There’s no question that green commercial building is grabbing its share of headlines these days. Major corporations such as Toyota, Goldman Sachs, and BP have built and moved into environmentally responsible buildings, citing energy savings, healthier indoor environments, and smaller carbon footprints. Is green really better? Should you give green buildings a higher rating when considering competing lease or purchase proposals?
There are several reasons why green is better. But first you need to understand how expenses are created in commercial properties or professional office buildings. The normal and customary procedure in a lease agreement is for the landlord to cover the operating expenses, which may include utilities, janitorial services, real estate taxes and other common expenses. But there is a qualifier — it’s typically only for the first year. In subsequent years, as utility, water and other costs increase, the landlord bills those increased costs back to the tenants, pro-rated based on their percentage of leased building square footage. I’ve seen tenants billed as much as 10-15% of their total rent in what is referred to as “pass-throughs” — an additional expense due to operating costs.
So reason number one to “go green” is lower operating expenses. A “green” building will generally have lower operating costs (approximately 13.6% lower than similar non-green buildings, according to McGraw-Hill Construction). Efficient use of energy and water and proper waste management lower the operating costs of the overall building, and the savings are passed on to the tenants.
What makes a building green? A building’s green features may include the use of recycled and regional construction materials; the recycling of more than 75% of construction debris; preferred parking spaces reserved for low-emitting vehicles; and design and construction guidelines to help tenants with green build-outs. Carpet, adhesives, and paint are made from low volatile organic compounds, and daylight is usually available to 75% of the space. Green buildings save millions of gallons of water a year by using water-saving plumbing fixtures and cooling systems that can reuse water and then irrigate the outside landscaping through its runoff.
Green buildings’ heating, ventilating, and air-conditioning systems are often “hospital quality,” running 85-90% clean air, whereas most office buildings run at 35%. High performance buildings can improve employee health and well being, leading to lower health care costs. Better interior lighting is another hallmark of green buildings. Often referred to as “natural light harvesting,” the balance of interior wall placement, windows and full-spectrum lighting systems create more efficient and comfortable environments.
All this adds up to reason number two to “go green”: employee productivity. Yes, it’s true — people working in green buildings are healthier, happier, and more productive. In a recent DOE study, it was shown that worker productivity in a green building increased by 15%. In another study by The Rocky Mountain Institute, air quality improvements fostered increased productivity of up to 20% and reduced absenteeism by up to 25%. Imagine if you could increase the power of your workforce by 15-20% — without hiring additional staff!
While improved productivity can bolster a company’s bottom line, tenants are still concerned that going green costs more. Should it? At one time the lack of green construction materials drove up prices. Not so anymore. There is a plethora of competitively-priced green building materials on the market, from paint and carpet to HVAC systems. So the answer is no, the construction costs of a typical green building should not impact the rental cost.
And lastly, the third reason to go green — it enhances your company’s brand and reputation. Companies are seeing an increasing number of customer requests for information about sustainability efforts. A buyer for over 60,000 suppliers, Walmart is a visible example of this trend.
Existing and potential employees are increasingly emphasizing the “green” features of their office in choosing employers, impacting companies’ ability to attract and retain talent. I recently represented the Regence Group in a lease renewal. It was during that process, that the head of Real Estate & Facilities remarked that more and more, she was seeing younger employees express their desire for a green building, as they understand its impact on their personal health and well-being. Would being in a green office building help retain your talent or attract the new talent you are looking to hire? As the economy improves, we may very well see a talented labor shortage. Going green will be to your advantage.
Enjoy the benefits of going green-it’s as easy as one, two three!
1. Lower operating expenses and increase profitability
2. Increase productivity
3. Enhance your corporate reputation
Need more information or help going green? Call Bill Beck today at (208) 333-7050, or email beck@tenantrealtyadvisors.com.