence that some buyers will pay apremium for a green residence. Adoption of green buildings in the residential sector,however, appears slower than in thecommercial sector. That both real estatebrokers and developers are missing aconsiderable commercial opportunity now seems clear. Equally clear is that thehome-buying public is not always informedabout the benefits of green buildings.

The extent of that commercial opportunityis much greater than the demand for newgreen buildings suggests. There is evenmore potential in the renovation andretrofit of existing, conventional buildingsto benefit from green design, building andoperational systems. This market isthought to be as much as eight timesgreater than the size of the newconstruction market.

Many barriers hinder the further spread of green building, and of the 12 NorthAmerican projects investigated for thisreport, five did not seek designation.Yet all five have won several green awards, generating publicity that broughtcommercial benefits. This suggests furtherscope for simplified green rating systems.

Some governments now require that newbuildings constructed for them must begreen, and that suppliers adhere to greenprinciples. In many cases, however, outdatedlocal and national building codes are a bigobstacle to sustainable development.

At the heart of the debate over the linkagebetween green buildings and asset valueitself are the different notions of whatconstitutes ‘value’. There is a substantialbut, we suggest, surmountable hurdle to beovercome. This is the gap in understandingand knowledge that exists between thegreen industry and the financial industry,in particular the valuers/appraisers whoadvise companies, pension funds, banks,insurers and others on the investment sideof real estate.

Both the green and the financial industries,have their own definitions of value, andneither may be entirely appropriate inquantifying the impact on asset value.Many on the green side refer to the valueof green buildings but are actually referringto cost savings. These are not necessarilythe same as value, nor can savings becertain to add directly to building value assome have claimed.

As a result, the financial side remainssceptical and largely unengaged. However,some on the financial side are beginning to recognize the superior performance ofgreen buildings within their productofferings including: Examples includeFannie Mae and Freddie Mac in the US,VanCity in Canada, and Norwich andPeterborough Building Society in the UK.

Until the green and the financial industrieswork together and start seeing eachother’s point of view, the benefits of greenbuildings, financial and non-financial, willbe neither fully understood nor quantified.

Each industry needs to meet the otherhalfway. The green industry needs a bettergrasp of the financial methodology used by valuers/appraisers to analyse propertyinvestments. Accounting and valuationbodies need to catch up on green buildingbenefits as well as costs. Green andfinancial interests need to reach acommon understanding in the pursuit of consistent valuation measures that will require a wider base of financial andother comparative information than iscurrently available.

4

There are already a number of alternativeapproaches to valuation, among them theTriple Bottom Line, Full-Cost Accountingand Multiple Accounts Evaluation. All seekto model value more holistically byintegrating environmental, societal, andcommunity as well as strictly ‘financial’concepts, and all have yet to achieveuniversal acceptance. Each, however, pointstowards a possible path valuation can takein quantifying the effect on the marketvalue of real-estate and its green featuresand related performance. The valuationindustry would do well to embrace thedeveloping green momentum, and startadapting valuation standards to betterevaluate green building value. The samecan be said of the accounting professions.

Valuers and appraisers are client-led, andwill be open to broader interpretations ofthe impact on the value of green buildingfeatures as more clients understand anddemand green developments.

Whatever country they may work in,valuers/appraisers are often asked to valuein accordance with accounting standards,yet some green building benefits aredifficult to fit within standard accountingmethods. One example of such a benefit isthat a green building may last longer thana conventional one. This may lead to loweroperating costs, reduced replacement,better lifespan, higher capital value and soon. But these are examples of benefits thatmay be difficult to express (and may evenbe totally ignored) where accountingmethods use only depreciation of theoriginal cost.

Cost approaches can skew how sustainablepractices are treated. Such approachesaccount for the often-higher capitalinvestment of green buildings, but in effectignore the resulting benefits to occupiersand on market value. This can slantaccounts against green buildings, detergreen investment, and prove unhelpful tocompanies for whom sustainability iscentral to their corporate ethic.

Perhaps the largest single area of valuefrom green buildings lies in the ‘soft’ gainsthat can be difficult to value withconventional accounting methods. Acompany may win kudos from a greenbuilding that translates into sales or imagegains. Better lighting and air quality maymake for healthier employees, fewerabsences, better retail sales and greaterproductivity. Such a building may provide a company with a competitive or costadvantage, help it meet its corporateresponsibility targets and improve itsstanding with investors and customers.

It is not that the financial and real estate businesses are hostile or resistant togreen building, although some may knowlittle about it, and many remain to beconvinced. Accounting standards are notnecessarily set in stone and can be varied.

The distinction between good design andgreen buildings is blurred, but it can be saidthat if good design is helpful to business,green buildings are often found to be atthe leading edge of excellence in benefitsto occupiers. The literature review foundimpartially-evaluated evidence of savingsfrom good design, in one instancedocumenting a 21% improvement in theoperating efficiency of health-care delivery:far more than the average 10% or lessspent by business on all real estateexpenditures.

What business can ignore the potential for improving its efficiency by 21%? Whereis the executive who would not move in aheartbeat if he or she could out-competeby 21%? Which economy or governmentwould ignore the possibility of a 21%reduction in health-care costs or similarreduction in waiting lists.

If there is one major area in which greenbuildings can add value, it is in this benefitto business: if this can be realised, thebenefit could even exceed the value of thereal estate.

This study has found examples of wheresuch operating efficiencies do indeed draw demand and add value not just to businesses and the economy, but toinvestment and development.

The benefit to business is thus the largestsingle value of going green. It is a benefit that perhaps goes beyond the core aim ofthis study, which is to assess the impact ofgreen practices and related features andperformance on asset value. A 21% benefit toa business becomes more than a saving thataffects property and one that is of wider,more direct and substantial benefit.

As businesses become aware of theproductivity benefits of green buildings,demand for them will rise. This may be themost valuable aspect that will drive greenbuildings to success, yet it may only befound in reduced demand for non-greenbuildings: as they fail to compete fortenants, vacancy will increase andinducements to keep tenants will rise.The asset value impact of green buildingsmay thus be experienced first by thosebuildings that are not green rather thanthose that are.

The green building industry has been ledby architects, engineers and others, withthe result, it can be argued, that much ofthe financial/valuation industry has yet tocatch up. That is why the argument thatthere is no relation between the marketvalue of a real estate asset and its greenfeatures and related performance is sooften heard.

That there is such a link, this report makesclear. The nature and extent of that linkwill become clearer as the green buildingindustry matures, as mature it must.Demand for green building is too high andthe business opportunity too great for it tobe otherwise.

5

CONCLUSION BARRIERS TO A BETTER UNDERSTANDING OF GREEN BUILDINGS

6

This study sets out to test the sceptical‘null hypothesis’, that ‘There is norelationship between the market value of a real estate asset and its green features and related performance’.

The evidence gathered through literaturereview and case studies, leads us toconclude that the sustainable features of green buildings can add value to real estate.

• The assumption that it costs more to build green

• Lack of awareness of the market

• Knowledge, research and resources

• Green strategies are not widelyunderstood

• Steep learning curve for developers and consultants

• Construction companies lack experience

• Shortage of engineers with experienceof operating green building systems

• Lack of incentives for owner-investorsas opposed to owner-occupants

• Insufficient correlation between lowerenergy costs and benefit to the landlord

• Leases don’t take account of green issues

• Outdated planning and building codes.

This study sought to test a widespreadperception that there is no relationshipbetween the market value of a real estateasset and its green features and relatedperformance, and comes at a time whenchanges to accounting standards will affectboth valuation and the market value ofreal estate assets1.

The research team began by reviewingexisting research on the links betweengreen features/ performance and assetvalue, and then moved on to examine anumber of green buildings to assess theimpact of their green features/performanceon market value. Direct measuresconsidered included rental rates,investment yields, and net operatingincome. So, too, were indirect measuressuch as leasing/absorption rates, tenantinducements, tenant turnover rates,and tenant workplace productivity and marketing.

Following the pattern of questions put to developers, owners, users and tenants in interviews, the report’s conclusions and recommendations are divided into the following categories: general, financial,social/environmental, and those aimed at the building industry.

METHODOLOGY

7

1 Valuation for Financial Reporting, now largely implemented in Europe and pending in North America

1. Strengthen the linkBuildings with green (or ‘sustainable’)features, whether residential orcommercial, do bring developers fasterabsorption (the rate at which vacantspace is leased or sold), higher rent/yieldand lower tenant turnover.

Green building being in its relative infancy,the industry should collect information toenable better evaluation of how buildingsoperate and perform and the impact onvalue. Building rating systems shouldconsider the integration of financialreporting.Valuation and accountingstandards need to be reviewed so thatthey encompass green buildings.

2. Speak the languageBetter communication and informationdistribution between the green buildingindustry and the financial sector willbenefit both.

Green builders need to learn more aboutvaluation, underwriting and other toolsthe financial sector uses to analyseproperty investments. The financial and accounting sectors need a betterunderstanding of green buildings.Both green and financial sectors needmore and better information about each other in their own ‘language’.

3. Bank knowledge to everyone’s benefitThe level of interest in their projectsoverwhelms developers, builders andoccupants of green buildings. Yet fewtenants or landlords budget for the timeand staff needed to collect the post-occupancy data to satisfy this interest.Rating systems already are felt toburden green development; addingfurther occupancy evaluation whiledesirable, is thus a significant challenge.

Incentives for developers, owners andoccupiers to prepare detailed post-occupancy performance analysis areneeded if the green building industry is to bring home to the financial sectorthe benefits of green buildings. This datacould be captured as part of thecertification of green building ratingsystems. Governments should considerincentivising projects so good audit isundertaken.

4. Valuers should become more involvedIf green buildings are to be valued moreeffectively and their benefits distinguishedfrom non-green buildings, valuers mustlearn to differentiate between green andmore traditional buildings.

As the green building industry matures, soprogressive valuers/appraisers will developa more rigorous analysis of the valueimpact of green building features.Valuersand appraisers’ present reliance uponcapital and operating costs is no longerenough.Valuers/appraisers must betterunderstand and distinguish green features,adjusting comparables accordingly.

5. Learn more about existing buildingsPromising though the new-build greenmarket is for investors, developers andtenants, there is huge scope for adoptingand applying green building practices toexisting buildings, a sector whose size isconsiderably greater than that of newconstruction.

The potential for applying green buildingpractices to existing buildings, like theimpact on asset values, will repay furtherdetailed research.

6. Communicate to the beneficiaryBeneficiaries commonly do notunderstand that green buildings addvalue to building occupiers. Muchcommunication is instead directedinternally towards the green industry.

If the industry can convince occupiers ofthe benefits of green buildings, it willmake green buildings more desirable andso boost market demand. Developers,owners, investors and lenders will haveto respond to this increased demand ifthey are to retain investment value.Valuers, appraisers and real estatebrokers/agents are important to securingthis success, and the green buildingsector would do well to communicatethrough these professionals to thepublic. Communicate the benefits ofgreen building in terms the consumercan understand.

7. Make the case, make the moneySome developers and their advisors,including green building professionals,understand the benefits of greenbuilding but do not communicate themclearly to the occupant. Others thinkthere is little market interest in greenbuildings when what has happened isthat green options have often beenbadly ‘sold’. The way to ensure value is secured is not only to communicateeffectively with occupants; it is alsoessential to align communications to the occupants’ benefit:

• Developers develop what they think themarket wants, and don’t offer greenbuildings because customers don’t knowenough about them. This includescustomers who could and would pay for green if offered the chance.

• Contributors to this study appear tosuggest that customers have a lot of‘guilt money’ that they would spend on better, green choices if the choiceswere offered.

• Contributors indicate that ignoranceof green value distorts market pricing,especially among developers and realestate brokers/agents. Customers canbuy only what is on offer. In theabsence of knowledge and choice,people will continue to make do withconventional buildings, a choice basedupon the current and inaccuratesystem of pricing.

Just because the market does not offergreen options or if offered, they are nottaken up does not means that greenoptions are not in demand. Wherepossible, stress the financial benefits as well as the health and other benefitsto occupiers.

8. Improve the processInterviews suggested there would bewider use of rating systems if the processand resultant impacts on developmentcontinue to be improved. Greaterunderstanding of the value and financialimpacts of the certification process areareas where benefits can be obtained,

Green certification processes will benefitfrom the ongoing improvements andevolution that are continuing. Evidencesuggests that rating systems will benefitand be best accepted where theyminimize cost and time impact.

RECOMMENDATIONS: GENERAL

8

9. Share green secretsThe quality of financial data collectedfor case studies of green buildingprojects was limited by the reluctanceof building owners or developers toshare financial information becausethey perceive a need for confidentiality.None of the green building-certifiers(the Canada Green Building Council,the US Green Building Council, or theBritish Research EnvironmentalAssessment Method Consultancy,for example) appears to collect suchdata. This is a very significant omission,given that financiers' approval isnecessary for development to proceed.Failing to appeal to those whoseimperative is value, will continue to hold back green building.

The gathering and sharing of financialinformation on green buildingperformance is crucial to thedevelopment of the business case. RICS,the valuation/appraisal industry andrating system certifiers would do well to work together to bring this about.

10. Make valuation measures consistentMarkets need good, consistentinformation to evaluate the performanceand value of green buildings.

Consistent definitions, measures andmethods should be developed to gaugethe costs and benefits of green buildings.This consistency should be applied byreference to valuation and accountingstandards. The green building industrywill benefit from improved integration ofvaluation/appraisal audit in its processessince this will more clearly demonstratethe value of green buildings.

11. Accountancy could go greenerBy concentrating on cost, traditionalaccounting practices may not alwayscapture many benefits of greenbuilding. Accounting standards andfinancial regulations could be betterlinked to market value concepts.Governments were the first to turn to green buildings, and the applicationof cost-valuation methods bygovernments remains an impedimentto properly accounting for the value of green buildings.

Accounting standards and financialregulations can be better linked tomarket value since cost approaches will usually fail to reflect properly the benefits of green features andsustainable practices. Cost approachesremain optional for government andcorporate reporting, creating thepotential for inconsistency and/oruncertainty. Accounting and valuationstandards could address this by movingmore strongly towards market value ifthere is to be proper accounting forgreen buildings.

12. Find out who gets whatIt may not be popular to say so, butsome commentators do not seem tounderstand how costs and benefits aresplit between the developer, owner,user and tenant. Many financial andother benefits of a green building, forexample, flow to the tenant or occupierrather than the developer or owner andmay not add asset value, so limiting thegrowth of green building. In the USAespecially, many leases are gross,resulting in well-documented instancesof tenants being discouraged fromconserving energy. By contrast, much ofthe rest of the world uses net leasesthat often deter green investmentbecause it is not the beneficiaries whoare burdened with the initial investmentcost. Many disincentives are thusembedded in lease structures,encouraging wasteful construction,ownership and occupation.

Much greater rigour is essential in theanalysis of the relative impact on assetvalues of green building features. Thisanalysis should progress beyond capitaland construction costs. The creation of‘Green Lease’ terms that cover andreward green practices is overdue, andis fundamental to, for example, energyconservation by occupiers.

13. Convince the scepticsThroughout the English-speaking world,valuers/appraisers have only just begunto understand green buildings and howto value them appropriately. Thevaluation industry was not the leader in establishing the green buildingmovement. Only now are they andother financial professionals beginningto understand the opportunity thatgreen buildings present.

If the green building industry is toattract capital from investors who aresceptical of the financial benefits, it isvital that the industry does more toeducate valuers/appraisers as to therelative impacts of green buildingfeatures on asset values. Occupiers andthe public have to be drawn into thegreen buildings issue, one way being to demonstrate the value of greenbuildings to tenants. Agents andvaluers/appraisers will be key toprogress on this issue; the greenindustry would be well-advised to shift communications to those who,like real estate brokers/agents andvaluers/appraisers, are able todemonstrate the financial benefits of green buildings.

RECOMMENDATIONS: FINANCIAL

9

10

RECOMMENDATIONS: SOCIAL AND ENVIRONMENTAL

14. Chart the unknownMany social and environmentalbenefits spring from green buildingdesign but, as things stand, thesebenefits are hard to quantify and aretherefore unknown to or ignored bythe financial professionals whose job it is to value or appraise real estate.

It would be to the mutual benefit of thegreen building and the financial sectorsto quantify social and environmentalbenefits in such a way that financialprofessionals can integrate thesebenefits with their financial reportingand project analysis. Translation ofsocial and environmental factors to afinancial context will encourage thegrowth of green building.

15. Tell it like it isThe more post-occupancy feedback on building design, performance andquality there is, the better the greenbuilding industry as well as otherindustrial, commercial and financialinterests can communicate, understandand measure the potential of greenbuildings. Groups such as The UsableBuildings Trust in Great Britain and,in the USA, the Centre for the BuiltEnvironment at Berkeley, California,are now studying the impact onhuman health of building design,tracing the relationship betweenoperational performance andoccupants’ comfort. Studies like these, often carried out between oneand five years from the completion of a building, are illuminating the life-cycle benefits of green design featuresand strategies.

A building pre- and post-occupancyevaluation should be required afterevery green building completion. Theseevaluations should be focussed firmlyon the holistic business case. Equally,tracking pre- and post-occupancy gainsover time will benefit occupiers. To helpthe financial evaluation of occupancybenefits, evaluation should quantify,ideally in monetary terms, everyavailable indicator such as reducedabsenteeism or improved productivity.Wherever possible, evaluations shouldbenchmark the impact on such factorsas staff productivity, sickness, andabsenteeism – not just the physicalattributes of the building.

16. Make more of the marketingadvantageIn nearly every case study covered bythis report, landlords and developerscited shorter lease-up periods as asubstantial benefit of green building.Similarly, owners/occupiers andtenants said green building broughtthem positive media/marketing gains.

Marketing advantage emerges from the present study as one of the mostsignificant and easily-understoodbenefits of green building, and shouldbe better quantified and publicized.

17. Modernize building codes, reducebureaucracyThe green building market is growingexponentially. This growth, however,is despite rather than because ofregulatory systems. The biggest hurdlefaced by the green building industry is often outdated local and nationalbuilding codes, as well as otherregulatory barriers.

Building codes, local and national,need to be updated to support greenbuilding while continuing to meet theirobjectives of protecting life, health, andproperty. Governments can and shouldexplore how they might encouragegreen development by reducingregulation and accelerating approvals.

18. Certification: better demonstrate the valueSome building projects that otherwisecould be rated ‘green’ do not seek orcomplete independent certificationbecause of the perceived cost in timeand money, relative to the benefits ofindependent review.

If the rate of certification is to beincreased, certification bodies need topresent industry with the business casefor certification, part of which entailsdemonstrating green value. That casewill be the more easily made ifcertification efficiency continues toimprove, at the same time as thebenefits of independent certificationare clearly demonstrated.

19. Training: encourage small green shoots The pool of green design leaders thatindustry can draw upon is still small.Operations and maintenance staffshave little experience withsophisticated green buildingtechnologies. Contractors and buildingtrades require training to build greenbuildings without compromisingcertification. Lenders, developers andvaluers/appraisers have much to learnabout how green buildings affect value.

Financial professionals commonly donot understand the holistic nature ofgreen buildings and the potential forbenefits such as better operatingperformance combined with higheremployee morale and productivity.Even the case studies for this researchproject were often the first greenbuildings on which many project team members had worked.

The green building industry needs tobe a better trainer of everyoneconnected with the industry, actuallyor potentially. In particular, developers,valuers, appraisers and other financialprofessionals need more financialinformation and training in how green buildings affect asset value.Information should be shared, sosmoothing out the steep learningcurve that many green buildingprojects entail. Incentives may berequired to encourage developers andothers to share this information.

20. Don’t go it aloneGreen projects work better and deliver more where operations andmaintenance staff are brought in earlyin the design stage, for the designteam benefits from operations andmaintenance experience.

Since the integrated design process iscentral to the ability to capitalize onthe synergies and tradeoffs betweenarchitectural design strategies andmechanical system choices, allconsultants and stakeholders should be involved in a project from thebeginning. Track and compare alloptions financially, and this will easerisk management and financialacceptance, as well as contributing tothe best-achievable financial success.

21. Recognize economic gainsGreen building developments are goodfor their surrounding communitiesbecause they encourage widerinitiatives such as green policy orregulatory developments, other greencase studies, and a wider ecognition ofthe community regionally, nationally orinternationally.

Green buildings should be considered aspart of an economic and communityrenewal strategy because of thebenefits they bring locally, throughusing local employment and materials.

RECOMMENDATIONS: THE BUILDING INDUSTRY

11

For the purposes of this study, a ‘greenbuilding’ (sometimes called a ‘sustainablebuilding’) is one that has been rated ‘green’by a green building rating system, or, in theabsence of such a rating, a building that isrecognized as ‘green’ in the media or in thesurrounding community. In a broadercontext, sustainable development issometimes discussed in relation to the‘Brundtland Definition’, that ‘...developmentthat meets the needs of the presentwithout compromising the ability of futuregenerations to meet their own needs’.

The problem of definition is one that dogsthe property and construction industries.Many argue that ‘green’ is nothing new,and that green buildings have been builtand green materials used and reused forcenturies. That is true, but as populationsexplode, there are no longer enough suchbuildings or materials to re-use.

Put simply, there is increasing agreementthat the earth cannot sustain the currentconsumption of its non-renewableresources and the damage being done toits atmosphere. Unless changes are made,it is further agreed, life upon earth willbecome even more difficult, if notimpossible, for many more human beings.

As ever, opinions vary, but it seemsgenerally accepted (Roodman and Lenssen,World Watch Institute Paper 124, 1995)that, globally, buildings and constructionactivity consume:

• Three billion tons of raw materials,or 40% of total global use

• Buildings use 40% of the world’smaterials and energy

• 55% of the wood cut for uses otherthen fuel is for construction

• 30% of newly-built or renovatedbuildings suffer from ‘sick buildingsyndrome’, their occupants exposed tostale, or mould- or chemical-laden air

• Buildings and construction materialsproduction account for at least 30% of greenhouse gas emissions.

Since green buildings have a smaller‘environmental footprint’ than moretraditional developments, it makes sense to have more of them. This is especially so, since according to Dr David Orr,Chair of the Environmental StudiesProgram at Oberlin College, as manybuildings will be constructed worldwide inthe next 50 years as over the last 5,000.

Although economic benefits flow fromgreen buildings and green buildingpractices, the environmental and socialbenefits tend to be discussed in the lightof how they reduce costs. There is room for a wider consideration when assessingvalue, one example being the ‘TripleBottom Line’ approach to social,environmental and financial accounts.

Construction and operation of buildings areinterdisciplinary. Buildings are places wherea number of environmental, social and

economic systems converge. In valuing green buildings, therefore, it ishelpful to acknowledge that in addition toeconomic impacts in business operationsthere are also inherent social andenvironmental impacts.

In general, a green building reduces theimpact on the environmental and socialsystems that surround it. Green buildingsenlarge our economic, social andenvironmental capital. Compared toconventional buildings, green structures useless water and energy, as well as fewer rawmaterials and other resources. They are alsobetter places in which to live and work, forgreen buildings improve human wellbeing asmeasured by health and productivity.

Reducing a building’s negative social andenvironmental impacts can also bringfinancial benefits. Because the threeaspects are connected, a change in one will ultimately have an impact upon theother two.

Time is not on the side of those who seek to further an understanding of therelationship between asset value and green features. Green buildings haveachieved prominence in the marketrelatively recently. The US Green BuildingCouncil (USGBC) has seen an exponentialrise in its membership as well as in thenumber of green buildings registered under its LEED® programme since 1998when USGBC unveiled its Leadership inEnergy and Environmental Green BuildingRating System (LEED®). This rise, especiallymarked over the last three years, is oneindicator of a rapidly-growing interest ingreen building.

WHAT IS A GREEN BUILDING?

12

USGBC MEMBER NUMBERS*

Year Number of

USGBC Members

2005 5516

2004 5438

2003 3773

2002 2397

2001 1137

2000 573

1999 264

*As of July 5th 2005

In Canada, the momentum benefits fromthe progress made by the USGBC. Thenumber of member-organisations of theCanada Green Buildings Council (CaGBC)has gone from zero in January 2003 to 800in April 2005. LEED®-registered projects inCanada double or triple each year: in 2000there were none, in 2001 five, 19 in 2002,36 in 2003, and in 2004, 74.

Many studies now seek to establish‘the business case’ for green buildings,in an attempt to promote them andencourage developers and designers tobuild them. In practice, however, much ofthis research is to do with providinginformation on design strategies andenvironmental benefits, or on establishinga base-line for capital costs.

Construction costs being what concernsthe building industry most, studies focuson such costs for building green. Researchinvolving LEED® (Matthiessen and Morris,Costing Green, 2004; Kats, The Costs andFinancial Benefits of Green Building, 2003)has found that there need be negligibleadditional construction costs: the cost-premium ranges from 0-8%, dependingupon the level of rating, with an average ofaround 2% (pp.32, 48, LePage).

Green buildings, however, are widelyperceived as more expensive thanconventional buildings. Whatever theperception, however, if green building wasonce a side issue, this is no longer the case.Since the main focus of green buildings isto improve building efficiency andeconomics, it is entirely practical for greenbuildings to become more accepted andeventually the standard for the buildingindustry. Indeed, the most likely scenario isfor the gradual absorption into everydayconstruction practices of the componentaspects of green building.

For green buildings to further increase theirmarket share, more building professionalswill need to familiarize themselves withgreen building practices and how they canbe integrated into design, construction,and development viability.

The building market is generally risk-averse,which hinders acceptance of greenbuildings because of an understandablereluctance to accept new methods withoutproof that they work. Documenting thefinancial benefits of green buildings willreassure the building market andencourage acceptance.

Examples of green building are either fewin number or inadequately-documented topresent a persuasive case to developers,lenders and others, helping to understandgreen viability. However, the increasingnumber of owners and developers who aredeveloping green buildings suggests thatthey foresee value in building green.

13

USGBC LEED® METRICS

LEED® METRICS* 2002 2003 2004 2005

NC Registrations 624 1,095 1,792 2,080

NC Certified Projects 38 82 167 237

NC Total SF >80m >144m >217m >243m

EB Registrations 6 45 88 96

EB Certified Projects 1 13 20

EB Total SF >10m >14.5m >29m >31.5m

CI Registrations 4 52 106 137

CI Certified Projects 21 26

CI Total SF 8k 3.7m >9m >11m

Total Workshop Attendees 7,905 14,606 22,495 25,615

NC Accredited Professionals 2,443 5,978 19,200 20,250

* Cumulative; includes previous years’ data, e.g. 2002 totals include data from 2000 through 2002.Registration data includes pilot projects.

NC, New Construction SC, Square FeetEB, Existing BuildingsCI, Commercial Interiors.The LEED® Rating System now covers existing buildings and commercial interiors as well as new construction.

Registrations: projects in the pipeline for certification but not yet built or finished

Source: USGBC

While interest in green buildings is on the increase, the literature on therelationship between asset value and greenbuilding is largely anecdotal or theoretical.One reason is that many green buildingsare government – or owner-occupied,and are thus not treated as an investmentand are rarely assessed on a value basis.Those that have more traditionalinvestment characteristics may either beinsufficiently-tracked to allow analysis, orthe value is kept confidential. Others haveyet to be occupied or market-tested longenough to have demonstrated value, orotherwise have yet to be the subject of a full appraisal.

Whatever the reason, the fact remains that the relationship between greenbuilding and asset value has yet to be fully explored. This report attempts tothrow fresh light on that link.

Current green building rating systems include:

1. British Research EstablishmentEnvironmental Assessment Method(BREEAM,products.bre.co.uk/breeam/index.html)

2. Green Globes™ Online Auditing Tool(www.2.energyefficiency.org/default.asp)

3. Australia’s Green Star(www.gbcaus.org/greenstar/)

4. Hong Kong Building EnvironmentalAssessment Method (HK-BEAM;www.hk-beam.org/general/home.php)

5. US Green Building Council’s Leadershipin Energy and Environmental DesignGreen Building Rating System (LEED®;www.usgbc.org/leed/)

6. Japan Sustainable Building Consortium’sComprehensive Assessment System forBuilding Environmental Efficiency(CASBEE), (www.ibec.or.jp/CASBEE).

14

Key findings Marketing Green• Developers develop what they think

the market wants, and too often don’toffer green buildings because customersdon’t know enough about their benefitsto demand them. These includecustomers who could and would pay forgreen if they were offered the choice.

• Market pricing is distorted by ignoranceof green values, especially amongdevelopers. Customers can buy onlywhat is offered. In the absence ofknowledge and choice, people willcontinue to make do with conventional buildings.

• The more people know about greenbuildings, the more they want them.

Managing Green• Financially speaking, use of the

Integrated Design Process to achievethe higher performance of greenbuildings keeps down constructioncosts. Moreover, green-buildingprofessionals should be brought in earlyin the design stage before key decisionsare made, maximizing the benefits ofgreen design while minimizing costs.

• Having an informed professional valueron the Integrated Design Team will helpunderstand how green aspects will bevalued and decide what choices willimprove value. These choices supportmarketing the green aspects' value toconsumers and help improve valuationof the building for financing.

Valuing Green• Lifecycle cost analysis is needed to

make the link between green buildingand asset value because much of agreen building’s asset value may lie inits long-term lifecycle benefits. Betterand more formalised life-cycle valuationwill help to demonstrate theadvantages of green buildings.

• There’s a need for assessment of howgreen buildings perform in the market,and the degree to which their capitalvalue rises. The sample size for greenbuildings is still small, and operationaldata on them smaller still, makingprofessional documentation and tracking a must.

• Valuation is increasingly used to assess green assets by developers,renovators, investors and owners.

• Valuation lags in accounting for green features within acceptedstandards, although knowledgeablepractitioners can apply valuationmethods to green assets.

• Financial indicators of value areincreasingly incomplete unless they take account of other green indicators in order to satisfy Corporate SocialResponsibility.

• Clients and governments have to bedrivers of valuers/appraisers’ adaptationto green values. Valuation is largely aservice business, and therefore client-,regulation- and profession-led.Valuation professions must advise theirmembers on absorbing green buildings’value into valuations.

• Valuation can support green building,as the literature indicates direct benefitto asset value from green design andbuilding practices.

• The literature concentrates more upon the benefits, financial and non-beneficial, to occupiers than on thebenefits, primarily financial, to owners,investors and financiers. Documentationlargely focuses upon cost-savings andfrequently makes the link to valuehaphazardly or incorrectly. A strongercase for the benefits of green buildingneeds to be made to the investment and financial community.

• Governments and other advocates ofgreen building such as developers,lenders, owners and others who wish to see more green building will benefitfrom encouraging valuation to play agreater part.

• Valuation professions will profit from a greater understanding of how to dealwith the impacts of green features onasset values, and by developingappropriate methodologies.

• There are many misconceptions about the impact of green design andbuilding systems on asset value. As anunderstanding of green issues is both abusiness imperative as well as a socialtrend, the valuation profession shouldtry to counter these misconceptions.

Theoretical linkages to valueAlthough valuation has been anindispensable tool of commerce for many centuries, valuation texts have yet to cover extensively green buildingfeatures/performance and their impactupon value. Valuation practitioners aretherefore left largely left to their owndevices when it comes to incorporatinggreen considerations into valuation theoryand principles.

The table on the following pagesummarizes the theoretical links to value.

REVIEW OF LITERATURE

15

Sustainable site development • Reduce site disturbance and soil erosion during construction

• Use of natural drainage systems (e.g., swales)

• Preserve or restore natural site features.

• Landscape and orient building to capitalize onpassive heating and cooling.

• Improved site aesthetics

• Greater public support for the developmentand accelerated local approval process, hencelower carrying costs.

• Lower energy costs.

• Reduced development costs, improvedmarketability, reduced ongoing maintenancecosts, improved natural appearance, highersales/rents, absorption and re-tenanting,NOI*/ROI** benefits.

• For gross leases, higher NOI. May have impact for net leases*** if benefit can bedemonstrated to tenants.

GREEN OBJECTIVES GREEN STRATEGIES/FEATURES GREEN IMPACT THEORETICAL LINKAGE TO VALUE

Water efficiency • Use captured rainwater for landscaping,toilet flushing, etc

• Treat and re-use greywater, excessgroundwater, and steam condensate

• Use low-flow fixtures and fittings (pressure-assisted or composting toilets, waterlessurinals, etc.) and ozonation for laundry

• Use closed-loop systems and other waterreduction technologies for processes

• Lower water consumption/costs. • Lower tenant CAM**** charges. Direct NOIbenefit for gross leases, potential for net leasesrequires communicating benefit to tenants.

Energy efficiency • Use passive solar heating/cooling and natural ventilation

• Enhance penetration of daylight to interiorspaces to reduce need for artificial lighting

• Use thermally efficient envelope to reduceperimeter heating and size of HVAC.

• Use energy management systems, monitoring,and controls to continuously calibrate, adjust,and maintain energy-related systems.

• Use third-party commissioning agent to ensurethat the installed systems work as designed

• Develop O&M manuals and train staff.

• Lower capital costs

• Occupant benefits

• Lower energy costs.

• Operational savings (can offset higher capital costs)

• Reduced capital cost of mechanical systems because control systems reduce theneed for oversizing.

• Lower operating costs

• Lower maintenance costs.

• Reduced operating costs, longer life cycle, lower development costs

• Improved occupant productivity, lower churn,turnover, tenant inducements, etc

• Higher net income for gross leased buildings,improved yield.

• Lower operating costs. On gross leases,higher ROI/NOI. On net leases, potential for improved ROI/NOI.

• Marginally higher initial soft costs should beoffset by long term operating cost benefits,higher ROI.

Indoor environmental quality • Control pollutant sources

• Use low-emission materials

• Ventilate before occupancy

• Enhance penetration of daylight and reduce glare

• Provide outdoor views

• Provide individual occupant controls when possible.

• Superior indoor air quality, quality lighting and thermal quality

• Fewer occupant complaints

• Higher occupant productivity.

• Risk reduction

• Greater marketability

• Faster sales and lets

• Improved churn/turnover

• Higher ROI/NOI.

Reduced consumption of building materials

• Select products for durability

• Eliminate unnecessary finishes and other products

• Reuse building shell from existing buildings and fixtures from demolished buildings

• Use salvaged/refurbished materials

• Design for adaptability.

• Longer building lifecycle

• Lower maintenance costs.

• Lower depreciation typically after higherinvestment costs.

• Lower construction costs, probable lower operating/maintenance costs, higherROI/NOI.

KEY

* NOI: net operating income

** ROI: return on investment

*** Net lease: a lease thatrequires a leasee to pay alltheir operating costs resultingfrom their occupation of the premises.

**** CAM: common areamaintenance

Note:To view a larger version of this table, please go to www.rics.org/greenvalue

The link between green building and assetvalue has remained in large part untestedbecause, although the number of greenbuildings has increased in recent years,many are owner-occupied by government,few have yet to change hands and theirvalue has not been well-documented.Yet valuation is indispensable.

Valuations have been undertaken forcenturies, and are deeply embedded ineveryday business within and beyond realestate. A valuation helps a company tounderstand whether it is making a wisedecision. A company may agree to buy orbuild a property, and if that companyknows little or nothing about real estate, itmay pay a grossly-inflated price. Investorsand shareholders want to know that thecompany is handling their investment well:the impartial appraisal a valuation offers isindispensable in determining whether ornot funds are being properly applied.

It is rare for a company to invest in realestate without borrowing, and banks havea fiduciary responsibility to show theircustomers and shareholders that theirdeposits are secure. An independentvaluation, completed by a professionally-qualified valuer, helps to assureshareholders, investors and creditors thatinvestment in the company’s business iswise. Such a valuation acts as a safeguardto executives, justifying a decision orindicating how to improve one.

Investment and developments can involve the use of large capital sums fromboth shareholders and lenders.Management and shareholders need toknow whether a decision is wise, and avaluation makes such knowledge possible.Valuation helps all those involved to planand make decisions that maximise value.

Valuations are also a useful audit tool.They help to prevent or detect fraud, andto protect companies and their investorsagainst the financial risks of ignorance.A green example of the latter would be inevaluating the choices in managing riskwhile optimizing utility and value in a casewhere a property is contaminated.

Applied valuations are undertaken everyday as a guide to the best course of actionin business. For developers, valuation helpsto identify the most-promisingdevelopment or investment, and thuswhether green features make financialsense. Since lenders require a valuationaudit, valuation helps the developer bysimply applying the same basic techniquesthat will later help to secure finding.

Valuations help to make a comparisonbetween possible investments, and pavethe way for making a sound choice thatbalances risk against return. Although thisis not always understood, valuations aremade to standards of practice, which areboth internationally-accepted and allowfor adjustments to take into account localcircumstances.

Perhaps least understood is the differencebetween cost and value. Cost is somethingthat many try to minimise. But a focus on value helps understanding of whethercost is justified. An accounting, cost orcost-saving focus can overlook whereincreased cost will be more than offset by extra value. Hence a focus on value,not cost savings, is essential to businessand thus, green buildings.

But the question remains: how doesvaluation benefit green buildings?Valuers themselves have no choice but to assess a building’s green features andrelated performance from the point ofview of asset value. In other words, it is the valuer’s job to establish whether thegreen features' performance of a buildingcause it to have a value that is higher orlower than a conventional building, andwhether the estimated operating costsshould be adjusted to reflect anydifferential performance.

Furthermore, since the life of a greenbuilding may be longer than that of aconventional structure, valuers have toconsider what adjustments need to bemade to investment capitalization, andwhether rents should be higher or lowerthan the norm. Tenant fit-out costs andincentives (such as rent-free periods) andabsorption periods are among the otherissues that may be affected, and mayrequire adjustment on the basis ofcomparable evidence or throughinvestment cash-flow adjustment.

Whether they want to or not, valuers and appraisers are required to estimatehow green features/performance affectdevelopment, investment and lending risk which materially impact value or ifcomparables need adjustment. Valuersmust evaluate their impact on absorption,tenant inducements, and, in the longerterm, on tenant churn. For many aspects of green building, the challenge is whetherand how the longer lifecycle will affectcapitalization rate, yield and years’purchase.

Until green building features and relatedperformance are integrated into valuations,it is hard to see how green buildingfeatures/performance can be integratedinto the construction, financial anddevelopment industries. Unless thefinancial sector understands the benefits of green to the net value of an asset,financial professionals will not bemotivated to account for green in theirfinancing decisions. Awareness of the valueof green buildings on the part of the realestate and financial sectors is thereforepivotal. However, some within this industryare beginning to recognize the superiorperformance of green buildings within their product offerings including: FannieMae and Freddie Mac in the US, VanCity in Canada, and Norwich and PeterboroughBuilding Society in the UK.

THE ROLE OF VALUATION

17

Texts offering direct and indirect linksbetween green features/performance andvaluation include:

• International Valuation Standards:International Valuation StandardsCommittee

• Uniform Standards of ProfessionalAppraisal Practice: Appraisal Institute of Canada

• Uniform Standards of ProfessionalAppraisal Practice: Appraisal Foundation

• Red Book (Manual of Valuation): RoyalInstitution of Chartered Surveyors

• Green Book: UK government’s guidelines on incorporating greenpractices in business

• Multiple Account Evaluation Guidelines:Province of British Columbia.

• Contemporary EnvironmentalAccounting – Issues, Concepts andPractice: Schaltegger and Burritt,Greenleaf Publishing

• Green Development – IntegratingEcology and Real Estate: Wilson andothers, Rocky Mountain Institute

• The Income Approach to PropertyValuation: Baum and Mackmin,Thomson Learning

• Modern Methods of Valuation: Britton,Davies and Johnson, Estates Gazette

• Various papers on the benefits of greenbuilding: UK Building Research Institute.

The economics of valuationThere is a gap between green andeconomic practice that helps neither.Green rating systems go some way tobridging that gap, and are likely to remainthe principal way until the industrializedeconomies start to rebalance economicmodels by integrating the broad range ofbenefits offered by building green.

Historically, construction in emergingeconomies has been green. Where peopleare poor, they tend to build with locally –available materials because these arecheaper than those imported or fromfurther afield. Local materials are easierand quicker to obtain. Furthermore, jobsand money stay local, reinvested directlyback into the local economy.

Industrialized economies, however, are ableto spread their net further in obtainingmaterials, aided by the relative affordabilityof transportation. By increasing the use ofnon–local materials, however,environmental sustainability to suffer.This is because the price of fuel does not include a charge to compensate for the resultant pollution.

Rating systems such as LEED® provide an incentive for buying local materials,thus re-establishing the balance. There is,however, another major benefit of usinglocal materials. This is the indirecteconomic benefit to local economies ofspending on local materials.

In most economies, construction createsjobs and wealth locally through localemployment. Contractors then re-spendtheir income locally, in effect re-investingright back into other local jobs.

Whatever their level of commitment tofree trade, governments arguably thereforehave a built-in economic justification forencouraging their citizens to ‘go green’.

The economic pricing models ofindustrialized societies are imbalanced,it can be argued, in that they have yet toadapt to the higher value their citizensplace on green practices. Damage to theenvironment, for example, can be seen asan unpriced economic benefit if thepolluter avoids the cost of damage.LEED® and similar rating systems try tointernalize such ‘external benefits’ bymaking available credits; pricing modelsmake no such allowance.

To summarise, therefore, developingbuildings provides jobs – usually local jobs. The people and business they houseare sources of wealth, as are the buildingsthemselves. But buildings can impact the environment. It has thus been widelyargued they have three main dimensions –societal, financial and environmental.The following section looks at the benefitsof green buildings from these threeperspectives.

18

Environmental benefitsIt is still comparatively uncommon forenvironmental benefits to show up in abalance sheet or income statement. As aresult they have yet to figure widely infinancial decisions. Although environmentalbenefits do have links to value, especially ifproperly marketed, these benefits are oftenseen to accrue to the community andsociety rather than to a company balancesheet. As the real estate industry largelyexists to make profits, the environmentalbenefits of green buildings are bestexpressed in economic terms.

Land/siteHow a building is sited, its use, latitude,exposure to sun and wind and so on, canprofoundly affect a building’s reliance onmechanical heating/cooling and artificiallighting, and hence, its energy costs.Green buildings that are carefully plannedreduce sprawl, lessen expenditure on newcommunity infrastructure or extend thelife of existing infrastructure. A carefullydesigned and managed site can yieldconstruction cost savings, as well as restrictstormwater runoff and erosion, so reducingwater consumption. These are features thatcan also improve a property’s ‘curb appeal’or site aesthetics and potentially supporthigher rental rates (Laverne and Winson-Geideman; The Influence Of Trees AndLandscaping On Rental Rates At OfficeBuildings, 2003) or sale prices (Henry,The Contribution Of Landscaping To ThePrice Of Single Family Houses, 1994).

Indoor air qualityThis is the benefit most easily ‘sold’ tooccupants. Green buildings offer healthierair because they are better ventilated, andreduce or eliminate the use of chemicals in building materials that give off gases.Some green features are also cheaper ifintegrated at the design stage; underfloorair systems have been shown to cost lessthan overhead systems. While some of thisis a direct benefit in reducing capital cost,there is ample evidence that there is aneven larger, more tangible and directbenefit in improved productivity due to the healthier and more pleasantworking conditions.

AtmosphereOver their lifecycle, buildings areresponsible for about 40% of greenhousegas (GHG) emissions, and green buildingsare designed to have operating efficienciesthat reduce these emissions. Manybuildings use heating, ventilation and air-conditioning systems which do not use chlorofluorocarbons (CFCs),hydrochlorofluorocarbons (HCHCs),or halons, and so do less harm to theozone layer. Many atmospheric emissionsgo largely unpriced because governmentshesitate to tax atmospheric pollution orprefer regulation to rewarding goodpractice. Of course there are exceptions.In the US, for example, New Jersey is oneof six states that offers emission credits to building owners who invest in systemsreducing air pollution associated withelectricity. Owners can sell these credits topower plants and others for prices rangingfrom $90 to $272 per ton of emissions:they have tradable market value.

EnergyAccording to Rick Nevin and GregoryWatson (The Appraisal Journal, October1998) real estate markets assign toenergy-efficient homes an incrementalvalue that reflects the discounted value ofannual fuel savings. Their analysis suggestsan incremental home value of $10 – $20for every $1 reduction in annual fuel bills.

Green buildings save on energy costs byreducing total consumption as well as peakenergy demand. Green buildings use about36% less energy than conventionalstructures through a combination ofartificial and natural lighting strategies,controls, natural ventilation, energy –efficient fixtures and the use of renewableenergy resources.

Arguably, energy savings are one of themost obvious benefits of green buildingmovement and one of the easiest to ‘sell’.Unfortunately, however, it is a benefitfrequently presented as a ‘value’ of greenbuildings, which is to confuse value withwhat energy savings really provide, whichis cost reduction. As discussed in thesection on ‘Interpreting the benefits ofgreen building’, operating savings do notnecessarily offer value from a valuationperspective.

Materials and wasteBenefits include use and re-use of local,renewable and recycled materials, helpingthe local economy and reducing theextraction and processing of virginresources. The use of more benignmaterials improves indoor air quality.Large amounts of construction and otherwaste is put to use and diverted fromlandfill, thereby reducing constructioncosts by saving on tipping fees.

WaterLow-flow fixtures, efficient appliances,rainwater capture and wastewatertreatment lessen use of potable water andrelated operating costs. Once again, and asdiscussed in the section on ‘Interpretingthe benefits of green building’, operatingsavings do not necessarily offer value froma valuation perspective.

Replenishment of the water table throughstorm water management, which includespermeable pavements and landscapetechnology, can lower development costcharges by limiting the need for stormwater infrastructure.

19

Social benefitsEnormous cost savings are being made in‘soft benefits’ such as increasedproductivity, better health and wellbeing,higher academic performance, improvedmorale and lower absenteeism. These havea financial benefit, which is becoming acornerstone of the benefits of greenbuilding. In commercial buildings,employee overhead is the highest cost, soimproving their productivity and reducingtheir turnover and absenteeism may be agreen building’s most significant economiccontributions to a business.

In a 2004 survey of over 800 greenbuilding owners, developers, architects,engineers and consultants, TurnerConstruction showed green buildingsoutperforming conventional buildings inseven categories, of which the top threewere social benefits:

• Greater health and wellbeing ofoccupants (86%)

• Higher building value (79%)

• Higher worker productivity (76%)

• Higher return on investment (63%)

• Higher asking rents (62%)

• Higher occupancy rates (52%)

• Higher retail sales (40%).

It is difficult to establish social benefits in new construction, for tracking anddocumentation over time is required.There is promising research to be done inretrofits and renovations, which in Europeare often preferred to tearing down abuilding. In 1996, a green building wasconstructed north of London for LongmansHouse Publishing: the company has sincebeen sold twice, and on each occasion thenew owner has decided against selling thebuilding because it was so good to work in.

ProductivityProductivity gains from better lighting,daylighting and air quality in greenbuildings can be enormous, and have thepotential to be a powerful reason tointegrate green features and practices.

Research into this and other ‘soft’ benefits,however, is hampered (Kozlowski, BuildingOperating Management, July 2003) by ‘thebelief that additional studies areunnecessary or the fear that buildingowners may be sued based on evidence ofpoor building performance’. According tothe USGBC Building Report (2002) ‘anincrease of 1% in productivity (measuredby production rate, production quality orabsenteeism) can provide savings to afacility that exceeds its entire energy bill’.

The Heschong Mahone Group (Skylightingand Retail Sales, 1999) found that ‘addingskylighting to the average non-skylit retailstore would be likely to improve itsperformance by 40%’. Pennsylvania Powerand Light (Romm & Browning, Greeningthe Building and the Bottom Line, 1998)found that conversion from general tohigh-efficiency task lighting reducedlighting costs by 69% and annualoperating costs by 73%, attributed toreduced absenteeism and higherproductivity. The payback for electricitychanges alone amounted to 4.1 years,a 24% return on investment, while totalpayback amounted to 540%, amounting a simple payback of just 69 days.

At Wal-Mart’s Lawrence, Kansas, ‘Eco-Mart’skylights were installed to reduce lightingcosts, and employees asked for theirdepartments to be moved to the daylitpart because sales per square foot werehigher there. Reno Post Office (Gottfried,in Sustainable Building Technical Manual,1996) improved lighting, acoustics and‘thermal comfort’: productivity gains that‘paid for the entire renovation, to the valueof $400,000-$500,000, in less than a year.The annual savings in energy use andmaintenance were a free bonus’. HydeTools (Romm & Browning) found that new lighting enabled workers to improvequality control equivalent by theequivalent of $25,000 a year. Since everydollar saved on the shop floor was worth$10 in direct sales, this retrofit was theequivalent of $250,000 extra salesannually to Hyde.

The Value of Good Design and otherstudies by CABE have shown thesubstantial productivity benefits of gooddesign, which in essence is a subset ofgreen buildings. In one example quoted by CABE, a 21% improvement in hospitaldischarge rate was found by the auditors,Sheffield University, after part of thehospital had been renovated. This mayexplain why the British government iscommitting billions of pounds to revitalizethe health system, to retain nurses and toimprove productivity.

ImageAlthough a developer or client (Guidry,The Appraisal Journal, Winter 2004) ‘mayspecify a low-energy building, theconsequences may be more profound thana mere saving in annual fuel bills’. Oneconsequence that benefits the bottom lineis that the company may find it has astrong marketing advantage it can exploit.The owner of a green building or thecompany it houses can find that its imageis seen much more positively. This helps to attract and retain tenants, employees,clients and suppliers, and thus, arguably,to make it more attractive to owners,occupiers and shareholders. A building’s‘distinctive character can be a symbolicmessage to visitors, community officials,and the public... including technologicaladvancement’. (The Business case forSustainable Design in Federal Facilities,US Department of Federal EnergyManagement, 2003).

20

Green economic benefitsFinal costs and paybackThe largest obstacles to greenconstruction, according to TurnerConstruction (2004) are ‘perceived higherconstruction costs (by 70% of allexecutives), a general lack of awareness[of] the benefits (by 63%) and short-termbudget horizons (53%)’. Decisions onwhether or not to invest in a greenbuilding are most often based upon capitalcosts (Kats, G., Green Building Costs andFinancial Benefits, 2003), although lowerenergy and water bills are sometimestaken into account. In other words, the netvalue of green buildings could be betterproven and more persuasively told: thefocus on cost without understanding theresultant value is an impediment.

Since green building is still relatively newhowever, design budgets may under-oroverestimate costs, so fuelling theassumption that green buildings cost morethan conventional structures. Kats, on theother hand, estimates the average payback(or return on investment) of a greenbuilding at about ten times the averagecost of building it.

A second assumption is that greenbuildings last longer than conventionalones. Guidry suggests green buildings maybe ‘built with more durable and low-maintenance materials may be moreadaptable to wide range of tenants andpurposes [and] designed with flexibleopens spaces that can significantly reduceconstruction cost and waste’.

While a longer-lasting building might seema benefit, entailing lower depreciationrates, the benefit is rendered invisible if itcannot be factored into accounting or taxrules. If green buildings are more durable,the fact has to be established and factoredinto analyses of asset value.

Experienced green building executivesestimate construction cost premiums atbetween nil and 14%, inexperiencedexecutives at up to 20% (Turner Study):Katz says premiums on LEED®-rated greenbuildings may average 2% and otherstudies generally support this (for exampleMorris/Matthiesson's ‘Costing Green’,David + Langdon 2004).

Such uncertainty over the cost incrementmay amount to the entire developmentprofit, could wipe out equity and deterrisk-averse lenders who see the potentialfor cost overruns in new constructionmethods (green roofs, for example).Little wonder, then, that the real estateand financial sectors remain sceptical. Andall the more unfortunate that such coststudies have yet to be consistently pairedwith an understanding of the benefit ofthe additional construction cost; if, forinstance, an extra cost of 20% were toresult in 40% increase in value, would notthe cost be worth it?

Rapid payback resulting from lower operations and maintenance costs isincreasingly recognized as the mostmarketable benefit of building green.Three-quarters of executives in greenbuilding, Turner continues, say that suchbuildings generate a higher return oninvestment. Advocates of green buildinghave to make the case that cost premiumsare negligible, low or quickly recoverable,especially as not all developers can profitfrom the benefits accruing to occupants.

USDOE puts construction costs at lessthen10% of the money that has to bespent over a building’s life, but between 60 and 85% (Morton, Building OperatingManagement, November 2002) of the realcost to business is staffing. Some greenbuilding features can increase costs, butUSDOE reports that it is usually possible to lower lifecycle costs significantly,recovering them even in the case of high-value green features within three to five years.

Considering that salaries and employeewell-being are the biggest item in acompany’s overhead (Kozlowski), a greenbuilding is cheaper if an owner-occupierconsiders the building’s life-cycle cost inrelation to the employee and thus,productivity benefits.

Construction cost bias will persist whereshort-term perspectives rule (USGBC,2002), for in that case, the interrelationshipbetween a building, its features, occupantsand surroundings is immaterial.Wheregreen features are part of the designprogramme, the cost premium can be nil(Syphers, G and others, Managing the Costof Green Building, 2003) as it avoidsinexperienced budgeters creatingcontingencies to cover their expectation ofcost increases. Syphers identifies the topfive barriers to controlling costs as:

• Lack of a clear design goal

• Midstream attempts to incorporate green

• Decentralized management of green building

• Lack of experience or knowledge

• Not enough time or funding.

21

Interpreting the benefits ofgreen buildingThe benefits of green building have to betranslated and quantified from a valuationstandpoint. There are InternationalValuation Standards (IVS) to whichnational or local valuation standards relate in one way or another. In the US,for example, individual states provide alocal tier of practice and standards throughthe licensing of real estate agents andappraisers. There are also national appraisalstandards established by the AppraisalFoundation. Canada has provincial licensingof real estate agents but the AppraisalInstitute of Canada produces nationalstandards of appraisal although someprovinces are edging towards provincialstandards. Valuation can thus be affectedby government intervention that harmshaving single, international standards.

Cost savingsValuers and others sometimes meandifferent things by the same word. Take the word ‘value’ itself. High-efficiency light fixtures, for example, are often said to ‘add value’ when, to a valuer, theymerely reduce costs. To an occupier, thefixtures can impact productivity positivelyor negatively – more related to the impacton the workspace than the type of light.Since cost reduction flows over a period oftime however, it affects ‘value’ as loweroperating cost payments resulting from ahigher capital investment. In other words,cost reduction may be of ‘value’ to atenant, affecting investment value onlyindirectly.

The incentive for a landlord in a net leasewill be to make tenants aware that greenfeatures reduce tenants’ operating costsand potenially more importantly, canimprove productivity. If so, tenants may be prepared to pay some of the benefitback as more rent, and to renew the lease, which is both a cost saving and aninvestment risk mitigation factor. In a grosslease, green cost reductions – and theinvestment cost to obtain them – maydirectly benefit the landlord: but may bemore than offset by the tenant having noincentive to switch off the lights. Where alandlord sees no benefit or it is toonegligible to figure in an appraisal, there isno effect on asset value.

Sadly, some literature chose to criticise thefailure of valuers/appraisers to reflect costsavings in asset value. But none reviewedwere written by professionalvaluers/appraisers or considered that leasestructures affect whether cost reductionsbenefit value. None mentioned that grossleases effectively incentivise tenants to bewasteful in their energy consumption,thus harming value, or that this mightconsiderably exceed the cost savings.

A fundamental problem of valuation isthat while advocates of green buildings see ‘value’ in the longer life cycle of some developments, valuers may not.The payback periods sought by investorsvary from country to country, but a surveyby BT (2003) notes perceptions of ‘long-term’ as five years or less in the UK.US markets focus on initial yield and see cost-reduction benefits over longerperiods as additional risk. These arecomparatively short investment horizonsfrom a valuation perspective.

A green building component’s life cyclemay not match a five-year cash flowprojection, and this causes a problem in valuation. The remainder life should be valued at the end of the projection,yet those other than valuers/appraisersmay not account for the longer remainderlife in the payback calculation, causing thevaluation and comparison to beincomplete or inaccurate.

In general, from a valuation point of view,the green building industry might benefitfrom differentiating better between costsaving and value. Cost and value are notthe same.

Value to occupierFrom the literature, it appears that thegreatest value of greenfeatures/performance is to be found in thevalue to the occupant. Green practices canbenefit tenants substantially, yet valuershave yet to account fully for this. Onereason is that the benefit could be keptentirely by the occupant, and not flowthrough to increase the asset’s value.

Much of property valuation is to do withthe market value of a building, althoughthe market increasingly sees buildings as aservice, with the result that the concept of‘value to occupier’ is gaining ground.Building occupancy costs are commonly10% or less of the costs of operating abusiness. If so, productivity benefits andsavings on business operations are ofgreater worth to occupants than savingson real estate, which makes a building withgreen design features of considerablepotential value to its occupants.

Rating systems such as LEED® can add tovalue for occupants, for such systemsdiscourage the use of volatile organiccompounds (VOCs) and inadequately –maintained or faulty ventilation systems,whose cost to employers in sickness,absenteeism and productivity can exceedthe cost of using low – VOC materials.Studies of over 11,000 workers in 107buildings (Kats) showed ‘a 1% increase inproductivity (equal to five minutes perworking day) is equal to $600 to $700 pera year, or $3 per sq. ft. per year... over 20years and at a 5% real discount rate, thepresent value of the productivity benefit isabout $35 per sq. ft. for (LEED®) Certifiedand Silver level buildings, and $55 per sq.ft. for Gold and Platinum buildings’.

With studies starting to show suchbenefits, the question now is whetherowners and investors are pressing realestate brokers to market these benefits topotential tenants, using studies thatdemonstrate the added value. If energysavings, like better internal air qualityaccrue to the occupier, why should thesenot represent added value?

22

IF ENERGY SAVINGS,LIKE BETTER INTERNAL AIRQUALITY ACCRUE TO THEOCCUPIER, WHY SHOULDTHESE NOT REPRESENTADDED VALUE?

How valuers and appraisers valueCost should never be confused with value, but in valuation terms the former is easier to define than the latter. Here arethe main approaches to valuing a realestate asset:

Direct ComparisonThe Direct Comparison Approach to Valuecompares one property with another,adjusting for dissimilarities, to arrive at avalue. A problem with Direct Comparison isthat adjustments can be made toosweepingly for the smaller differencesbetween the subject and comparableproperty to be accounted for. Benefitsfrom improvements in energy efficiency,for example, could reduce operating costsbut unless the difference is fairly large,an adjustment may not be made for thecapitalized benefit.

Many appraisers working on a valuationhave yet to ask for sufficient detail aboutthe differences in comparables to enablethem to identify the differential in values.Since valuation is a client-led discipline,it is up to valuers/appraisers’ clients –developers, investors and lenders – torequire appraisers to include greenconsiderations in adjusting comparables.It is hardly the valuer’s fault if the marketis slow to differentiate between green and conventional buildings, leading to theconclusion that green building features andpractices have little or no impact on value.

Investment ApproachSometimes called the ‘Income Approach’,the Investment Approach, for example,is defined by the Canadian UniformStandards of Professional Appraisal Practice as ‘a study which reflects therelationship between acquisition price and anticipated future benefits of a realestate investment’. This approachdominantly uses projected income rather than comparables to arrive at value, and tries to model how a possibleinvestment purchaser might assess thebenefits of the asset's income flow.

The Investment Approach adjusts for both the time and size of each aspect ofan asset’s operating costs, and so adjustsmore easily and fully for the operatingcosts of a green building than under Direct Comparison. Adjustments for lifecycle and replacement costs may also be more accurate.

The Investment Approach has its pitfalls.There are technical differences in the wayvaluers in North America and the UKdefine and apply this method. Manyfeatures of a green building may cost moreto begin with, but the building may lastlonger and be cheaper to operate. Thediscounted cash flow ‘Investment Horizon’,a predominantly North American way ofcalculating value with the InvestmentApproach, needs careful adjustment if theimproved lifecycle and longer incomestream are not to be overlooked. ‘Term andReversion’, a method more frequentlyapplied in the UK, can adjust better for thedifferent lifecycle of a green building.

Cost ApproachOne definition of the Cost Approach to valuation is that of the AppraisalFoundation, which calls it ‘the cost to replace or reproduce the property being appraised’.

The problem with cost approaches is thatthey may ignore the benefits of greenbuilding features and performance andtheir effect on asset value. To compoundthis problem, and because green buildingaspects often have higher constructioncosts, corporate accounts may reflect costdisproportionately, impacting debt withoutoffsetting recognition of value benefit.What is more, depending on the amountby which cost is depreciated, it is unlikelythat the original cost will depreciate or endat the same life cycle rate as that of agreen building. Put simply, cost approachesare less accountable to the benefitsobtained from green building.

Alternative approachesOther approaches to valuation areavailable, often from outside the valuationprofession, in an attempt to integrateenvironmental, societal, community,economic and financial aspects:

Triple Bottom Line: (TBL): an approachthat tries to weigh economic, social andenvironmental performance. Althoughbroad agreement has yet to be reached onmethods of valuing and auditing naturalcapital (air, water, soil, for example), TBL iscatching on, although it is often used intandem with, rather than instead of, othervaluation methods.

23

Full-Cost Accounting: this approachpresents the full cost of implementingdecisions, and therefore includesenvironmental, social and economicimplications of decisions. While a usefulway of evaluating green components’lifecycle, operating cost/benefit and capitalcost/benefit, Full-Cost Accounting does notdetail how to include the broader aspectsin a full analysis and is criticized for lackingstrongly-developed standards.

These and other alternative approaches to valuation are gaining acceptance, asmany companies assess and report theirenvironmental and social as well as theirfinancial performance. Investors, accordingto the City of London’s 2003 reportInvesting in the Future, are beginning torecognize green issues as a factor inbusiness success. Increasingly, investorsidentify key environmental and social risksto short-and long-term business value, andtake them into account in investment andcorporate governance. With the financialsector moving or being edged towardsgreen-consciousness, it can be argued thatif accountants, appraisers and valuers donot adapt to TBL and other alternatives,they risk falling out of step with the needsof their clients. When a government of thestatus of the Corporation of the City ofLondon is covering more holisticapproaches to value, it is time thevaluation and accounting professionsembraced such an approach in valuationand accounting standards.

Accounting treatmentsMuch has been noted of the link betweenaccounting and valuation. Both professionsare made up of not one but a number oforganizations, sometimes even within onecountry. Accounting standards in general,however, are becoming more stringent inthe wake of financial problems such asthose of Enron and Nortel. They are alsoshifting towards market valuation: awayfrom cost approaches and towards fairvalue, which embeds the option of usingmarket value.

Use of cost approaches for corporateaccounts may fail to benefit companieswith green buildings because the value isnot properly reflected. Governments areespecially vulnerable to this: governmentaccounting standards deem many assets‘Special Purpose’ and require a costapproach. Accounting standards may thusperhaps be holding back the green buildingindustry, unless market value is adopted forcorporate reporting. International FinancialReporting Standards have moved towardsmarket value; however take-up seemsinconsistent and slow to take effect inNorth America.

These changes are likely to favour greenbuildings, for if such buildings havebenefits in value exceeding the cost ofmaking the building green, then a value-based approach will more accuratelyreflect that benefit. Although accounting ismoving in the direction of InternationalFinancial Reporting Standards, bothvaluation and accounting standards haveyet to adapt fully to cover companies’ wishto report adequately on social, communityand environmental as well as purely-financial performance.

24

In an ideal world, the way to assess therelationship between the market value of areal estate asset and its green features andrelated performance is to compile detailedfinancial information on each greenbuilding, using case studies. Each greencase study would then be matched with acomparable conventional building.

But while this may be a greener world,it is still less than ideal. Detailed financialinformation has yet to be widely shared onconventional buildings or collected ongreen buildings to the extent that researchcan be conducted. Nonetheless, analternative comparative approach yieldedvaluable results.

The research team developed a survey and interviewed stakeholders who includedtenants, developers, owners, architects andproject engineers and occupiers, dependingupon the type of property. The survey hadto be sufficiently detailed to cover thequestions raised by this study, but stillbroad enough, given the different propertytypes and geographic locations, to providea useful cross-section of opinion supportedby factual data.

In this way, proxy financial information wascollected, which includes:

• Initial construction costs

• Operating costs

• Operating performance

• Occupant satisfaction levels

• Occupant health

• Marketing and absorption periods

• Vacancies

• Rent levels

• Tenant inducements.

Detailed interviews were held at 12 buildings of five different kinds,across Canada and the United States.

Office buildings1. Green on the Grand, Kitchener,

Ontario, Canada

2. SAS Building, Toronto, Ontario, Canada(under construction)

3. Ottawa Paramedics Building,2465 Don Reid Drive, Ottawa, Canada(under construction)

4. Vancouver Island Technology Park,Victoria, British Columbia, Canada

5. 260 Townsend Street, San Francisco,California, USA (renovation)

Industrial 6. Phillips Eco-Enterprise Centre,

Minneapolis, Minnesota, USA (office and industrial)

Retail7. Mountain Equipment Co-op Store,

Montreal, Québec, Canada

Residential8. The Solaire, New York City, New York,

USA (apartment building)

9. Cranberry Commons, Burnaby,British Columbia, Canada (co-housing)

Educational10. Adam Joseph Lewis Centre for

Environmental Studies, Oberlin College,Ohio, USA

11. The C.K. Choi Building for the Institute of Asian Research, Vancouver,British Columbia

12. The Liu Centre for the Study of GlobalIssues, Vancouver, British Columbia.

CASE STUDIES AND INTERVIEWS

25

A

B

C

D

E

F

G

H

I

J

K(i)

K (ii)

Summary of property information

26

Green on the Grand, Kitchener,Onatrio, Canada

SAS Building, Toronto,Ontario, Canada

Ottawa Paramedics Building,Ottawa, Ontario, Canada

Vancouver Island Technology Park,Victoria, B, Canada

260 Townsend, San Francisco,California, USA

Phillips Eco-Enterprise Centre,Minneapolis, Minnesota, USA

Mountain Equipment Co-op Store,Montreal, Quebec, Canada

The Solaire, New York City,New York, USA

Cranberry Commons, NorthBurnaby, BC, Canada

Oberlin College, Oberlin,Ohio, USA

CK Choi Building, Vancouver,BC, Canada

Liu Centre, Vancouver,BC, Canada

Office

Office

Office

Office

Office

Office/industrial

Retail

Residential

Residential

Educational

Educational

Educational

New construction

Under construction

Under construction

New construction

Renovation

New construction

New construction

New construction

New construction

New construction

New construction

New construction

Investment

Owner occupied (52%)

Investment

Investment

Owner occupied (100%)

Investment

Owner occupied (100%)

Investment

Owner occupied (100%)

Owner occupied (100%)

Owner occupied (100%)

Owner occupied (100%)

Multi-tenant

Multi-tenant

Single tenant

Multi-tenant

Single tenant

Multi-tenant

Single tenant

Multi-tenant

Multi-tenant

Single tenant

Single tenant

Single tenant

1996

Late 2005

Dec. 2005

2001

2002

1999

2003

2003

2001

1998

1996

2000

23,573

115,000

100,000

184,000

66,947

64,000

48,438

357,000

26,662

13,600

30,000

18,800

C-2000 (Natural resources Canada)

Applied for LEED® certified

Applied for LEED® certified

LEED® gold

LEED®-EB gold

None (several green awards received)

C-2000 (Natural resources Canada)

LEED® gold

None (several green awards received)

None (several green awards received)

None (several green awards received)

None (several green awards received)

Index Property Name/Location PropertyType

Status Ownership Type Single/Multi-Tenant

Completed Buildingarea (sq.ft.)

Green Designation

27

Why they went greenOf the 12 American and Canadiandevelopments where interviews were held,five have a designation from a green ratingbody, two have applied for designation andfive have no plans for designation but eachhas received several green awards.

The Green on the Grand, Kitchener:the developer, Ian Cook Construction,acquired the site at a time of downturn inthe housing market and needed to offersomething special. Enermodal Engineering,the lead tenant and project engineer,shared Ian Cook’s interest in a greenbuilding, and the project won a C-2000award of $400,000 to assist with thedesign and construction.

SAS Building, Toronto, Ontario:the SAS corporate philosophy is to be socially-responsible and a leader ininnovation. While there was no consciousdecision to go ‘green’, during constructionit became clear that green-buildingfeatures would be better for staff and for the surrounding district.

Ottawa Paramedics Building, Ottawa:the occupant requested a LEED®-certifiedbuilding.

Vancouver Island Technology Park,Victoria: British Columbia BuildingsCorporation, the developer and formerowner, is committed to green buildingpractices. The project was developedrecognizing that technology parks need to be pleasant and healthy places of work if high-calibre employees are to be attracted and retained. The Universityof Victoria Properties Investment Inc onbehalf of the Vancouver Island Park Trust is the new owner.

260 Townsend Street, San Francisco:green building is a core belief of theowner/occupant and builder, SwinertonFamily of Companies. Such a building was thought the best way both ofaccommodating Swinerton employees and of demonstrating to clients howgreen-building practices can beincorporated into an existing building.

Phillips Eco-Enterprise Centre,Minneapolis: the owner, the GreenInstitute, is a non-profit organization,which had moved from re-using buildingmaterials and into property development.A green building was seen as a way ofattracting companies in the energy andenvironmental businesses to a rundownarea where they would create jobs.

Mountain Equipment Co-Op Store,Montreal: the Mountain Equipment Co-Op has established a policy of buildinggreen, and in particular of eliminatingozone-depleting substances from itsdevelopments.

The Solaire, New York City: the owner of the site, Battery Park City Authority,is mandated to promote green buildingpractices, while the developer, AlbaneseOrganization, wished to market an extra-healthy building which offered tenantsmaterials and systems of even higherquality than BPCA’s environmentalguidelines.

Cranberry Commons, Burnaby: theresident co-owners wanted a buildingwhose green features included a higher-than-usual amount of amenity space.

Adam Joseph Lewis Centre forEnvironmental Studies, Oberlin College:Oberlin’s Environmental Studies Programhad outgrown the basement of a campusbuilding which, being cramped, havingasbestos insulation and coal-firedelectricity and no natural light, was‘fundamentally contradictory’ to thedepartment’s teachings.

This larger, purpose-built centre elsewherein the college grounds houses currentactivities appropriately and provides forexpansion. Green building features figureprominently in the Oberlin curriculum,and many are incorporated in the newdevelopment.

The C.K. Choi Building for the Institute of Asian Research, and The Liu Centre forthe Study of Global Issues, Vancouver:the C.K. Choi Building was part of auniversity expansion scheme whichincluded a demonstration green building, built for the same budget as aconventional structure. The success of the C.K. Choi development and thefavourable media coverage paved the way for the Liu Centre.

The General Expectations of Going GreenWe asked whether project met the originalgeneral expectations for a variety of aspects.

Interestingly, it was absorption and lowerturnover that exceeded more expectationsthan other factors.

28

A Green on the Grand, Kitchener, Ontario, Canada – Office buildingB SAS building, Toronto, Ontario, Canada – Office building (UC) – Office buildingC Ottawa Paramedics building, Ottawa, Ontario, Canada – Office buildingD Vancouver Island Technology Park, Victoria, British Columbia, Canada – Office buildingE 260 Townsend, San Francisco, California, United States – Office buildingF Philips Eco-Enterprise Centre, Minneapolis, Minnesota, United States – Office/Industrial buildingG Mountain Equipment, Co-op Store, Montreal, Quebec, Canada – Retail storeH The Solaire, New York City, New York, United States – Residential apartment buildingI Cranberry Commons, New Westminister, British Columbia, Canada Co-housing project – Residential apartment buildingJ Oberlin College, Oberlin, Ohio, United States – Educational facilityK CK Choi building and Lui Centre, Vancouver, British Columbia, Canada – Educational Facilities

UC Under construction

CASE STUDY

A B C D E F G H I J K AVERAGE

Rent 4 – 3 4 – 3 – 5 3 – – 3.7

Yield (rate of return) 5 – 3 4 – 4 1 5 5 – – 3.9

Marketing success 5 – 3 5 – 4 1 3 5 – – 3.7

Level of absorption of space/units 5 – – 4 – 4 – 4 3 – – 4.0

Operating cost 1 – – 4 4 3 3 3 5 4 3 3.3

Initial construction costs 2 – 3 3 3 2 1 3 1 3 4 2.5

Ongoing maintenance costs 1 – – 4 4 2 3 3 – 3 3 2.9

Tenant allowances 3 – – 2 – 3 – – – – – 2.7

Turnover of space (vacancy) 3 – – 5 – 4 – 4 4 – – 4.0

Reduction in internal 5 – – 5 4 2 – 3 – – 1 3.3

fit-out costs (churn)

Average score 3.4 – 3 4 3.8 3.1 1.8 3.7 3.7 3.3 3.3

3.5 3.1 1.8 3.7 3.3

KEY

1 Not met2 Partially met3 Met4 Partially exceeded5 Exceeded

29

A Green on the Grand, Kitchener, Ontario, Canada – Office buildingB SAS building, Toronto, Ontario, Canada – Office building (UC)C Ottawa Paramedics building, Ottawa, Ontario, Canada – Office buildingD Vancouver Island Technology Park, Victoria, British Columbia, Canada – Office buildingE 260 Townsend, San Francisco, California, United States – Office buildingF Philips Eco-Enterprise Centre, Minneapolis, Minnesota, United States – Office/Industrial buildingG Mountain Equipment, Co-op Store, Montreal, Quebec, Canada – Retail storeH The Solaire, New York City, New York, United States – Residential apartment buildingI Cranberry Commons, New Westminister, British Columbia, Canada Co-housing project – Residential apartment buildingJ Oberlin College, Oberlin, Ohio, United States – Educational facilityK CK Choi building and Lui Centre, Vancouver, British Columbia, Canada – Educational Facilities

UC Under construction

1.1 1.45 – 1.0 -0.2

CASE STUDY

A B C D E F G H I J K AVERAGE

Rent 4 – 1 3 – 3 – 2 – – – 2.6

Yield (rate of return) 5 – 1 2 – 5 – 2 2 – – 2.8

Marketing success 1 – 1 5 – 4 – – 4 – – 3.0

Level of absorption of space/units 1 – – 5 – 4 – – 4 – – 3.5

Operating cost -1 – – 3 4 1 – – 3 2 1 1.9

Initial construction costs -4 – 1 1 1 -2 – – -4 -1 -1 -1.1

Ongoing maintenance costs -4 – – 3 4 3 – – 4 -2 -2 0.9

Tenant allowances 1 – – -2 – -1 – – – – – 0.0

Turnover of space (vacancy) 1 – – 3 – 1 – – 4 – – 2.3

Reduction in internal 1 – – 4 – -4 – – – – -1 0.0

fit-out costs (churn)

Level of occupancy 1 – – – 1 – – – √– – – 1.0

Average score 0.5 – 0.4 2.4 0.9 1.5 – 0.4 1.5 -0.1 -0.3

KEY

Exceeded1 0 - 2%2 3 - 5%3 6 - 10%4 11 - 20%5 21 - 50%6 51 - 100%7 Over 100%

Fell below-1 0 - 2%-2 3 - 5%-3 6 - 20%-4 21 - 50%-5 51 - 100%-6 Over 100%

The financial benefits of going greenWe tested the extent to which financialswere quantifiably met, and contrasts withmore general expectations shown in theprevious table. The results were differentwith some contributors offering no opinionon the financials.

Overall, the most impressive financialbenefits of green features reported werethe competitive advantage offered by thepositive impact on the marketing of aproperty and the speed with which spaceor units were leased/sold. Rent and yieldwere also impressive.

Who knows what?Architects have been central to the green building movement, andunsurprisingly nine out of eleveninterviewees rated architects as having a good or excellent understanding of thefield, giving them an average 4.2 out offive. Planners ranked second with anaverage score of 3.6, six of the eleveninterviewees ranking them as good orexcellent. Appraisers scored lowest,at 1.8, below real estate brokers at two and lenders at 2.1. Three of theprojects, however, had no involvementwith third-party lenders, appraisers or real estate brokers.

30

A Green on the Grand, Kitchener, Ontario, Canada – Office buildingB SAS building, Toronto, Ontario, Canada – Office building (UC)C Ottawa Paramedics building, Ottawa, Ontario, Canada – Office buildingD Vancouver Island Technology Park, Victoria, British Columbia, Canada – Office buildingE 260 Townsend, San Francisco, California, United States – Office buildingF Philips Eco-Enterprise Centre, Minneapolis, Minnesota, United States – Office/Industrial buildingG Mountain Equipment, Co-op Store, Montreal, Quebec, Canada – Retail storeH The Solaire, New York City, New York, United States – Residential apartment buildingI Cranberry Commons, New Westminister, British Columbia, Canada Co-housing project – Residential apartment buildingJ Oberlin College, Oberlin, Ohio, United States – Educational facilityK CK Choi building and Lui Centre, Vancouver, British Columbia, Canada – Educational Facilities

UC Under construction

2.8 2.14 3.67 2.8 4

CASE STUDY

A B C D E F G H I J K AVERAGE

Lenders 4 1 2 2 2 1 – 3 2 – – 2.1

Architects 4 5 5 4 4 3 5 4 2 5 5 4.2

Appraisers 3 1 – 2 2 1 – – 2 – – 1.8

Planners 3 4 4 3 3 3 5 4 2 4 5 3.6

Developers 2 1 4 5 2 4 1 4 2 4 2 2.8

Tenants 2 2 3 3 3 2 – 3 2 5 2 2.7

Brokers 2 1 – 2 2 1 – 4 – – – 2.0

Average score 2.86 2.14 3.6 3 2.57 2.14 3.67 3.67 2 4.5 3.5

KEY

1 No understanding2 Limited understanding3 Understanding4 Good understanding5 Excellent understanding

Making professionals more green-consciousRespondents suggested a number of waysto make it easier for appraisers, brokersdevelopers, lenders, planners andtenants/purchasers to understand green practices. These include:

• Educating consumers to demand betterbuildings

• Providing more, simpler, and betterinformation on the consumer’s benefit from green practices

• Get the project team together tounderstand the impacts of greenfeatures throughout the life cycle of the project. This team should include architect, developer,occupant and others

• Understand the project’s impact on the productivity of its occupants

• Do more to identify the benefits fortenants of investment properties,and not just for owner-occupieddevelopments

• Visit completed green buildings to see how they work

• Carry out more post-completion follow-up studies

• Provide an occupant’s manual on your building’s green features

• Launch an awareness/informationcampaign to educate tenants and users.

What occupants like best about greenHealth and productivity are the two most popular direct and indirect financial benefits of green buildings,while lower occupancy costs – perhaps the most tangible direct financial benefitof the five categories – came last, aftermarketing/promotion and energyconsumption.

Although two of the twelve properties had yet to be completed, and someinterviewees spoke only for occupants, theinterview responses suggest occupants aremore interested in indirect benefits whichare more difficult to quantify but whichmay yield the most significant financial,operational and wellbeing benefits.

31

A Green on the Grand, Kitchener, Ontario, Canada – Office buildingB SAS building, Toronto, Ontario, Canada – Office building (UC)C Ottawa Paramedics building, Ottawa, Ontario, Canada – Office buildingD Vancouver Island Technology Park, Victoria, British Columbia, Canada – Office buildingE 260 Townsend, San Francisco, California, United States – Office buildingF Philips Eco-Enterprise Centre, Minneapolis, Minnesota, United States – Office/Industrial buildingG Mountain Equipment, Co-op Store, Montreal, Quebec, Canada – Retail storeH The Solaire, New York City, New York, United States – Residential apartment buildingI Cranberry Commons, New Westminister, British Columbia, Canada Co-housing project – Residential apartment buildingJ Oberlin College, Oberlin, Ohio, United States – Educational facilityK CK Choi building and Lui Centre, Vancouver, British Columbia, Canada – Educational Facilities

UC Under construction

CASE STUDY

A B C D E F G H I J K AVERAGE

Energy consumption 1 – – 5 1 4 – 2 2 2 3 2.5

Operating costs 5 – – 4 5 5 – 3 2 5 4 4.1

Health 3 – – 2 3 1 – 1 – 3 2 2.1

Productivity 4 – – 1 2 1 – – – 3 – 2.2

Marketing and promotion 2 – – 3 4 3 – 4 4 1 1 2.8

Other (i.e. overall environment) – – – – – – – – 1 – – 1.0

Appraisers, lenders and insurersIn one case, that of Minneapolis’ PhillipsEco-Enterprise Centre, the developer wasable to convince the appraiser that higherrents were achieved by the building’s greenfeatures and the appraiser reflected this inthe analysis. Otherwise, where an appraiserwas involved, green features were rated aslowering operating costs only where theinformation was both available andverifiable. Some projects, however, wereself-financed and did not involve anappraiser. In other cases, the impact oninsurance could not be quantified becausethe developer/owner or user had a blanketinsurance policy covering more than onelocation, only one of which might be agreen building.

Environmental costs and benefitsGreen v. non-green featuresIn the few cases where detailed paybackanalysis had been done, the returns ongreen features were significant andpaybacks short, although items such asphotovoltaic panels are expensive and slow to pay for themselves. Green on the Grand, 260 Townsend Street and thePhillips Eco-Enterprise Centre had trackedthe comparative initial cost of greenfeatures compared to conventionalconstruction, but there were no directlycomparable non-green projects. Overallconstruction costs seem to be higher inmost cases, although this difference will lessen with the increase in industryexperience, availability of technologies/materials and demand.

Financial and non-financial benefitsPerceptions vary widely with project andoccupant, although savings in energyconsumption were popular. Financially,the easiest features to quantify are energyconsumption and operating cost savings.From occupants’ point of view, however,less-quantifiable benefits such as airquality, absence of noise, and natural lightwere all prized.

32

A Green on the Grand, Kitchener, Ontario, Canada – Office buildingB SAS building, Toronto, Ontario, Canada – Office building (UC)C Ottawa Paramedics building, Ottawa, Ontario, Canada – Office buildingD Vancouver Island Technology Park, Victoria, British Columbia, Canada – Office buildingE 260 Townsend, San Francisco, California, United States – Office buildingF Philips Eco-Enterprise Centre, Minneapolis, Minnesota, United States – Office/Industrial buildingG Mountain Equipment, Co-op Store, Montreal, Quebec, Canada – Retail storeH The Solaire, New York City, New York, United States – Residential apartment buildingI Cranberry Commons, New Westminister, British Columbia, Canada Co-housing project – Residential apartment buildingJ Oberlin College, Oberlin, Ohio, United States – Educational facilityK CK Choi building and Lui Centre, Vancouver, British Columbia, Canada – Educational Facilities

UC Under construction

CASE STUDY

A B C D E F G H I J K AVERAGE

Overall 5 – – 5 5 5 – 4 – 5 5 4.9

KEY

1 No understanding2 Limited understanding3 Understanding4 Good understanding5 Excellent understanding

A question of attractionOf the seven interviewees who answeredthe question ‘To what extent did greenfeatures attract tenants or the user?’,all but one ranked green features as‘extremely important’. Lighting, low-VOCbuilding materials, good indoor air quality,ventilation and building systems (such asground-source heat pumps) were otherdraws. Energy consumption and energyefficiency, however, were not consideredvery important. Energy consumption andassociated operating cost savings werefrequently cited as financially-advantageous features. This suggests thatenergy consumption tends to be a primarymeasure by which the financial benefits ofgreen buildings are demonstrated, becauseit is easier to quantify, although not valuedby the end user as much as health andproductivity gains. The findings seem tounderscore the relative importance of costsaving measures versus the benefits tooccupiers and to productivity.

Green goes to marketHigher rents and reduced lease-up periodswere achieved as a result of green featuresin at least three developments, Green onthe Grand, The Phillips Eco-EnterpriseCentre and The Solaire. In addition, half thesample buildings had market comparables,albeit with limited data. Where cited, greenfeatures were thought to have had apositive effect on marketing by providing acompetitive advantage. Most projects wereseen to be market-leaders because of thetechnologies employed and the publicitythey attracted.

What’s the most importantenvironmental feature?Using less energy is ranked as the mostimportant factor in developing a project,scoring 4.8 out of five, rating as extremelyimportant in all but one project. Usingsustainable materials and improved airquality comes a close second, while greenroofs were seen as least important.

33

A Green on the Grand, Kitchener, Ontario, Canada – Office buildingB SAS building, Toronto, Ontario, Canada – Office building (UC)C Ottawa Paramedics building, Ottawa, Ontario, Canada – Office buildingD Vancouver Island Technology Park, Victoria, British Columbia, Canada – Office buildingE 260 Townsend, San Francisco, California, United States – Office buildingF Philips Eco-Enterprise Centre, Minneapolis, Minnesota, United States – Office/Industrial buildingG Mountain Equipment, Co-op Store, Montreal, Quebec, Canada – Retail storeH The Solaire, New York City, New York, United States – Residential apartment buildingI Cranberry Commons, New Westminister, British Columbia, Canada Co-housing project – Residential apartment buildingJ Oberlin College, Oberlin, Ohio, United States – Educational facilityK CK Choi building and Lui Centre, Vancouver, British Columbia, Canada – Educational Facilities

UC Under construction

CASE STUDY

A B C D E F G H I J K AVERAGE

Using less energy 5 5 4 5 5 5 5 5 4 5 5 4.8

Using sustainable materials 5 5 4 5 4 5 5 5 4 4 5 4.6

Using recycled or salvaged 5 3 3 4 4 5 5 5 2 4 5 4.1

material

Using less water 5 4 3 4 3 4 5 5 4 4 5 4.2

Green roofs 1 2 1 – 1 5 3 5 1 – 1 2.2

Indoor air quality 5 5 4 5 5 5 4 5 3 5 5 4.6

Average score 4.33 4 3.17 4.6 3.67 4.83 4.5 5 3 4.4 4.33

4.0 4.83 4.5 4 4.4

KEY

1 Not important2 Somewhat unimportant3 Neutral4 Somewhat important5 Extremely important

Rankings on the green social register The reputations of professionals involved in surveyed green buildings rose as a resultof the wide and favourable publicityinspired by the coverage in the media,in business and the community, andthrough accreditation bodies.

About half the projects found measurablebenefits to the bottom line, sales orservice, whether through productivity orexposure. If not measurable, the impactswere thought positive.

Some projects had such a great effect onthe community, to the extent ofconverting municipalities to greenbuildings, or of persuading students ororganizations to change their ownenvironments. Higher expectations werecreated in the community, the SASBuilding and the Phillips Eco-EnterpriseCentre being two projects that proved thecatalyst for transforming local economies.

Asked ‘Which social issues were factors indeveloping your project?’, mostrespondents cited better corporate or civicimage, leadership in social/environmentalresponsibility and improving indoor airquality. Reducing absenteeism was seen asleast important.

34

A Green on the Grand, Kitchener, Ontario, Canada – Office buildingB SAS building, Toronto, Ontario, Canada – Office building (UC)C Ottawa Paramedics building, Ottawa, Ontario, Canada – Office buildingD Vancouver Island Technology Park, Victoria, British Columbia, Canada – Office buildingE 260 Townsend, San Francisco, California, United States – Office buildingF Philips Eco-Enterprise Centre, Minneapolis, Minnesota, United States – Office/Industrial buildingG Mountain Equipment, Co-op Store, Montreal, Quebec, Canada – Retail storeH The Solaire, New York City, New York, United States – Residential apartment buildingI Cranberry Commons, New Westminister, British Columbia, Canada Co-housing project – Residential apartment buildingJ Oberlin College, Oberlin, Ohio, United States – Educational facilityK CK Choi building and Lui Centre, Vancouver, British Columbia, Canada – Educational Facilities

UC Under construction

4.2 4.43 2.1 2.1 4.1

CASE STUDY

A B C D E F G H I J K AVERAGE

Reducing absenteeism rates 2 4 – – 4 4 1 – – 3 3 3.0

Increasing productivity 2 5 – 4 5 5 1 – – 3 3 3.5

Improving employee health 2 5 – 5 5 5 – – – 3 5 4.3

Improving indoor air quality 2 5 – 5 5 4 – 5 – 5 5 4.5

Increasing employee morale 4 5 – 4 4 4 3 – – 5 5 4.3

Increasing corporate

or civic image 5 4 – 5 4 5 5 5 – 5 3 4.6

Increasing corporate or

civic leadership in social/

environmental responsibilty 5 4 – 4 4 4 5 5 – 5 5 4.6

Average score 3.14 4.57 – 4.5 4.43 4.43 3 3 – 4.14 4.14

KEY

1 Not important2 Somewhat unimportant3 Neutral4 Somewhat important5 Extremely important

CASE STUDIES:

35

Grand on the green, good for business tooGreen on the Grand, on Kitchener’s eastside, is a two-floor office building of20,452 square feet completed in 1996overlooking the Grand River. The propertyhas always enjoyed high occupancy levelsand is fully leased. Having carried out apost-occupancy audit and tenant survey,both landlord and tenant regard Green on the Grand as a success from theenvironmental, investment, occupancy,social and marketing points of view.

The landlord is Ian Cook Construction(ICC), a home builder, and the building’slead tenant/project engineer is EnermodalEngineering (EE), a provider of innovativesolutions to reduce the energy, waterconsumption and environmental impact ofbuilding designs.

Green on the Grand was built at a timewhen it was hard to lease office space.On the other hand, the developer hadacquired the land relatively cheaply.Encouraged by the possibility of grants fora green building, ICC and EE agreed on anenvironmentally state-of-the-art facility.This would employ the latest in energy-saving and environmentally-friendlyfeatures, and so attract tenants who,spoiled for choice, otherwise might notcommit to taking space.

The quality of the proposals won theproject $400,000* from Canada’s C-2000program to help with design andconstruction. C-2000 was a demonstrationprogramme sponsored by the CANMETEnergy Technology Centre of NaturalResources Canada to encourage highstandards of energy performance, waterconservation, site ecology maintenanceand indoor environment.

Green on the Grand stands on a riseoverlooking the Grand River, and was builtas two off-set rectangles, facing south tocatch the sun, make best use of daylight,and to offer most offices in the five suitesa river view.

Appropriately for a waterside building,Green on the Grand is thrifty in its wateruse. The building requires about 30% lesswater than conventional office buildings, asaving achieved by the harnessing ofrainwater for landscape irrigation, theinstallation of water-conserving bathroomfixtures, and a specially-built pond as analternative to a cooling tower. Green onthe Grand has also achieved a 72%reduction in drinking water consumption.

Ian Cook, President of Cook Homes and Steve Carpenter, President ofEnermodal Engineering, lists in descendingorder of financial benefit to landlord ortenant the following green features ofGreen on the Grand:

Building envelope: operating cost benefitfrom the use of wood as the mainmaterial, a renewable material that costsmuch the same as other materials, butmade possible a structure that is airtightand has insulation three times better than standard.

Lighting: natural daylight pleases workersand electricity consumption for lighting ishalf that typical of other offices.

Ventilation: natural and mechanical,independent of the heating and coolingsystem, the ventilation system suppliesoutdoor air to all offices. Cheap to run,yet makes for good working atmosphere.

Lack of ambient noise: noise does carry through the floor, although in generalsound quality in offices is good.

Operable windows: tenants like thewindows that can be opened, and wishthat fewer were fixed shut.

Pond: cooling and heating at Green on the Grand are by the mostenvironmentally benign fuel available,natural gas. Both rely on radiant heatingand cooling rather than forced air systems.Waste heat is sent not to a rooftop cooling-tower but to a landscaped pond andwaterfall for loss through evaporation.

Although popular with tenants, the pond isreported to have created maintenanceheadaches for the landlord that impactmechanical systems.

Mechanical systems: with hindsight, thesystem would be piped differently: using amodular system rather than a centrally-controlled system allowing for thevariation of loads required in a multi-tenanted building.

The tenant ranked the principal gains as inenergy consumption, marketing andpromotion, employee health, productivity,and operating costs.

GREEN ON THE GRAND, KITCHENER, ONTARIO, CANADA

36

Developer and major tenant found that architects, lenders, appraisers andplanners understand green building more than developers, tenants and real estate brokers do.

Enermodal, says President Steve Carpenter,measurably profits from its connectionwith Green on the Grand. The publicity,national and international, has generated arapid expansion of the company’s businessrequiring Enermodal to double the officespace it occupies. Similarly, Ian Cook,President of Ian Cook Construction reportsthat the good publicity has helped toboost awareness of his company and salesof its homes.

The developer sees Green on the Grand as an investment, based upon the rentsachievable at the time of completion.Lower mortgage financing was not availablebecause of the building’s green features,and their impact was not reflected in thelender’s appraisal. Insurance was actuallyhigher than otherwise, on account of thewooden construction. In the developer’sopinion, the building’s green features haveyet to make higher rents achievable. On theother hand, the development wasundertaken at a time when the office rentalmarket was weak: it was the green featuresthat got Green on the Grand noticed, somuch so that the project was fully leasedat completion.

The example set by Green on the Grandwill be easier to follow once there is moreincentive for an owner/investor to ‘buildgreen’, in the shape of a greater correlationbetween savings in energy costs andbenefit to the landlord. At present, theadvantage is to the owner-occupant. Undera conventional net lease, it is the tenantwho benefits from energy efficiency andoperating cost savings, while the owner isstuck with the initial capital andcontinuing maintenance costs.

* Unless otherwise stated, dollar values are those of therelevant country: in this case, 400,000 Canadian dollars.

37

Green on the Grand’s comment:

CREATE A DEMAND FOR THE

PRODUCT, AND THEREBY, ACHIEVE

ECONOMIES OF SCALE.

Green is as green doesSAS Institute Inc. did not plan to develop a green building as its new Canadianheadquarters, but having incorporated onepractical measure after another, SAS foundthat the project within sight of meetingthe requirements of Canada’s Leadership inEnergy and Environmental Design greenbuilding rating system (LEED®). Thesepractical measures included energy-savingfeatures, abundant natural light, nearnessto public transport and the use ofresource-efficient building materials.

SAS Institute Inc., of Cary, North Carolina,USA, is the world’s largest privately-ownedsoftware company, and regards itself associally-responsible as well as a leader ininnovative technologies. SAS’s primemotive in building a new national HQ forSAS Institute (Canada), however, wasfinancial. It would have been prohibitivelyexpensive to extend the lease on itscurrent Toronto HQ, and there seemed tobe nowhere else in the Canadian financialcapital to meet the company’srequirements. SAS’s solution was todevelop its own HQ, the SAS Building,which is on the north side of King Street,on the edge of the financial district.

The SAS Building, built on the site of anopen-air car park, has eight floors aboveground, and a further three below forunderground parking. The developer willoccupy 52% of the structure’s 115,000square feet rentable area and lease therest. Having decided that development wasthe best financial option, SAS decided thatthe way to get the most out of theinvestment was to build the best-possibleplace in which to work, while availing itselfof the economies in operating costsoffered by green features.

Raised floor air conditioning: saves onenergy costs, and allows each occupant thehighest level of individual control.

Daylighting: operating costs reduced byfull-height low-emission glazing on thesouth and west sides which allows thesun's heat and light to pass through theglass into the building, yet blocks heatfrom leaving the room, so reducing heatloss considerably. A sky-lit atrium extendsthrough the top three of the eight above-ground floors, admits natural light, savingon lighting costs and solar heat gain.

Reduced energy consumption: overallenergy consumption is projected tobetween 30% and 50% that of aconventional office building, much of thissaving related to lighting features.

Water consumption: all rainwater iscollected in tanks, treated and re-used inthe washrooms.

In assessing the relative benefit of suchfeatures, impact on workspace quality andon the bottom line was regarded as equallyimportant.

Jerry McDermott, Manager Real EstateDevelopment, SAS Institute (Canada), liststwo additional environmental benefits ofthe SAS Building:

Reducing ‘heat island effect’: the roof iscovered with a white membrane to reducethe tendency of buildings and roads to actlike giant storage heaters. The largeamounts of concrete, asphalt and bricksused 'soak up' heat in the daytime, store it,and then release the energy at night. Thesite was previously a paved parking lot.

Improving the neighbourhood: replacing aparking lot with eight storeys of officespace helps to regenerate the district, andthe underground parking space removespolluting vehicles from the street as wellas the paved surface which contributed tothe heat island effect.

As the developer will not occupy the SASBuilding before late 2005, it is too early toquantify all costs and benefits. Buildingcosts, however, were ‘marginally’ higherthan those of conventional construction.As a consequence, SAS seeks higher rentsthan otherwise, and current firmed-upoffers show tenants willing to pay more for the SAS Building’s combination ofconvenient location and the green-featurefinancial benefits of lower operating andenergy costs, plus staff benefits such assuperior indoor air quality and lighting.

Although it is too early to quantify theimpact on the bottom line, the developerreports that the SAS Building’s greenfeatures generate positive publicity in thenational daily press, in journals and inindustry presentations, thus increasingknowledge of the SAS Institute (Canada)and strengthening the brand.

SAS BUILDING TORONTO ONTARIO, CANADA

38

SAS comment:

LOOK AT THE BOTTOM LINE,

AND CONSIDER ONLY THE

DIRECT INCREMENTAL COSTS

OF SUSTAINABILITY VERSUS THE

ENERGY COST REDUCTION IT

YIELDS.

Driving a green bargainWhen the City of Ottawa decided that itsOttawa Paramedic Services needed apurpose-built headquarters, it is hardlysurprising that the city also decided thatthe building should embody features thatmade life as healthy as possible for thepeople working in or living around it. Thebuilding, moreover, would have to beLEED®-certified.

This, then, was the brief that Ottawa gaveto its private-sector co-developer, ForumLeasehold Partners who, with Aecon-Westeinde Alliance, designed and built thenew Ottawa Paramedic Service HQ, 2465Don Reid Drive, scheduled for completionin December 2005. Forum financed the$20 million construction costs, and willlease this 100,000 square foot project for30 years, at the end of which the buildingreverts to the city. Meanwhile, the propertymanager, Trammel Crow Company Canada,has committed to ‘green housekeepingpractices’.

Health-conscious requirements include anindoor air quality plan to protectconstruction workers as well as the futureoccupants. The ventilation system hascarbon dioxide monitoring to keep airfresh, and materials used in adhesives,carpets, paints and sealants are required tobe low on volatile organic compounds.Nine-tenths of ‘normally occupied’ interiorspaces have windows. A target of at least25% better energy performance thanCanada’s Model National Model EnergyCode for Buildings is to be met bymeasures such as high-efficiencycondensing boilers for space and waterheating, high-efficiency windows andlighting. CO2 demand control sensors willalso reduce ventilation when offices arenot being used.

Recycled and locally sourced buildingmaterials were used as far as possible,much of which would otherwise have gone into landfills. Native plants requiringno irrigation have been chosen forlandscaping.

In all, estimates the general contractor,Aecon-Westeinde Alliance, there was a‘green premium’ of about 1.2 %, or$230,000, to pay for the green featuresnecessary for the LEED® certificationOttawa sought. To offset against this extracost, there was the prospect of a $60,000grant to reward energy savings. Accordingto Michael Sullivan of Forum and RobertVaillancourt of the City of Ottawa, LEED®certification is ‘onerous and expensive’,yet the city thought it important to showenvironmental leadership at a time whenthe city was preparing to make LEED®certification a requirement for newmunicipal building. The 25% energysavings, however, would pay backincremental costs within five years.

OTTAWA PARAMEDICS BUILDING OTTAWA ONTARIO, CANADA

39

Ottawa Paramedics Building’s comment:

IMPROVE DATA ON SAVINGS

ACHIEVED: FOR THIS PROJECT,

40% ENERGY SAVINGS ARE

ANTICIPATED ON ELECTRICAL AND

MECHANICAL SYSTEMS.

Even the salmon like itVancouver Island Technology Park (VITP) is a 35-acre site on the southern tip ofVancouver Island, a campus-likecountryside setting containing a salmon-spawning creek and criss-crossed bypathways and trails. Persuading themunicipality in which VITP is situated thata green development would be better forlocal salmon habitat was one challenge thedeveloper faced. The approved strategyincluded developing parking lots with car-pooling spaces and plug-ins for hybridvehicles, and an innovative grass/gravelsystem to reduce runoff and vehicle-related site contaminants that might harmfish. There are no storm drains, water filtersor separators: the unpaved surfaces andmicrobes in the soil do their work.

Other green features help to attract andretain tenants in the high-technologyindustry, whose employees often work long hours. Media attention and the LEED®Gold certification gave free publicity toVITP and its tenants. What has reallyimpressed tenants, however, is the qualityof the lighting, heating, ventilating and airconditioning systems in the buildings. Onetenant, E-traffic Solutions, said in less thana year after moving into VITP, theirproductivity rose 30%.

Completed in 2001, at a time when thetechnology boom was about to bust, the184,000-square-foot Phase One of VITP is now 98% leased to 25 companies. InMarch 2005, VITP's developer and formerowner, the British Columbia BuildingsCorporation (BCBC), also the Crownagency responsible for British Columbia’sproperty assets, sold VITP to the Universityof Victoria Properties Investment Inc.(UVPI) for $20,200,000.

While it is difficult to quantify theincremental value green features broughtto the sale, they did improve itsmarketability. BCBC says it was able tolease up more quickly than otherwise,thus reducing development costs, and thegreen features made the project moremarketable to prospective purchasers,improving liquidity.

Dale Gann, General Manager of VITP,says that VITP was conceived as aninvestment property. The investment isachieving market rents and operating cost savings, raising awareness of LEED®and green practices. Local economicdevelopment gains are also noted by BCBC as the result of VITP attracting high-technology companies, and thecreation of high-paying jobs and a well-educated workforce.

Two other green developments are nowunder way locally: the University ofVictoria Medical Sciences Building fordoctor training; and an 18-buildingDockside Development initiated by theCity of Victoria, which was chosen over aconventional development. Green buildingis now integral to many BC governmentdevelopments, and BC governmentsuppliers and contractors are changingtheir business products and services tobetter align them with this change inmarket demand.

Overall, BCBC reports that rents exceedexpectation, as do absorption, operatingand maintenance savings, all attributed togreen features, although tenant allowanceshave been higher than expected.

VANCOUVER ISLAND TECHNOLOGY PARK VICTORIA BRITISH COLUMBIA, CANADA

40

Vancouver Island Technology Park’scomments:

PLAN WELL FROM THE START –

GET THE PROJECT TEAM TOGETHER

TO UNDERSTAND THE EFFECTS OF

GREEN FEATURES OVER A

BUILDING’S LIFECYCLE AND THE

INTERDEPENDENCIES BETWEEN

BUILDING COMPONENTS.

PLAN FOR AND CONDUCT MORE

AND BETTER POST-OCCUPANCY

AUDITS TO MEASURE HOW GREEN

BUILDINGS IMPROVE OCCUPANTS’

PRODUCTIVITY.

Don’t tell the clients, show themSwinerton Family of Companies is a large contractor and construction managerthat sees in 260 Townsend a multipleopportunity to create value, accommodateits employees, and to provide aneducational centre to show its clients andsuppliers how to build green. Swinertonacquired the seven-storey building in 2002,when it was nine-tenths empty after 16years’ occupancy by a previous tenant,during which time maintenance problems,including ductwork contamination, hadbeen allowed to build up. 260 Townsendhas since been renovated and upgraded toa standard that has won the propertyLEED® – EB (Existing Buildings) Goldcertification.

This is an owner-occupied property, andsince no third party was involved in thefinancing, there has been no lender’sappraisal that took into account 260Townsend’s green features. However,William Krill, Operations Manager andGreen Building Chairman, SwinertonBuilders, said the company’s aims in thisdevelopment were direct return fromenergy savings, improved productivity andthe business development and marketingbenefits of building green.

The company has received a number ofdirect referrals as well as a number ofproject opportunities through hostingmeetings of the US Green BuildingsCouncil Big Users Group. In the two yearssince acquiring and redeveloping 260Townsend, Swinerton has also signedcontracts for about $500 million of newLEED® projects, five times more than inthe equivalent preceding period.

Productivity is also up. One factor is themove from a 25-storey high rise with verylittle space in which employees couldgather, to a building which, besides betterlighting and air quality, has open-airrooftop terraces. One of these canaccommodate up to 200 people. Staff get-togethers, the company says, haveimproved communication and the flow ofideas. 260 Townsend’s terraces arelandscaped with native plants, whichreduce storm runoff and heat island, effect.

Temperature, CO2 and humidity aremonitored by state-of-the-art Emcor fully-digital building management system (BMS)with dedicated Internet access. The BMSalso maximizes use of outside air, thebuilding is totally non-smoking, and airquality is further maintained by aninsistence upon low-impact fertilizers,cleaning and pest-control chemicals. TheBMS also runs the HVAC system to meetactual rather than estimated demand, thussaving over 30% on utility bills. High-efficiency light fixtures with motionsensors complement best use of daylight,direct and indirect. It is too early for thedeveloper/occupier to quantify the savingson operating costs due to the building’sgreen features, but one indication isavailable. Premium and savings weretracked for each green item duringconstruction. The total additional cost wasestimated at $107,547 or $1.13 per sq. ft.(including 28,179 sq. ft. of indoor parking),2.01% over the entire project cost.

The annual operating cost savings areestimated at $28,535, or a payback of less than four years. One usefulcomparable with three conventionalbuildings of a similar size in San Franciscoshows them to have combined gas andelectricity consumption of 87.9, 70.5 and63.0 kBtu per sq. ft. a year, compared withthe 51.1 kBtu of 260 Townsend.

260 TOWNSEND STREET SAN FRANCISO CALIFORNIA, USA

41

260 Townsend Street’s comments:

VISIT 260 TOWNSEND TO SEE FOR

YOURSELF.

SEEK OUT CONFERENCES ON

HOW TO UNDERSTAND AND

IMPLEMENT GREEN PRACTICES.

INVOLVE LOCAL UTILITY

COMPANIES TO TRAIN THE PROJECT

TEAM AND BUILDING – USERS IN

ENERGY-SAVING TECHNOLOGIES.

ESTABLISH CONTINUING

EDUCATION AND TRAINING IN

GREEN PRACTICES FOR EVERYBODY

INVOLVED.

From solid waste to solid gainMinneapolis’s Phillips Eco-Enterprise Centreis an industrial office propertydevelopment in a high-crime, low-employment neighbourhood on a site thathad been earmarked for a solid wastetransfer station. The centre’s owner is thenon-profit Green Institute which, havingstarted in the business of re-using buildingmaterials, had then moved on to propertydevelopment. With what is now the PhillipsEco-Enterprise Centre, the Green Institutewanted to show that this downtown sitecould be put to more productive use thansolid waste transfer. The result is a 64,000sq. ft. development, one-third offices andtwo-thirds industrial space. It is adevelopment, which has created over 100jobs in a rundown district, while meetingthe proprietor’s strict financial criteria.

Developed as an investment property onthe Green Institute’s behalf by CoreyBrinkema, now Principal of TrilliumPlanning & Development, the Phillips Eco-Enterprise Centre is the first speculatively-built green business centre in the US. TheState of Minnesota provided $1,500,000 inequity funding, and Welsh Companiesundertook third-party leasing.Requirements included a minimum 50%pre-leasing and the rents that could beachieved at the time in the market tosecure debt financing coverage and third-party financing.

By completion in 1999, 40% pre-leasinghad been achieved, but there was 75%absorption within the first year and fulloccupancy within two years. Net leaserates achieved were between 5% and 10% above market rate for conventionalbuildings, developer Corey Brinkemaconcluding that green features contributedto higher rents, shorter lease-up period and the ability to target a specific group of tenants.

The Centre now has 18 tenants, many inthe energy and environmental industry,more in the non-profit sector than theGreen Institute would like. Constructioncosts were about 3% higher than with aconventional building, although rates ofreturn are similar, thanks to the higherrents the green features command. Hadmore been known about green buildingpractices in the 1990s, the Centre couldhave been completed more quickly and for less than its $5,800,000 cost.

Much of the building’s steel and brick issalvaged or locally sourced, and watercapture allows all storm water runoff to beused onsite. In the warehouse section,sunlight is reflected by skylights and sun-tracking mirrors which reflect up to tentimes more lumens in the morning andlater afternoon than ‘passive’ skylights.A 30-kilowatt photovoltaic array on thewarehouse roof is the region’s biggestsingle solar energy installation. There wasadditional expense in building wells, due to the shallowness of the surroundingbedrock, with payback estimated at sevenyears. In fact, payback was within fouryears due the heat pump system’s runningentirely on low-cost electricity, when otherprojects rely upon increasingly expensivenatural gas.

An appraisal conducted to secure low-interest government financing resulted in the lender concluding that there wasincremental value in the project’s greaterenergy efficiency. Only after evidence had been presented did the appraiseraccept that higher-than-average rents were being achieved.

Projected operating costs were lowerbecause of the building’s energy-efficientcharacteristics, and contributed to a 5% to 10% net rental premium. A post-occupancy survey concluded that thebuilding systems resulted in a development35% more energy-efficient than one witha typical high-energy furnace, and that thebuilding’s energy exchanges and the use ofnatural light resulted in a total energyusage 40% lower.

Lower mortgage financing charges were not available because of the greenbuilding features, and the requirement for substantial pre-leasing involved thedeveloper in ‘significant’ marketing efforts.According to the developer, however, theCentre poses less risk for the lender thanan equivalent conventional building. Itsgreen features extend the building’s usefullife and result in higher occupancy, thusimproving the quality of the incomestream, residual value and overall securityof the financing.

The Phillips Eco-Enterprise Centre has won professional, city, state, national and international awards, but The GreenInstitute has decided against LEED®certification as being too expensive in time and money.

Phillips Eco-Enterprise Centre’s comments:

BETTER QUANTIFICATION OF

POST-OCCUPANCY BENEFITS OF

GREEN FEATURES.

MORE FOLLOW-UP ANALYSIS (THE

DEVELOPER AND FUNDER ON THIS

PROJECT HAD NO FUNDING LEFT TO

COMPLETE THIS ANALYSIS).

MORE PEOPLE NEED TO BE SHOWN

THE BENEFITS OF GREEN PRACTICE

IN INVESTMENT PROPERTIES AS

WELL AS IN OWNER-OCCUPIED

PROPERTIES, BECAUSE MANY OF THE

GREEN PROJECTS COMPLETED IN

THE USA AND CANADA SO FAR ARE

OWNER-OCCUPIED.

PHILLIPS ECO-ENTERPRISE CENTRE MINNEAPOLIS MINNESOTA, USA

42

All the news that’s fit to buildThe Mountain Equipment Co-op (MEC)store in Montréal made the newspapers,and to some extent newspapers havehelped to make the store. This greendevelopment made news, and the walls ofthe structure are insulated with shreddednewspapers. MEC is a consumer co-operative and Canada’s leading supplier ofgood-quality outdoor clothing and gear,with over 1.8 million members worldwide.The co-op’s approach to building isconditioned by corporate goals, one ofwhich is to ‘reduce the ecological impactof running our business while increasingthe positive impact we have on people andcommunities’. Acting upon this principle,the Montréal store is the third in MEC (theother two are at Ottawa and Winnipeg) tomeet the environmental and energyperformance objectives of NaturalResources Canada’s C2000 standard, and isthe first in Québec.

MEC, the tenant, also acted as developer,thus reducing its lease rate. MEC’sMontréal store opened in May 2003, at acost of $6 million, or $123.87 per sq. ft.,which was above budget but not becauseof its green features.

One unusual aspect of the MEC store isthat materials and waste management isdesigned so that, subject to local by-laws,parts of the structure and façade can betaken down and reused somewhere else inthe future. Interior space design limitswaste through design with walls that caneasily be taken down, moved andreassembled. Air is not drawn into thebuilding from ground level, where it mightbe polluted by highway traffic.

According to MEC’s Marie-Eve Allaire andCorin Flood, the co-operative regards theMontréal store as an investment propertyas well as an embodiment of the group’sgreen philosophy. In deciding to act as itsown developer, MEC reasoned that it couldachieve three things: avoid paying thedeveloper’s profit, build the store the wayit wanted, and benefit from loweroperating costs. MEC, however, does notmeasure rate of return on the investmentin real estate, preferring the rate of returnon the business.

The energy efficiency of Montréal’sMountain Equipment Co-op storeoutperforms Canada’s Model NationalEnergy Code by 69.2%, a calculation basedupon the first year of operation. Two PVpanels power the solar domestic water andirrigation systems, helping to limit costs toan estimated at $50,000 a year, a thirdthat of a conventional building. AlthoughLEED® was used as a guide to the designof the development, MEC has not appliedfor certification, because of the time ittakes and because some of the designrequirements are thought to be overly-elaborate.

Mountain Equipment Co-op’scomments:

DEVELOPERS DEVELOP WHAT

THEY THINK THE MARKET WANTS,

AND DON’T OFFER GREEN

BUILDINGS BECAUSE CUSTOMERS

DON’T KNOW ENOUGH ABOUT

THEM, INCLUDING CUSTOMERS

WHO COULD AND WOULD PAY

FOR GREEN IF THEY WERE OFFERED

THE CHOICE. MEC SAYS THERE IS

A LOT OF ‘GUILT MONEY’ THAT

CUSTOMERS WOULD SPEND ON

BETTER CHOICES IF CHOICE

WAS OFFERED.

MARKET PRICING IS DISTORTED BY

IGNORANCE OF GREEN VALUES,

ESPECIALLY AMONG DEVELOPERS,

AND CUSTOMERS CAN BUY ONLY

WHAT IS OFFERED. IN THE ABSENCE

OF KNOWLEDGE AND CHOICE,

PEOPLE WILL CONTINUE TO MAKE DO

WITH CONVENTIONAL BUILDINGS,

BASED UPON THE CURRENT,

INACCURATE, SYSTEM OF PRICING.

EDUCATE THE CONSUMER. THERE ARE

ALREADY MANY DESIGNERS WHO

CARE ABOUT ENVIRONMENTAL

DESIGN, AND ARE EXCITED ABOUT

WORKING FOR A CLIENT WHO IS

OPEN TO GREEN CONCEPTS.

MOUNTAIN EQUIPMENT CO-OP STORE MONTREAL QUEBEC, CANADA

43

Green ice at cocktail timeAmong the health-conscious greenfeatures of the Manhattan’s The Solaire is a central water filtration system, backed byrefrigerators, which double-filter drinkingwater and ice. The Solaire, a 27-storeyresidential apartment development of 293 units and 357,000-sq. ft. with onsiteparking, is in Battery Park City on the westside of New York’s financial district. Itadjoins the site of the former World TradeCentre, and was completed in August 2003after a nine-month delay because of theterrorist attacks of 11 September.

The Solaire cost $116 million to build,$76 million in hard costs, and $40 millionsoft costs, a total equating to $325 per sq.ft. or $395,904 per unit. Extra costs due togreen features were not quantified, asmost of the features were a requirementof the tender. A joint venture by developersThe Albanese Organization, Inc. andNorthwestern Mutual Life Company, TheSolaire is the first building designed tomeet environmental guidelines set in theyear 2000 by the Battery Park CityAuthority (BPCA). The project receivedLEED®-NC (new construction) Goldcertification, and grants include $3,200,000over five years from a New York StateGreen Building tax credit and $560,000from the New York State Energy ResearchDevelopment Authority.

Among The Solaire’s Green features are 35% lower energy and drinking waterconsumption, and 65% reduction in peakdemand for electricity. BPCA’srequirements, however, account for only75% of The Solaire’s green features, for thedeveloper wanted a better building thatincorporates higher-quality materials, aswell as systems which are healthier for theoccupants.

Martin Dettling, Vice-President of TheAlbanese Organization, says energyefficiency features provided the bestpayback, because they both attractedgrants and reduced energy costs. Indoor airquality, however, was almost as significant,for this proved to be a big marketing gainfor the project. One family reported thaton moving to The Solaire their daughter, anasthma sufferer, began sleeping soundly forthe first time. The Solaire was leased upwithin six months, lower water andelectricity charges proving a particulardraw. The development’s popularitybrought with it a 5% rent premium, onethat was not envisaged when the projectwas first proposed.

Once the Solaire was completed, thedeveloper successfully lobbied the localwater board to reduce its charges, havingdemonstrated a saving of over 25% inwater usage. Air quality is maintained byan advanced central air-filtration system,with 24-hour monitoring, including carbonmonoxide levels in the garage, and everybath and kitchen has 24-hour exhaust.This energy-conserving development alsohas PV panels that generate 5% of TheSolaire’s energy at peak loading.

The Solaire’s comments:

MAKE THE COMMITMENT TO

BUILD GREEN FIRST, AND THEN

DECIDE HOW TO IMPLEMENT IT

COST-EFFECTIVELY.

GIVE TENANTS OPTIONS

BECAUSE THE MARKET IS NOT

STATIC AND DEVELOPERS NEED

TO BE ABLE TO RESPOND TO

CHANGING PERCEPTIONS.

THE SOLAIRE NEW YORK NEW YORK, USA

44

Green from goCranberry Commons is a housing co-op of green-minded people who range fromyoung couples in their 20s to a woman inher 80s. The co-op aspect of thedevelopment was taken into account bythe lender’s appraisal, but not the manyother green features. On a busycommercial street, half an hour’s bus ridefrom downtown Vancouver, the 26,662 sq.ft. co-op has 22 apartments andtownhouses, and was completed in 2001at a cost of $5,317,750, or $239 per sq. ft.,$241,698 per unit. The developer,Cranberry Commons Co-housingDevelopment Consulting, is a companycreated by the future owners of thehomes: the same company also financed the project and directed designand development.

Members have tried to build insustainability features at every stage,from site selection, through in-floor radiant heat (less noise, dust), to theinstallation of solar roof-panels, whichhalve domestic hot-water load. High-volume fly-ash concrete was used in theoffstreet parking and other flooring,putting to constructive use this wasteproduct of burning coal, while halving thegreenhouse gas emitted in making cement.The production of cement aroundVancouver, the developer points out,produces half as much CO2 as all personalautomobiles combined.

One feature of note in this courtyarddevelopment is the unusual amount andhigh finish of common amenity spaces,which are seen as a shared asset. Designand construction of such spaces to balanceprivacy and community is expensive, saysCranberry Commons resident anddeveloper’s representative RonayeMatthew, who adds that the appraiserunderstood this concept and how to value‘common asset spaces’.

Cranberry Commons is owner-occupied,and homes rarely change hands but valuesare claimed to between 15% and 20% percent higher than for similar footage inconventional properties, althoughconstruction costs were higher. Yield,marketing success, operating andmaintenance savings are all considered tohave exceeded expectations, while saleprices and absorption met expectations,and initial construction costs were higherthan expected. Even at CranberryCommons, however, green features takesecond place in financial performance tohigher sale price, lower operating costs andrate of resale.

To realise their plans for sustainable co-operative living, the Cranberry Commonsresidents had to overcome a number ofhurdles. The first was that the project tookshape during a slow building market, whenrisk was out of fashion and it was difficultto assemble sufficient members. That done,to find and acquire the site, co-opmembers had to compete withconventional developers who aresophisticated land purchasers.

Although the street was a citydevelopment area, the key site wasprivately owned. Once the co-op hadbought this site, however, the city waswilling to sell neighbouring lots, until thepresent 0.46-acre site had been assembled.Site acquisition led to the next hurdle: thecity had zoned the area for townhouses,and at first the floor space ratio (FSR) ofcommon spaces was included in the total.Had the City of Burnaby not agreed totake common amenity spaces out of FSR,the project would have been moreexpensive to build. Lastly, the city requiredthere to be 38 parking spaces at CranberryCommons when the co-owners see a needfor only 21, and the city refused their offerto trade some additional environmentalfeatures in exchange for releasing the 17redundant spaces for other use.

Cranberry Commons comments:

MAKE MORE INFORMATION ON

GREEN BUILDING PRACTICES

AND MANAGEMENT AVAILABLE.

CRANBERRY COMMONS CO-OP

MEMBERS WANTED TO ADOPT

SUSTAINABLE PRACTICES, BUT

FINDING THAT CONSULTANTS

‘DIDN’T HAVE TOO MUCH TO

OFFER’, HAD TO OBTAIN ADVICE

ELSEWHERE. MANY GREEN

BUILDING DECISIONS WERE

‘INTUITION-BASED’ RATHER THAN

FORMED WITH HARD DATA.

CRANBERRY COMMONS BURNABY BRITISH COLUMBIA, CANADA

45

Those who teach can also doOberlin’s Environmental Studies Program was fast outgrowing its ownenvironment, the basement of a campusbuilding. This was not only cramped, butthe pipes were insulated with asbestos, theelectricity was coal-fired and there was nonatural light. In short, says Cheryl Wolfe-Cragin of Oberlin’s Environmental StudiesProgram, it was an environment‘fundamentally contradictory’ to thedepartment’s teachings.

The answer was to move to a larger,purpose-built centre elsewhere in thecollege grounds. This would not only house current activities in an appropriateenvironment, but also provide forexpansion as well as livening up anunderused section of the campus.Green building features figuringprominently in the Oberlin curriculum,many are incorporated in the newdevelopment, Adam Joseph Lewis Centrefor Environmental Studies, which wascompleted in 1998. The centre is now afocal point of the academic programme,practising what it preaches, attractingstudents and staff, as well as providing anexample to its surrounding community.Energy savings of 63% are being achieved,making a ‘living laboratory’ of the buildingboth for students and the thousands ofvisitors who tour and study it. Electricityusage is a third less than other campusbuildings, while usage of the space byother departments means that it is twiceas busy as originally envisaged, placinggreater demands upon building systemsand management.

The Environmental Studies Program notonly chose to develop a sustainablebuilding: the program was also obliged tobe self-sustaining, in that it also had tofind the money. With Oberlin as thedeveloper, the centre was funded throughthe contributions of The Lewis FamilyFoundation of Cleveland and of theProgressive Insurance Company.

Construction costs for the 13,600 sq. ft.centre, at $4,800,000 ($353 per sq. ft.),include outlay on two items not normallyfound in a conventional development,$400,000 for wastewater treatment,known as the ‘Living Machine’, and$500,000 for a PV system. These twofeatures added 19% to building costs, buttotal operating costs are lower thanexpected, and such is the media interestgenerated that, with an article in Time anda television profile on ABC News, inquiriesare now handled by a full-time staffmember. One story generated is that of astudent who, though badly affected by thegases emitted by materials in conventionalbuildings, was able to work in the Oberlindevelopment. Off-campus, Wal-Mart hasnow agreed to changes in its plans andbuilding practices for a store openingoutside Oberlin.

The ‘Living Machine’ is a sunlight-powerednatural wastewater treatment system,which eliminates the need for off-sitetreatment, and significantly reduces thebuilding’s water consumption. Heating andcooling throughout the development is byclosed-loop geothermal wells. The AdamJoseph Lewis Centre has also taught thedeveloper a thing or two. Were the projectbeing started today, the developer wouldhave chosen simpler systems. Secondly,provide ventilation by a mixture of freshand re-circulated air, and not 100% freshair, which existing systems find difficult torecycle. It was also difficult to find anengineer who understands the systems andknows how to operate and maintain theclosed–loop groundwater system.

The developer foresees two main problems for people considering a similardevelopment, one being the shortage ofqualified engineers, and the other beingthe limited knowledge of the necessarycomputer control systems. The AdamJoseph Lewis Centre is a high-performancebuilding, requiring very specializedknowledge to operate, and the lack ofsuitably qualified engineers is seen as a barrier to wider adoption of itssophisticated technologies. Secondly,the computer controls require a level ofprogramming knowledge and a grasp ofthe systems logic and capabilities that ishard to find.

Adam Joseph Lewis Centre’s comments:

CREATE A WEBSITE WITH REAL-TIME

DATA ON THE BENEFITS OF

BUILDING GREEN.

ENABLE INTERESTED PARTIES TO

EXPERIENCE A GREEN BUILDING,

ESPECIALLY, AS IN THE CASE OF

THE ADAM JOSEPH LEWIS CENTRE,

NATURAL DAYLIGHT AND INDOOR

AIR QUALITY.

CREATE AWARENESS THAT A GREEN

BUILDING CAN GENERATE ITS OWN

ELECTRICITY: THIS PROJECT

GENERATES 58% OF ITS NEEDS.

LAUNCH A MEDIA ‘BLITZ’

PROMOTING THE BENEFITS OF

SUSTAINABILITY.

ADAM JOSEPH LEWIS CENTRE, FOR ENVIRONMENTAL STUDIES, OBERLIN COLLEGE OBERLIN OHIO, USA

46

East, west, payback’s bestThe C.K. Choi Building, a research centre,and the Liu Centre, a policy and conferencefacility, are neighbouring green buildingsamid trees on a university campus, itselfon a promontory.

Finance is as much a part of therelationship between these two buildingsas shared commitment to green features.Both were developed and are owned bythe University of British Columbia (UBC).The 30,000 sq. ft. C.K. Choi Building camefirst, and was completed in 1996, the18,800 sq. ft. Liu Centre four years later.The C.K. Choi Building cost $4,400,000, or$150 per sq. ft., and was financed 50:50 byUBC and private donations. It was plannedas part of a university expansionprogramme, with provision for it to be agreen building, provided it could bedemonstrated that construction wouldcost no more than a conventional design.In this, the C.K. Choi succeeded, while alsomeeting targets for resource and energyuse. Operating energy savings are 50%greater than those achieved by Vancouver’sEnergy By-Law.

Along the way, the centre overcame apopular misconception that the buildingwould prove to be substandard because so many building materials were re-used:60% of primary wood structure, and 100%of exterior brick cladding for example. Oneuser was discovered to have an allergicreaction to the building, but it was foundthat a joint had not been caulked. Oncethis had been put right, the allergysubsided: had this been a conventionalbuilding, the problem would probably havebeen neither discovered nor dealt with.

Among its many honours, the C.K. ChoiBuilding numbers the BC Hydro SmartEnergy Award, and listing as one ofAmerican Society of Architects’ top tenbuildings. According to Jorge Marques,UBC Energy Manager and Freda Pagani,Director, Sustainability, the public acclaimwith which the development has beengreeted, nationally and internationally, hasboosted UBC’s reputation, and paved theway for the development of the Liu Centre,a second green building.

Completed in 2000, the Liu Centre cost $3,100,000 or $165 per sq. ft., $15per sq. ft. more than the C. K. Choi, the LiuCentre having a more generous budget, theearlier development having demonstratedthe operational savings possible with green building.

As befits the spectacular setting, care for the site was the developer’s first greenconsideration in both cases.

The C.K. Choi building replaced a parkinglot, and existing trees were preserved tobenefit from their shade and the removalof CO2 from the air. The Liu Centre alsopreserved trees, restricted the use of heavymachinery to protect tree roots and tolimit soil compaction, and used nativeferns and wild grasses to restore the forestfloor and reduce irrigation.

Three things would have been donedifferently were the projects being startedtoday. First, renewable energy sourceswould be used: previously they were tooexpensive. Secondly, the buildings relyupon natural ventilation, the acoustics ofwhich are difficult to manage. Lastly, ageothermal/geoexchange ground sourceheat pump system would have beeninstalled, offering still more energy savings.With no third-party lender involved, therewas no appraisal required, and the questionof achieving lower financing costs did notarise. UBC reports, however, that onedonor was a Buddhist who ‘appreciated’the green features. In common with mostgreen developments, there was no abilityto achieve lower insurance premia, in thiscase because there is a blanket policy forthe entire campus. Building insurance costsmay even have increased due to the higherreplacement costs for the two buildings:replacement is higher than forconventional structures and does notdepreciate as quickly.

C.K. Choi Building and the Liu Centre comments:

DISPEL IGNORANCE. MANY

PEOPLE BELIEVE, MISTAKENLY, THAT

GREEN COSTS MORE TO BUILD

THAN CONVENTIONAL; THERE IS

LITTLE UNDERSTANDING OF THE

VALUE A GREEN BUILDING CAN

CONTRIBUTE, AND IT’S ALSO HARD

FOR PEOPLE TO UNDERSTAND HOW

THEY CAN CONTRIBUTE TO

SOLVING GLOBAL PROBLEMS SUCH

AS GREENHOUSE GASES AND

NATURAL RESOURCE DEPLETION.

YET DEVELOPING, LIVING AND

WORKING IN GREEN BUILDINGS

CAN MAKE A DIFFERENCE.

LAUNCH AN AWARENESS CAMPAIGN

TO INFORM STAKEHOLDERS OF THE

FINANCIAL AND NON-FINANCIAL

BENEFITS OF SUSTAINABILITY.

THE LIU CENTRE, IN A MOVE THAT

COULD BE USEFUL ELSEWHERE,

HAS PREPARED A MANUAL THAT IS

DISTRIBUTED TO ALL OCCUPANTS TO

HEIGHTEN AWARENESS OF GREEN

FEATURES AND TECHNOLOGIES.

C.K. CHOI BUILDING FOR THE INSTITUTE OF ASIAN RESEARCH,LIU CENTRE FOR THE STUDY OF GLOBAL ISSUES UNIVERSITY OF BRITISH COLUMBIA VANCOUVER, CANADA

47

People will pay for green featuresAs part of this study, English Partnershipssponsored research into six residentialdevelopments throughout England, threedesigned and built to British ResearchEstablishment EcoHomes ‘Very Good’building standards and three developed to current conventional buildingregulations. It proved impossible tocompare the green and non-green houseprices on a like-for-like basis becauseaccess to key financial data was severelylimited. Nevertheless, one housingdevelopment in Warrington in the north-west of England bears out the contentionthat customers are interested in greenfeatures and, if necessary, will pay more for them. We were asked to respect theconfidentiality of the information provided.

According to an online survey of 912potential home buyers in the UK carriedout in June 2004, 82% of people would beprepared to pay an extra 2% for an‘environmentally-friendly’ new home, and17% as much as 5%. This research, for theCouncil for Architecture and the BuiltEnvironment, the World Wildlife Fund, andmortgage provider HBOS, shows the mostvalued green features to be higher energyefficiency, lower operating costs, better airquality and daylight, use of low-allergy andenvironmentally-friendly materials, andwater efficiency.

Research for the present study by English Partnerships found residentialproperty developers citing lack of customerinterest in green homes. Several developersclaimed that occupiers remove greenfeatures from a new home or subsequentlyinstall ecologically unfriendly appliancessuch as tumble-dryers or power showers.Public ignorance of the benefits of greenfeatures perpetuates the pursuit of theconventional.

The Warrington project, however, maysuggest a latent customer interest andcommercial opportunity is beingoverlooked. To date, 15% of Warringtonbuyers have signified willingness to payover 6% more for a green home. This is adevelopment of 116 houses being built tono formal ecological standard, averaging1,252 sq. ft., and costing £216,198 (£173per sq. ft.). The developer, however, createdand actively promotes a package of greenfeatures, marketing them as a separateproduct. The features,Photo Voltaics, wind turbine (to produceelectricity) and rainwater recycling (fortoilets), cost a total of £13,700, thedeveloper estimating that energy savingsoffer payback within 3.8 years, with thepossibility of selling excess energy to theNational Grid. The offer required take-upby at least seven houses to cover the costof the wind turbine (£49,000, £7000 per house).

Developer's comments:

DEVELOPERS SHOULD ORIENT

BUILDINGS ON A SITE TO MAKE THE

BEST USE OF ITS NATURAL LIGHT

AND PREVAILING WINDS.

BETTER UNDERSTANDING OF

THE FACT THAT ARCHITECTS’ AND

LANDSCAPING ARCHITECTS’ FEES

ARE NO HIGHER FOR ECOLOGICAL

THAN NON-ECOLOGICAL

DEVELOPMENTS. IT IS WHEN THE

DEVELOPER HAS A CHANGE OF

MIND ALONG THE WAY THAT

COSTS MOUNT.

MANY GREEN FEATURES ARE

COST-EFFECTIVE, AND DEVELOPING

TO A REASONABLE ECOLOGICAL

STANDARD DOES NOT COST MORE

THAN FOR CONVENTIONAL

BUILDINGS.

ECOHOMES SCHEME WARRINGTON CHESHIRE, ENGLAND

48

49

Some terms used in the reportThe definitions offered are condensed from The Environment Dictionary by David D. Kemp (Routledge, 1998), andDictionary of Architecture andConstruction, edited by Cyril M. Harris(McGraw-Hill, 2000).

Absorption, the number of units ofproperty that will be leased or sold in agiven period of time; the time taken for agiven number of units to be let or sold ina given market.

Appraisal, an expert opinion on the value of a property; the act or process ofestimating value.

Appraiser, a professionally skilled,trained, and experienced person whoprovides an estimate or opinion on thequality, worth or value of real of personalproperty; someone appointed to carry outan appraisal.

Capital costs, include the purchase priceof buildings, construction costs such aslabour and materials, and the relatedarchitectural, engineering, legal, tax andpre-occupancy interest costs.

Capitalization rate, a rate of discount orpercentage selected as appropriate for theconversion if income into capital. A ratesufficient to provide a return to an investorfor accepting the risk of capital investmentas well as a return, or recapture, of thecapital invested.

Chlorofluorocarbons (CFCs), a group ofchemicals containing carbon, chlorine, andfluorine, whose stability and low toxicitymake them ideal for refrigeration and airconditioning, as well as propellants inaerosol spray cans. Inert at surfacetemperature and pressure, they becomeunstable in the stratosphere where chlorineis released as they break down. Chlorine inturn initiates a catalytic chain reactionthat leads to the destruction of ozone.

Churn, moving the tenants or occupiers ofa building for financial advantage, forexample moving tenants between floors toimprove the appearance of leasing activityor generate extra commissions for a broker.

Discounted Cash Flow (DCF), the presentvalue of the estimated future cash flow tobe derived from an investment in a capitalasset, over a given period of time. DCF canalso mean the technique for analyzing theviability of a capital investment project bydiscounting all budgeted, or projected,income and expenditure flowing from orinto a project, including the initial outlayand any residual value.

Envelope, the imaginary shape of abuilding, indicating its maximum volume;used to check the plan with respect tozoning regulations.

Face rate, the nominal interest ratepayable for a period of one year assuming the entire principal remainsoutstanding during the year, and interest isaccrued only once a year, as compared tothe effective annual interest rate which isthe true rate payable when interest iscompounded at intervals of less than a year.

Also the basic annual interest rate uoted on a promissory note or on a loan agreement and levied throughout the term of the loan on the initial amountof principal, not withstanding that theinterest is compounded other thanannually or repayments of principal aremade by instalments during the term ofa loan.

First costs, in North America, the costs of physical construction, although in thechronological sense other capital costsprecede them.

Grey water, waste water which does notcontain the products of bodily functions,such as that produced by bathing,showering, dishwashing, and so on. Oftenused for lawn and garden irrigation.

Halons, synthetic organic compounds that contain bromine and commonly usedin fire extinguishers. Halons are moredestructive of the ozone layer than CFCs of the ozone layer

Heat Island, Urban Heat Island, the namegiven to the situation in which at certaintimes the temperatures within a built-uparea are higher than those in surroundingcountryside. Heat islands occur at nightwhen wind speeds are low and skies clear,usually in summer. Vegetation and soil arereplaced by brick, concrete and asphalt,which have a greater heat capacity, andrelease that heat overnight. HVAC, heating,ventilating, and air - conditioning system.

GLOSSARY

50

Net lease, a lease that require the lesseeto pay the operating expenses resultingfrom his or her occupation of the premises,including real estate taxes andassessments, repairs, maintenance,insurance premiums, and utility costs.

Net Useable Area, the area that a tenant or occupier may actually use for thepurpose for which he or she is occupyingthe building.

Net Operating Income, net incomereceivable from a property after alloperating expenses have been paid and anallowance made for bad debts anddefaulting tenants, but before payment ofcapital or interest on any loans and beforeincome taxes.

Payback Analysis, a method of investment analysis that measures thetime required for the total net income orcash flow, generated by an investment, toequal the initial capital cost of thatinvestment. Also a method of comparinginvestments that takes no account of thestage at which income is received over thepayback period.

Remainder, a residual interest or estate in land. An estate in land that comes intoeffect as a right to possession upon thenatural determination of an immediatelypreceding estate.

Residual value, the value of an interest in property for the remaining,or residual terms of a lease. The presentvalue of the right to receive the rent andprofits reserved under a lease for the restof its term.

Retrofit, retrofitting, the adaptation of an existing structure or appliance to meet needs that did not exist whenthe structure or appliance was first built.

One example is the addition of extrainsulation to homes to save energy and cut costs as energy prices rise.

ROI, return on investment.

Swale, tract of low, usually wet land;depression in a tract of otherwise flat land.

Term and reversion valuation, theconventional method of assessing thecapital value of a property that willgenerate a variable income.

Turnover, the rate at which properties aresold; the rate at which tenants move inand out of a leased property.

Valuation, the act or process ofdetermining the value or worth, anassessment of the market value of aproperty at a given time.

Years’ purchase, a sum of money which ifinvested now will produce an annual returnof one unit of value for a given number ofyears; the present capital value of the rightto receive one unit of value per annumover an appropriate term at a required rateof return.

Yield, the net income of profit from aninvestment expressed as a percentage ofits cost or the capital invested, usuallycalculated at an annual rate; the actualrate of return on capital.

51

Bordass B.and Cohen R.; 2003, Property Needs Sustainability; Building Services Journal,September

BT/Forum for the Future, 2003: Just Values – Beyond the business case for sustainabledevelopment.

Building Research Establishment (BRE) published several related papers on ‘Sustainablebuildings:’ each with subtitles ‘benefits for occupiers,’ ‘benefits for constructors,’ ‘benefitsfor designers’ and ‘benefits for developers.’ They are available on-line at www.bre.co.uk/

Cassidy, Robert et al. 2003. White Paper On Sustainability: A Report On the Green BuildingMovement. Oak Brook, IL: Building Design & Construction.www.bdcmag.com/newstrends/BDCWhitePaperR2.pdf

Chou M and G Parker. 2000. Recognition of Energy Costs and Energy Performance inCommercial Property Valuation. Institute for Market Transformation, prepared for the NewYork State Energy Research and Development Authority New York Energy $mart Program.Available at URL: www.imt.org

City of London, 2003: Financing the Future

CMHC, Energy-efficient Housing Made More Affordable with Mortgage Loan Insurance,www.cmhc.ca/en/moinin/moinbuho/moinbuho_022.cfm

Commission for the Advancement of the Built Environment (CABE): The Value of GoodDesign, November 2002

Coriolis, 2003. Do Development Cost Charges Encourage Smart Growth and HighPerformance Building Design? Vancouver, BC: West Coast Environmental Law.

Doxsey, W. Laurence, 2001 [1998]. Sustainability Evaluation of Capital ImprovementProjects. Austin, Texas: Sustainable Communities Initiative.

Fannie Mae(a), Energy Efficient Mortgage,www.fanniemae.com/homebuyers/findamortgage/mortgages/energyefficient.jhtml;jsessionid=4NKNBSTBLX1BXJ2FQSISFGFHQWCI4IV5?p=Find+a+Mortgage&s=Mortgage+Solutions&t=By+Alphabetical+Listing

Fannie Mae(b), Smart Commute Initiative,www.efanniemae.com/hcd/single_family/mortgage_products/smartcommute.html

Feder, Barnaby, 2004. Environmentally Conscious Development. New York Times, August 25.

Federal Energy Management Program (FEMA), The Business Case for Sustainable Design in FederalFacilities, www.eere.energy.gov/femp/technologies/sustainable_federalfacilities.cfm

Federspiel CC. 2001. Costs of Responding to Complaints. Indoor Air Quality Handbook. eds.JD Spengler, JM Samet, and JF McCarthy. McGraw-Hill, New York.

Gottfried, David A. 2004. A Blueprint for Green Building Economics. In The Economics ofGreen Building, Conference Proceedings, The Simon Fraser University City Program &GVRD, Vancouver, November.

Gottfried, David A. 1996. The economics of green buildings. In D. A. Gottfried & L. N.Simon (Eds.), Sustainable building technical manual. USA: Public Technology Inc.

Green Buildings: Key Market Developments and the Growth of LEED® as of Sep. 2004.Green Buildings BC website www.greenbuildingsbc.com/new_buildings/other-resources.html

Guidry, 2004. How green is your building? An appraiser's guide to sustainable design.The Appraisal Journal, Winter, 62.

GVRD, 2003. The Economics of Green Building, Conference Proceedings, The Simon FraserUniversity City Program & GVRD, Vancouver, November.

GVRD, 2003. Sustainable Building Design. Principles, Practices and Systems. Vancouver: GVRD.

Heerwagen, Judith H 2004. Green Buldings, Organizational Success, and OccupantProductivity, Jan 22

Henry, M.S. 1994. The contribution of landscaping to the price of single family houses:A study of home sales in Greenville, South Carolina. J. Environ. Hortic. 12:65–70.

Heschong Mahone Group, 1999. Skylighting and Retail Sales. An Investigation into theRelationship Between Daylighting and Human Performance, Condensed Report. Fair Oaks,CA: Heschong Mahone Group.

Institute for Location Efficiency (ILE), www.locationefficiency.com/

Institute for Market Transformation (IMTS), 2003. Valuing the Future of SustainableProducts, Buildings & Vehicles, Executive Summary. Washington, DC: Institute for MarketTransformation mts.sustainableproducts.com/downloads/econ_summary.doc

Institute for Market Transformation (IMTS), 2002. Hidden Value: Recognizing The Asset ValueOf High-Performance Buildings. Washington, DC: Institute for Market Transformation.

Institute for Market Transformation to Sustainability (IMTS), 2002. Sustainability and theBottom Line. Building Operating Management, May.

Johnston Controls, 2004, CaseStudy: National Geographic Society, Washington,District of Columbia

Kats, Gregory, 2003a. Green building costs and financial benefits. Westborough:Massachusetts Technology Collaborative, November.

Kats, Gregory 2003b. The Costs and Financial Benefits of Green Building: A Report toCalifornia’s Sustainable Building Task Force. California: Capital E. October.www.usgbc.org/Docs/News/News477.pdf

BIBLIOGRAPHY

52

Kozlowski, David, 2003. Green gains: Where sustainable design stands now. BuildingOperating Management. July www.facilitiesnet.com/bom/Jul03/Jul03environment.shtml

Kozlowski, David, 2002. Defining the Future of Green Buildings. Building OperatingManagement, September.

Kozlowski David, 2001. Taking Energy to the Bank, Building Operating Management, March.

Kozlowski, David, 2000. Can Green be Gold. Building Operating Management. November.

Laverne, R. J. and K. Winson-Geideman, 2003. The Influence Of Trees And Landscaping OnRental Rates At Office Buildings, Journal of Arboriculture 29(5):

Loftness V, R Brahme, M Mondazzi, E Vineyard, and M MacDonald. 2002. Energy SavingsPotential of Flexible and Adaptive HVAC Distribution Systems for Office Buildings. Air-Conditioning and Refrigeration Technology Institute (ARTI), Arlington, Virginia. Available atURL: www.arti-21cr.org/research/completed/finalreports/30030-final.pdf

Lovens, Amory (1998): Research Study

Matthiessen Lisa F, Peter Morris, 2004. Costing Green: A Comprehensive Cost Database andBudgeting Methodology. Davis Langdon Adamson, July.

Mills, Evan, Lawrence Berkeley National Laboratory, 2004, From ESCO to Energy ServicesPartner: Amplifying Real Estate Value through Energy & Water Management

Morton, Steven, 2002. Business Case for Green Design. Building Operating Management,November www.facilitiesnet.com/bom/Nov02/Nov02environment.shtml

Nevin, Rick and Gregory Watson, 1998. Evidence of Rational Market Valuations for HomeEnergy Efficiency. The Appraisal Journal, October.

Newsday, 2003. Their Goal: Eco-Friendly Buildings; October 20www.usgbc.org/News/usgbcinthenews_details.asp?ID=492

Nicklas, Michael H. and Gary B. Bailey, Undated. Student Performance in Daylit Schools:Analysis of the Performance of Students in Daylit Schools. Raleigh, NC: Innovative Designwww.deptplanetearth.com/pdfdocs/studentdaylit.pdf

Norman, Wayne and MacDonald, Chris, Business Ethics Quarterly, March 2003: ‘Getting tothe bottom of Triple Bottom Line’.

Norwich and Peterborough Building Society, Green Commercial Mortgage,www.npbs-commercial-mortgages.co.uk/green_mortgage.html

Packard Foundation, 2002. The Sustainability Report and Matrix. The David and Lucile PackardFoundation: Los Altos Project. October, www.packard.org/index.cgi?page=building

Reguly, Eric, 2004. Ottawa should be building on Kyoto. Globe and Mail, Thursday October 21.

Rocky Mountain Institute, 1998. Green Development: Integrating Ecology and Real Estate.Toronto: John Wiley.

Romm, Joseph J, and William D. Browning, 1998 [1994]. Greening the Building and theBottom Line. Snowmass, Colorado: Rocky Mountain Institute.

Schaltegger & Burritt’s: ‘Contemporary Environmental Accounting – Issues, Concepts andPractice’ (Greenleaf Publishing).

Syphers, G., Baum, M., Bouton, D., & Sullens, W., 2003. Managing the Cost of Green Building.Oakland, CA: Kema Consultants.www.kemagreen.com/KEMAGREEN/Portals/0/ManagingtheCostofGreenBuilding.pdf

The Tellus Institute: Green CDC Initiative: ‘The Costs and Benefits of Green AffordableHousing: Opportunities for Action’ at page 4.

Trusty, W.B. and Scott Horst, 2003. Integrating LCA Tools in Green Building Rating Systems.Kutztown, PA: ATHENA Institute International.

Turner Construction, 2004. Construction Execs: Green Building Leads to Increased Efficiencyand ROI. GreenBiz.com www.greenbiz.com/news/news_third.cfm?NewsID=27182

Turner Construction: Turner Green Building Market Barometer

UBC, GVRD, 2003. Why Build Green? Ten Key Questions Answered. Vancouver: University ofBritish Columbia and Greater Vancouver Regional District, November.

Urban Land Institute (ULI), 2003. Green Buildings and Sustainable Development: Making theBusiness Case

United Kingdom's Climate Change Levy was introduced in 2001 and is designed toincentives more efficient building operation through charges to commercial applications.More information is at www.cclevy.com/

United Nations: The Protocol to the United Nations’ Framework Convention on Climate Change

USDOE, 2003. The Business Case for Sustainable Design in Federal Facilities. United StatesDepartment of Energy Federal Energy Management Program.

USGBC, November 2002. Building Momentum. National Trends and Prospects for High-Performance Green Buildings ww.usgbc.org/Docs/Resources/043003_hpgb_whitepaper.pdf

USGBC, Undated. Making the Business Case for High Performance Green Buildings. Brochure.www.usgbc.org/Docs/Member_Resource_Docs/makingthebusinesscase.pdf

USGSA 2004. GSA LEED Cost Study, Final Report. US General Services Administration,October www.wbdg.org/ccbref/ccbdoc.php?category=gsa&docid=280&ref=1

von Paumgartten, Paul, 2003. Business Case for High-Performance Green Building.Journal of Facilities Management, June.

53

von Paumgartten, Paul, 2003. The Economic Impact of Green Buildings. November. NAREIT:www.nareit.com/portfoliomag/03novdec/vested.shtml

Whitson, Alan, 2003. Why Green Buildings? Keynote speech at Municipal Green BuildingConference & Expo. Newport Beach, CA: Alan Whitson Company.

Wilson, Alex, 2004. Productivity and Green Buildings. Environmental Building News,Vol. 13(10).

Yates, 2001. Quantifying the Business Benefits of Sustainable Buildings, draft.London: Centre for Sustainable Construction, Building Research Establishment.

Yudelson, Jerry, 2004. Forecasting the market demand for green buildings. Daily Journal ofCommerce, September www.djc-or.com/SpecialPubs/index.cfm?page_editorial_id=34639#

The following texts are specifically noted as covering principles of valuation and as helpingto create a bridge to sustainability:

The International Valuation Standards (published by the International Valuation StandardsCommittee);

The Appraisal Institute of Canada’s Uniform Standards of Professional Appraisal Practice;

The Appraisal Foundation’s Uniform Standards of Professional Appraisal Practice;

The Royal Institution of Chartered Surveyors Red Book (Manual of Valuation);

UK Government’s Green Book – which sets out guidelines on incorporating sustainablepractices in business cases;

The province of British Columbia’s Multiple Account Evaluation Guidelines (1993 – nowdiscontinued but remain valid);

Contemporary Environmental Accounting – Issues, Concepts and Practice (Schaltegger &Burritt: Greenleaf Publishing);

Green Development – Integrating Ecology and Real Estate (Wilson, Uncapher, McManigal,Lovins, Cureton & Browning: Rocky Mountain Institute);

The Income Approach to Property Valuation (Baum & Mackmin: Thomson Learning);

Modern Methods of Valuation (Britton, Davies & Johnson: Estates Gazette);

Several papers on the benefits of sustainability published by the UK Building ResearchEstablishment – as previously noted.

54

For information contact:mchambers@rics.orggreen@astrics.com

The Royal Institution of Chartered Surveyors12 Great George StreetParliament SquareLondon SW1P 3ADUnited Kingdom

© 2005 Royal Institution of Chartered Surveyors

www.rics.org/greenvalue

Sept

embe

r 20

05/5

0261

/C.S

chof

ield

Consulting team: Resource and support contributions from:

RICS AmericasThe Chrysler Building405 Lexington AvenueSuite 2623New York NY 10174USA