The dollars and sense of green buildings – sustainability is strategic

The Saint ReportEnergy, Environmental Planning, Property Development, saintblog0 Comments

(Ellen Sinreich, green building strategist, attorney and president of Green Edge LLC, provides Green Building Consulting Services to businesses and public sector clients throughout the Americas. The Saint Report welcomes her as a guest columnist)

By Ellen Sinreich, President, Green Edge LLC

Ellen SinreichAs Tom Friedman notes in his recent bestseller, Hot, Flat and Crowded, “Green is going from boutique to better, from a choice to a necessity, from a fad to a strategy to win, from an insoluble problem to a great opportunity.”  This holds true for real estate: owners, tenants, lenders and developers would be well advised, in this author’s opinion, to strategically incorporate sustainability into their short and long term game-plan for surviving and ultimately thriving as we work our way through the current economic doldrums.   The following is a roadmap for how to accomplish this.

Once the overall strategic decision to “go green” has been made and there is a commitment to invest time and money to “green” the company or portfolio, the next level of decision making is tactical.  What are the company’s immediate and long term goals, what properties are appropriate for initial involvement, what green building attributes should be focused on first, etc.  Common goals include enhanced financial performance, reduced carbon footprint and risk mitigation. The decision making company’s perspective will influence the outcomes of these tactical decisions: the long term investor will have a different set of parameters to consider that the merchant builder (if there are any still building that is…)

Once the tactical decisions have been made and specific goals, properties and green building features have been identified, a cost benefit and payback period analysis should be made for each green building feature at each property to determine if the implementation of that feature fits into the financial constraints and objectives within which the real estate company is operating.

The green building features wish list, from which most real estate operators and occupants make their selections, typically includes the following: commissioning, high efficiency HVAC and lighting systems, daylight harvesting, energy management systems, low flow fixtures, smart irrigation systems and xeroscaping, storm water management systems, pervious pavement and shading and renewable energy including solar, wind and geothermal systems. 

The cost/benefit analysis should include the following steps:  First and foremost, you must evaluate where you are before incorporating any sustainable upgrades or features and this process is called benchmarking.  You need to understand the current costs and benefits, how much energy and water are you consuming, how much waste are you generating and dumping in landfills, etc.   Only when you understand your current costs, can you evaluate the projected benefits and cost savings of the green building features you are evaluating. 

After you have benchmarked your starting position, you are ready to consider the costs and benefits of the green building features under consideration.  Let’s start with benefits:  these range from the obvious: lower energy consumption, lower operating costs, higher net operating income and higher asset value to the less obvious: lower cost of regulatory compliance, better ability to meet tenant demand, enhanced enterprise value, reduced exposure to energy cost volatility and supply constraints and reduced exit/take out risk. 

Equally important is a thorough analysis of the cost factors, ranging from the obvious: out of pocket acquisition and installation costs, to the less obvious and harder to quantify costs of product or system failure, inexperienced and unqualified contractors and service providers, functional obsolescence and changing investor, tenant and lender demand.  

Ellen Sinreich is president of Green Edge LLC, a Green Building consulting/law firm that provides strategic sustainability services to businesses and governmental entities. email ellen@greenedgellc.com web www.greenedgellc phone      212-828-3840  212-828-3840    212-828-3840  212-828-3840    

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