REoptimizer^® Blog

Your company can benefit greatly by making sustainability a core part of its commercial real estate strategy. Greener buildings and spaces can help your company improve recruitment and retention, increase productivity, lower costs and even make it easier to find clients and re-tenant your spaces. Along the way, you will also be doing the right thing from both a public relations and a global perspective.

Once, commercial real estate benchmarking focused on identifying a space's productivity and its cost effectiveness. With the growth of the green movement in the CRE sector, exemplified by the popularity of LEED certification, benchmarks have changed. Today office users look at buildings on the basis of their environmental efficiency, and these commercial real estate benchmarking tools are not always directly correlated to economic efficiency.

The movement to green created quantum changes in how spaces get used. Square footages are shrinking, with the old benchmark of 225 square feet per employee being reduced by more than 50 percent to goals in the neighborhood of 100 square feet. Other changes include looking at energy efficiency as an end, instead of a means. These new focuses created cost savings and public relations benefits but ultimately harmed operations as too-green buildings hurt retention, morale and productivity.

Just adopted in July 2013, version 4 of the U.S. Green Building Council's LEED environmental rating system will be officially announced at the GreenBuild conference in Philadelphia in November 2013. LEED v4 is a quantum change in the way that commercial real estate projects qualify for recognition as green. After a long process of public comment, it passed the USGBC's voting process with 86% support, when only 66.7% was needed.

The basics of LEED certification remain the same. New or existing projects can earn one of four levels of certification by earning "LEED points." LEED still has a 100 point system where projects earning 40 to 49 points are "certified," 50-59 point projects are "Silver," 60-79 point properties get "Gold" certification and the highest "Platinum" certification gets awarded to projects with 80 points or more. However, the way that those points are earned, and the properties that qualify for points, are changed. Here is the website for v4.

Large Scale Changes

LEED v4 has separate rating systems and criteria for 21 different types of residential properties, developments and commercial real estate buildings. Some of the new building types added to LEED v4 include warehouses, distribution centers, and data centers. LEED is not an office building-only standard anymore.

The Green Building Council has gone a step beyond the regional credits in previous LEED systems by redesigning LEED v4 to be globally appropriate. One example of this is that LEED is now fully compatible with the metric system. The USGBC is so dedicated to making LEED global that it will absorb the certification fees for the first LEED-certified projects in 112 different countries from Afghanistan to Zimbabwe. This makes it easier for global companies to meet their green commitments in their commercial real estate anywhere they locate.

LEED Credit Changes

With the v4 standard, the USGBC has refocused LEED on reducing building carbon emissions. Approximately 20% of a building's LEED points can come from exceeding the ASHRAE 90.1-2010 energy efficiency standard, which covers efficiency for a building's lighting, HVAC and hot water systems as well as the efficiency of its envelope. The USGBC estimates that this one change will do more to reduce a building's carbon footprint than anything else in the LEED standard.

Builders can also earn up to 9 points for selecting certain green building materials, such as FSC-certified wood, in the construction of commercial real estate properties. LEED v4 also includes a new "Integrative Credit" that allows projects to earn points for including environmental outcomes as a part of their planning from the start of the project, instead of just bolting on green systems.

New Building Types

While industrial buildings have earned LEED certification prior to v4, the new LEED categories for data centers and for warehouses and distribution centers make the process of qualifying for certification more straightforward. For instance, LEED v4 contains standards for lighting that include the use of daylight to replace some electric lighting and occupancy sensors to further reduce energy consumption. It also uses ASHRAE or Energy Star standards to guide warehouse designers in how to minimize HVAC energy consumption. For data centers, water usage is now a major part of earning LEED v4 certification.

LEED v4 and Commercial Real Estate

LEED v4 will lead to greener commercial real estate buildings. However, many property types will also find it harder to earn points due to the higher carbon-output focus in the new credit weighting system. Since one of the primary ways to reduce a building's carbon footprint is to reduce its energy use, companies can recoup these costs relatively quickly. A five-year payback period is now a new standard for many commercial real estate efficiency projects, with many hitting three-year paybacks. With generous subsidies available for LEED-friendly upgrades like photovoltaic solar panels or LED lighting systems, the LEED points and the attendant cost savings are within reach for many developers and occupants. In this way, LEED v4 could lead to a greener future for company's bottom lines as well as for the planet as a whole.

4 Markets to Watch for LEED Certified Buildings in 2015

There's a reason environmental sustainability is called being "green." Done right, it doesn't just help the Earth. It also can help turn get your bottom line out of the red and save more green for your company. As a tenant, you can make environmental sustainability a part of your corporate real estate strategy in two ways. First, you can demand environmentally sustainable options in the buildings that you occupy. Second, you can become a more sustainable applicant of any building.

An environmental site assessment, frequently referred to as a "Phase One," is more than just another lender requirement that needs to be met when you are looking at purchasing a piece of investment real estate.  Pulling a phase one report can not only help you understand an asset better, but also save you from potentially buying large and expensive problems. However, they can also bring up their own problems and unnecessary complexities.