Relating LEED AP Growth to Green Building in the US

LEED AP Data through Feb 10, 2010March 31, 2010 AnalysisJoint work with USGBC

Cumulative LEED AP’s By Year

Top Ten Practice Areas (as of 2/10/2010)

Composition of Top LEED AP Professions By Year

Composition of Top LEED AP Professions By Year

Who is under represented relative to the size of the real estate industry?

• Appraisers – only 16 LEED APs in the country.• Lenders – only 41• Thus the problem of appraising and financing

LEED property.

Density of Total LEED APs By State

Wash DC not viewable here.

LEED APs Per Capita

LEED APs Per Capita Wash DC

Correlation of LEED AP’s Per Capita with # Leed Buildings LQ = .942

Where are the Green Buildings?

LEED Buildings Location Quotient=((state pop/US pop)/(# state cert/total US cert))

#1 Wash DC

#2 OR

#4, 5, 6 & 7 are WA, CO, MA, ME

#3 VT

Top Ten Greenest States/Dist Based on LEED LQ

1 DC 10.744012 OR 3.0464863 VT 2.6778394 WA 2.389765 CO 2.3482956 MA 2.0859857 ME 2.0317328 NH 1.366299 IL 1.23356510 CA 1.226033

Relative to All CRE Buildings Which States are the Least Green?

What are the Greenest States Per Capita Based on Office Stock?

Rank State or District Penetration Per Million People

1 District of Columbia

2 Colorado

3 California

4 Oregon

5 Minnesota

6 Massachusetts

7 Hawaii

8 Washington

9 Texas

10 VirginiaData: CoStar Analysis by Eugene Choi in “Green on Buildings” Forthcoming in the Journal of Sustainable Real Estate, 2011, see www.josre.org

Who are the Greenest Cities Based on Office Stock Penetration?*Rank State or District Penetration Per Million

People

1 San Francisco (6.23%)

2 Houston (5.89%)

3 Washington DC (4.63%)

4 Denver (4.32%)

5 Duluth (4.32%)

6 Minneapolis (3.88%)

7 Seattle (3.71%)

8 Honolulu (3.67%)

9 Burlington, NC (3.57%)

10 Chicago (3.46%)

Data: CoStar Analysis by Eugene Choi in “Green on Buildings” Forthcoming in the Journal of Sustainable Real Estate, 2011, see www.josre.org

LEED AP’s Versus # Buildings as % of Stock

Explaining the Location of LEED BuildingsLEED LQ is the Dependent Variable

• R Square = 0.957 • Adjusted R Square = 0.887

Independent Variable Coefficients t Stat

GDP Growth Rate 2008 3.116341758 0.370815325Pop Growth Rate 2000-2009 -1.512616551 -0.442021405Ratio of Rents -0.09727318 -0.362596865LEED AP/s Per capita 3447.500383 15.00559094

Using LEED AP’s Per Capita Explains LEED Building Efforts (or vice versa)

• R Square 0.934• Adjusted R Square 0.931

Coefficients t Stat

Intercept-

0.100974961-

0.575927223LEED AP/s Per Capita 3414.22675 15.9964954

Relative (Higher) Rents Alone Explain More Than Rent Differentials in Terms of Where Developers Build Green

• R Square 0.306• Adjusted R Square 0.267

Coefficients t StatIntercept -1.389899881 -1.200055695Qtr 1 2009 $Rent Levelfor LEED Buildings 0.126656144 2.814493583

Summary on Regression Analysis• It is impossible to know (on this work to date) if we have

LEED AP’s in areas with demand for LEED Buildings or if there are areas spawning LEED AP’s that in turn drive more LEED development.

• Yet we see a very strong correlation between LEED AP’s and Buildings and little correlation with GDP growth, population growth or even rent differentials (LEED rents above non-LEED rents)

• We do see more LEED buildings in those markets with relatively higher rents in absolute dollars.

• We still need to investigate regulatory effects and other possible drivers of green real estate.

• We need to drill down on some cities as well.

Summary• Incentives and regulation matter– Many states, i.e. CA, and cities with higher penetration of

LEED buildings have mandated green buildings, i.e. San Francisco, Houston, Washington DC. (See Eugene Choi, 2011)

• Higher rents also matter. Cities where rents are relative high compared to the US average tend to observe higher penetration rates.

• It is not clear whether LEED AP’s drive more LEED building or if LEED building drives the presence of LEED AP’s but there exists an extremely high correlation between the presence of LEED buildings and LEED AP’s.