business case for green building in canada
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Presentation to Build Sask Green conference in Regina, Saskatchewan, Canada, on October 15, 2010TRANSCRIPT
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Jerry YudelsonYudelson Associates
2010
The Business Case for Green
Building
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One “Take Away”
Anyone involved with a new commercial development, university, school or public project today, not making it as green – and low carbon – as possible, will have a building that’s functionally obsolete the day it opens for business and then economically disadvantaged for its entire lifetime.
Entire building portfolios could become devalued in this time of rapid market convergence to low carbon and green development. This creates both challenges and opportunities for everyone.
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The Big Picture (BP)
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Green Building Important for Carbon Reduction
HOK Architects, LEED-CI Office Toronto
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Our Opportunity to Build GreenB
illio
ns
of
Square
Fe
et
Current US building stock is approx. 300 billion sf.
Over the next 30 years:
• 52 billion sf will be demolished• 150 billion sf will be remodeled
• 150 billion sf will be new construction
Therefore, by the year 2035, three-quarters of building stock will be new or renovated vs. 2005
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Life Cycle Positive Solution
Buildings are the only Life Cycle Cost-positive solution
25% of total carbon solution can come from buildings, including homes, stores, offices, hotels, institutional buildings and other structuresChoosing Green
Choosing Green
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Green Building Is Growing Rapidly
Smith Carter SC3 Offices, Winnipeg, LEED Platinum
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2010 Trends: A Baker’s Dozen + 1
1. LEED certifications grow 8. Colleges/universities go green
2. Green homes 9. Public sector buildings/schools
3. Water conservation 10. Greening existing buildings
4. Green mandates 11. Retail sector goes green
5. Continued subsidies for green technologies
12. Zero net-energy buildings become more widespread
6. Green building goes global 13. Renewable energy growth
7. Green finance hits mainstream 14. Sustainability concerns
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Green Building Statistics
USGBC: 16,000+ members
LEED Commercial Projects (US)28,000 registered (July 2010)6,400 certified (July 2010)Ave. size ~ 100,000-sq.ft.
LEED Commercial Projects (CA)289 certified (Sept.)2000 registered (Sept.)
LEED for Homes (US)6800 certified27,000 registered (July 2010)
155,000+ LEED AP’s
“In God We Trust; All Others Must Bring Data.”-W. Edwards Deming
TELUS House, Ottawa LEED Gold
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LEED Growth Slows Down!
2005 to 2006: +50% cumulative growth in new LEED registered projects
2006 to 2007: +75%
2007 to 2008: +80%
2009 to 2010: +70%
2010 to 2011: only 10% thru July!
LEED: Platinum
New York City
$1 billion
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LEED Growth - Project Registrations
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LEED Growth – Project Certifications
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US Green Building Market Projections
Source: EL Insights, http://tinyurl.com/2egzhub
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Greg Kats: Greening Our Built World
• 14% reduction in CO2, 2025 vs. 2005
• NPV of green building: $650 billion in U.S.– 5x to 10x cost premium
• 2020 Prediction: – Green buildings 95% of
new construction– Green retrofits are 75%
of all retrofits
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Green Buildings Make Money Sense
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Business Case for Green
Financial/economic return
Risk mitigation
Marketing/public relations
Productivity/health gains
Recruitment/retention
Prevent “value erosion”
Sustainability concernsNorthfield Stapleton, DenverLEED Silver
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Proven Benefits
Absenteeism(15%)
Carbon Emissions(35%)
Energy Costs(30%)
Hospital Stays(2.5 Days)
WasteManagement Costs
(50-90%)
Water Usage(30-50%)
Performance on School Tests
(20%)
Retail SalesPer Square Foot
FactoryProductivity
Office Productivity(2.8-20%)
Occupancy Rates(3-4.1%)
Rental Rates(up to 174%)
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Q42007 Q42008 Q4200920
22
24
26
28
30
32
34
36
38
31.36 31.43
28.99
3535.45
31.97
30.99 31.25
29.07
Gross RentsOffice, 5 stories plus, 200,000 to 1 Million, Multi-tenant
Source: CoStar
Energy StarLEEDOverall
LEED Rent Premium
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Responsible Property Investing
• Energy Star properties (U.S.)– 5.9% higher income per
sq.ft.– 13.5% higher market
values per sq.ft.– Slightly higher multiple
of net annual income to value
– Source: Gary Pivo and Jeffrey Fisher, U. of Arizona/Indiana, “Investment Returns from Responsible Property Investments: 1998-2008,” March ‘09
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These are Global Trends
• “Real estate managers and managers are adopting greener business practices in all regions of the world…”
• Globalization is reinforcing and accelerating these sustainable property development and operating trends”
• Multi-national corporations and global investment firms are especially important in establishing greener real estate business practices worldwide through their tenancy and investment criteria”
• Major corporate tenants are seeking greener facilities, to attract and retain workers, differentiate their products, improve image and satisfy stakeholder demands…”
• Source: “Globalization and Global Trends in Green Real Estate Investment,” RREEF Research/Deutsche Bank, September 2008.
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Most costs are “people costs”
Studies show 3-7% gain in workplace productivity
A 1% gain in productivity pays all the energy bills
A 10% gain in productivity pays for the entire building (or the technology)!
Productivity Counts
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Making the Business Case
• 2009: CBRE/U. San Diego• 500 tenants in 154 LEED
buildings• 100 Pine St., San Fran.
• 55% said: more productive• Average gain: 4.9%• $5,200 value
add/employee• $21/sq.ft.
• 45% said: reduced sick days• Average: 2.88 days less• Value: $5.00/sq.ft.
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Genzyme Center-Employee Retention
• Biotech company
• 900 employees
• LEED Platinum, 2004– 360,000 ft2 corporate HQ
• Turnover reduced 5%/year– Value: $2 to $5 million Per
Year (or $5.60 to $14 per ft2)
– Contrast with green cost premium
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2010 LEED Predictions
• New buildings: – 2500 new U.S. LEED
project registrations in First Half 2010• Recessionary impact
– 2100 new project certifications
– Value of new LEED project registrations in 2010: >$35 billion
Child Development Centre, University of
Calgary, LEED Platinum
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Business Case for a Bad Building?
• Competitive disadvantage today
• Will have to disclose energy use in future
• Liability for sick building syndrome?
• Lower productivity?
• Health hazard?
• Value erosion in future?
Manitoba Hydro Place Winnipeg
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Greening Existing Buildings: The Next Big Challenge
Must improve existing buildings to meet carbon reduction goals
Very cost-effective to cut energy/water use by 30% to 40%
Many outstanding examples nationwide
Oxford Centre, Toronto
LEED-EB Silver, 2008
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LEED-EBOM Registrations
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Direct Economic Benefits – Greening Existing Buildings
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Greening Existing Buildings: Next Big Challenge
• Need to green existing building stock rapidly
• Over 4,800 LEED-EBOM buildings registered– Avg.: 300,000-sq.ft.– 40 in Canada, only 7
Certified
• Example: CBRE– 100 buildings certified
• Example: Chicago Merchandise Mart– 4 million-sq.ft. Merchandise Mart,
ChicagoLEED-EB Silver
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Case Study: Empire State Building
Built 1931; 2.8m sq.ft.Key Outside Players:
Jones Lang LaSalleJohnson ControlsClinton Climate Initiative
Completion: late 2012All projects
38% expected energy savings$4.4 Million Savings!Goal: LEED-EB Gold
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Water Use Concerns Growing…
• Urban water concerns are likely to increase
• Good design & practice can reduce water use +50% in buildings
• Retrofits can reduce water use 35% to 75%
• Australia is the case study, the testing ground– 150 liters/capita/day– U.S: 150 gallons/cap/day!
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The Future is Green, But…
If you want to score, skate to where the puck is headed, not to where it is now.
Ask yourself: how green will the built environment be in 2015? What will be the New Normal?
Poorly performing buildings will pay a penalty in that market!
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Conclusions?
• Green building is here to stay– Pace of adoption is rapid in schools, existing buildings– Green buildings & homes– Renewable energy & efficiency go with green building
• Still concern over actual building performance– This will be addressed in next 3 to 5 years– Building management will use “cloud”: SaaS
• Focus shifting rapidly to greening existing buildings
• Opportunities abound for nimble companies
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Take-Aways
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Jerry YudelsonYudelson AssociatesAugust 2010
THANK YOU!
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Further Resources
Books by Jerry Yudelson:Dry Run: Preventing the Next Urban
Water Crisis (2010)
Greening Existing Buildings (2009)
Sustainable Retail Development: New Success Strategies (2009)
Green Building Trends: Europe (2009)
Green Building through Integrated Design (2008)
Choosing Green: The Home Buyer’s Guide to Good Green Homes (2008)
Green Building: A to Z (2007)
The Green Building Revolution (2007)
Marketing Green Building Services: Strategies for Success (2007)