Green is good.
Nowhere is this truer than in one of the most sustainability-conscious cities in one of the greenest states in America—San Francisco. The City by the Bay, among the leaders in new green commercial office space construction, has strict sustainable-building codes, says Richard C. Mallory, partner in the San Francisco office of law firm Allen Matkins Leck Gamble Mallory & Natsis LLP. “No new-construction major retrofits will be permitted that do not include major green elements,” he notes. “State building codes are not far behind, and many other cities across the nation are following San Francisco’s lead.”?
Existing office buildings are becoming greener and greener, though not primarily to obtain higher rents, because there is no solid evidence that higher rents are being achieved for green buildings, Mallory says. “However, with governmental entities and more and more major and minor private businesses demanding green space for legal compliance purposes and in response to internal pressures from employees desiring to be located in sustainable projects, I foresee a wave of sustainable retrofits to meet the demand,” he says.
San Francisco is not alone in the drive for greener buildings and greater sustainability. Boston, Denver, New York City, Seattle, and Washington, D.C., and are also seeing increased awareness and a rising demand for greener structures. “Our view is that there is market sensitivity to being environmentally responsible when developing property and that the investment-grade properties will generally require LEED [Leadership in Energy and Environmental Design] certification,” says Brian L.P. Fallon, partner at O’Connor Capital Partners of New York City.
Sustainability is moving away from being optional and more toward becoming an expectation every day, says Steven M. Davis, a partner at New York City’s Davis Brody Bond Aedas architecture firm. “The life cycle of the built environment hinges on responsible design,” he says.
An emphasis on sustainability is here to stay, asserts Robert Brown, principal at CBT Architects, a New England–based planning and design firm. “I do feel it is on every market’s mind as a ‘have to,’” he says. “If you are not in a sustainable building, you are not considered top drawer. Developers, government agencies, and academic institutions alike are finding that the energy paybacks are real and valuable.”
If not mandated by government regulation, sustainability likely will be driven by tenants and buyers, says Dana Behar, president of HAL Real Estate Investments Inc. in Seattle. “If tenants and buyers give preference to sustainable buildings and are thus willing to pay more to occupy and/or buy them, sustainability will increasingly become an important issue,” he said.
In cities such as Seattle, sustainability has grown in importance, points out Bert Gregory, chairman and CEO of Mithun Inc., a local architecture, design, and planning firm. “One hundred percent of our clients and current projects include green goals,” he says. “This includes many with very ambitious sustainability goals from our private, public, and nonprofit clients for both individual buildings and at the district, campus, and neighborhood level. The leading development groups appear to recognize that competition for tenants, local government attitudes, smart exit strategies, and rising resource costs often require green strategies beyond the market baseline for their developments. Several are seeking differentiation or leadership status within a sector or region. For the most ambitious, there are still financial challenges to reach those goals, but ambition is strong to make it happen. Mithun has more than ten projects targeting net-zero energy and living-building challenge goals in Seattle and other areas of the U.S.”
Although many public entities are financially challenged themselves, the group is busy with public components of public/private partnerships, including green infrastructure design, parks, and libraries, says Gregory. “Higher-education institutions have been challenged in the downturn, but sustainable master plans for higher-education institutions, health- and lab-related educational facilities, and university student housing are strong,” he says.
In Denver, there is a prevailing social demand for sustainability, particularly among universities and housing firms, which find that their marketing benefits from the sustainable features that their users are seeking, says Andy White, principal at Colorado’s OZ Architecture. “Further, the municipalities we work with have become conscientious about their sustainable responsibility to the community and their leadership role,” he says.
If sustainability fails to become the norm in the real estate industry and lifestyle, “then shame on us,” says Susan Powers, president of Denver-based Urban Ventures Inc. “We’ve seen a tremendous embrace of green building over the last few years as consumers have become more and more interested in leading an environmentally responsible lifestyle. While Colorado has not enacted the same standards as California has to guide the construction industry in this area, I believe that most people in our industry expect that green building will become the norm, regardless of whether the legal requirements are in place. This is what the market is demanding, certainly on the commercial side, and unless developers respond, they will not be competitive.”
The majority of clients at Washington, D.C.—based WDG Architecture are deeply committed to sustainability issues, says Eric Liebmann, WDG managing principal and director of design. “Sustainability is here to stay,” he says. “Our designs start at a minimum of LEED Silver. The unknown is in the apartment market where there is a focus to keep the price down by using wood-frame construction and less of a focus on sustainable design features, and if noninstitutional clients will make the extra effort to have a project certified by the U.S. Green Building Council.”
Adds Rick Hammann, managing principal and director of multifamily housing at WDG, “Developers still are looking for an economic benefit as it relates to sustainability. They want the sustainable features that are useful in marketing the property, whether it is office or multifamily.”
Mallory agrees. “Even though higher rents may not be immediately forthcoming for green buildings, owners realize that the value of a property will increase due to the larger number of prospective tenants that will consider their building when space turns over, because government tenants and green-leaning businesses will put a high priority on locating in a green building, allowing available space there to lease faster,” he says. “Such a building will command a higher sales price per square foot even if rents are not presently higher for such space.”