It is only a matter of time before our world turns deep green. And this is not because there is a moral imperative to do so. If that were the case we would have been bleeding green 37 years ago at the time of the first Earth Day. Unfortunately, by almost any measure we do not live in a moral world. However, the world that we live in is economically rational. When it matters to our pocketbooks, we accept change. This will apply to moving from a world dominated by fossil fuel to an energy-neutral world. And along the way there will be dramatic emission reductions.
But the answer to “if” and “when” we get there depends upon the green movement passing two tests:
- Green buildings need to be economically viable.
- Green buildings must be design neutral, melding into normal design and construction.
What Is Green?
While there are various definitions of “green,” think of green buildings as those that have achieved a reduced ecological footprint by harvesting energy, water and materials as well as mitigating impacts on human health and the environment. A green building has a healthy life cycle through its design, construction, operation and maintenance.
Let’s make one thing perfectly clear: there is a wide distinction between the green movement — which is rooted in saving energy and resources — and the radical environmental movement, which often is rooted in NIMBYism. The latter has used “environmental” to foist “no growth” movements, which ironically have accomplished the opposite by forcing inefficient growth to the exurbs, encouraging low densities and land inefficiencies and clogging up the entitlement process, contributing to higher housing costs.
One can choose to view the green approach as a sort of movement or moral imperative. But it is more useful to think of it as an economic imperative.
To pass the economical viability test a building must make sense in cost of construction and reduced operating overhead during the initial investment life of the building, perhaps seven to 10 years.
A comprehensive report issued by California’s Sustainable Building Task Force — “The Costs and Financial Benefits of Green Buildings” — concludes minimal increases in front end costs of about 2 percent to support green design would, on average, result in life cycle savings of 20 percent of total construction costs — more than 10 times the initial investment. For example, an initial front end investment of up to $100,000 to incorporate green building features into a $5 million project would result in a savings of $1 million in today’s dollars over the 20-year life of the building.
Among the demonstrable economic and financial benefits would include lower energy, waste disposal, water, environmental, emissions, operations and maintenance as well as savings from increased productivity and health.
Our research has identified about 2,300 LEED (Leadership in Energy and Environmental Design) buildings in the United States. LEED buildings are generally those that achieve sustainability or greenness, as defined by the Green Building Council, a worldwide nonprofit group focused on transforming “the building marketplace to sustainability.” Many of these buildings are large, as the following list shows:
- Multi Use: 1,074
- Commercial Office: 391
- Multi-Unit Residential: 148
- Campus, Schools and Day Care: 202
- Higher Education: 199
- Public Order and Safety: 142
- Industrial: 91
- Health Care: 73
- Recreation 42
- Library: 91
- Military Base: 20
The reported value of these LEED projects in 2006 was $10 billion, divisible into 642 million square feet.
The real economic test is the cost of retrofitting existing buildings. For instance, virtually none of Downtown San Diego’s 10 million square feet of office inventory is green. These buildings are going to grace the skyline for the next 50 years. To become green, owners undoubtedly will have to see significant increases in lease rates. Higher costs certainly must be offset by higher rents.
We haven’t seen numbers in the housing area, but this upcoming Pacific Coast Builders Conference is holding a seminar on “Builder-to-Builder Green” to discuss ways to build healthier and more energy efficient homes. Forbes magazine has profiled the “Green Mansion” trend in California. This suggests that green will become economical, evolving from millionaires over time to the middle class. An analogy is the cruise control in your car: now ubiquitous, this feature was once available only on expensive cars.
Change In Public Policy?
Government is gradually getting involved by creating economic green incentives. For instance, the Centre City Development Corp. offers “one point of floor area ratio (FAR) for a green roof and one point for public open space” for new Downtown buildings. This is significant: if you have a 20,000-square-foot site, then adding 1 point of FAR is worth 20,000 extra feet of buildable space. The agency ought to be charging for density, and if that cost is expressed in real green, so much the better.
The state of California awards grants to advance green building design and constructions practices. Santa Barbara County’s incentives include fast-track building plan approval, award assistance and local tax relief. Sacramento Municipal has a fund to cover the costs of LEED project submissions.
However, government regulation, even incentive-based, won’t build green structures unless the incentives are sufficient to reduce the hard costs of construction or at least reduce regulatory hurdles to entitlement. We should be tying green projects to expedited building permits and entitlement certainty. Or even consider doing the reverse: charge higher fees and/or face a longer entitlement process if the developer cannot produce a green building.
Green Must Be Pretty
The other test should be attractiveness, or at least design neutrality. People don’t want weird or ugly, which is what they mostly get with solar panels and such. As solar panels are replaced with normal-looking solar roof tiles and as modifications can be made to windows, for instance, which suck in the energy and put it to use, the project must continue to look good. This is what we have seen so far:
- Triple-paned windows to reduce heat entering the building.
- Roofs made of recycled high-density polyethylene shingles.
- Houses wrapped in an environmentally friendly foam/concrete insulation system.
- Cathedralized insulation in attics.
- Water-filtration systems that recycle water.
No doubt we can invent numerous other materials and systems to reduce energy consumption.
In San Diego at the 2006 Green Built Tour (sponsored by San Diego EarthWorks) 14 different locations were toured including offices, homes, the Chula Vista Police department, and the Sun Harbor Marina, to name a few. Every building has a different degree of sustainability.
The old Chula Vista Police headquarters cost about $3.54 per square foot for gas and electricity, whereas the new headquarters cost is just $2.11 (not including a 150,000-square-foot parking garage).
Elsewhere, stunning examples of “green” include the Hearst Tower in Manhattan, that city’s first Gold LEED certified building. The 46-story, 856,000-square-foot Midtown structure is defined by its energy-saving design. The cost of foreign-sourced materials represents less than 10 percent of the cost of the construction of the tower itself. The tower’s frame will contain roughly 20 percent less steel than would a conventional perimeter frame, saving approximately 2,000 tons of steel.
The Bank of America Tower in New York (Sixth Avenue between 42nd and 43rd streets) will stand 1,200 feet tall when completed next year, making it the city’s second-highest structure after the Empire State Building. The 55-story building is projected to be the most energy efficient, water saving and healthful office tower ever built.
This project’s co-owner Douglas Durst says, “If you don’t build green, you’re building obsolete.” He estimates that all of the environmental factors they’re including account for 2 percent to 3 percent of the total $1.2 billion cost of building the tower. He believes the green additions will pay for themselves within two to four years through saved energy expenses.
Green can be done. But practically speaking, it must be rooted in economic savings.
Gary H. London is president of The London Group Realty Advisors Inc., providing real estate consulting and economic analysis. Check him out on the Web at londongroup.com or e-mail him at glondon@sandiegometro.com.