A question of LEED

Why Certify?

Stuart CarronENERGIZE RE

We’ve all run into these types

Why should I go through the trouble and cost for LEED certification?

When I already design/build/operate green, and can build all the same attributes in myself?

Only Performance Counts! Right?

Total Carbon Emissions Count

Bank of America Tower New York City

What’s in the LEED brand for me?

The Business Case for Green is Understood…

Financial/economic return

Risk mitigation

Marketing/public relations

Productivity/health gains

Recruitment/retention

Prevent “value erosion”

Sustainability concernsNorthfield Stapleton, DenverLEED Silver

But what is the business case for LEED Certification?

What is LEED Certification?

Consensus standards developed by the U.S. Green Building Council

Voluntary, performance-based green building rating system

Building labeling scheme, with a widely recognized brand

Third party verified

Why LEED Certification?

• THIRD PARTY VERIFICATIONIt's like the difference between self-publishing and having a paper peer-reviewed and edited by other experts. The added rigor of INDEPENDENT EXPERT REVIEW ensures that the outcomes are not only what they are expected to be, but are also high-quality.

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Why LEED Certification?

• Validation is a key concept - it ain't real if it's just you saying it's "compliant" or "certifiable."

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Why LEED Certification?

• COMMISSIONING

A fundamental requirement of LEED, Commissioning is the process of physically testing the building systems and controls to assure that they perform according to design. Non-LEED buildings often skip this step, and then under-perform in areas of energy efficiency, indoor thermal controls, and other areas.

LEED Energy Performance

Source: New Buildings Institute, “Energy Performance of LEED for New Construction Buildings”, March 2008

26% LEED Certified buildings compared to non-LEED buildings

32% LEED Silver buildings compared to non-LEED buildings

44% LEED Gold and Platinum buildings compared to non-LEED buildings

Why LEED Certification?• PUBLIC RECOGNITION

LEED is the most widely recognized green building rating system in the world. People who certify with LEED smartly use the media, builders and residents to promote their sustainable building program, their business and their careers.

Why LEED Certification?

• LEADERSHIP

Using LEED as a basis for your building project shows that you care about the environment and the people that occupy your buildings, places you in the top tier of practitioners in your field, and can get you a seat at the table discussing new initiatives in your area.

Market Performance

Not convinced LEED certification is a good idea?

LOOK AT THE FINANCIAL INCENTIVES!

LEED Incentives• Structural Incentives

– Expedited permitting for LEED bldgs– Density bonuses (higher FAR allowed)

• Financial Incentives– Permit fee reductions or waivers– Grants and subsidies– Low-interest loan funds– Technical and/or marketing assistance– Tax credits– Tax abatement

(insert map of U.S. showing incentives programs locations)

LEED Tax Abatement Benefits

• Owners pay no taxes on improvement value of property for up to fifteen years.

• Tax abatement remains with property and transfers to a new property owner.

Cincinnati has the most aggressive green building property tax abatement scheme in the country – up to 100% for 15 years – based on

LEED Certification! Why did Cincinnati pick LEED?

Because of who runs it: US Green Building Council

– Non-Governmental Agency– Non-Profit– Consensus Based Decisions– Great Brand Recognition– Voluntary Program– Tiered Program

Because of the Well Documented Outcomes from LEED Certified Buildings:

– Reduction of Operating Costs– Energy Savings– Water Savings– Improved Occupant Health and Comfort– Increased Occupant Productivity– Reduction of Potential Liability– Enhanced Building Marketability

Why Did Cincinnati Pick LEED?

Cincinnati Tax Abatement example

• Assume typical 50,000 SF commercial bldg with $120/SF cost of improvements ->

• $6.0M construction cost• 0.021 tax rate

• 15-yr / 75% abatement = • $6.0M x 0.021 x 0.75 x 15 yrs = $1,417,500

Market Performance

Still not convinced LEED certification is a good idea?

SHOW ME THE MONEY!

Why Did Great American Pick LEED?

• Higher occupancy rates

• Higher resale value

LEED Market Value

Source: RREEF, “The Greening of US Investment Real Estate”, November 2007

34% Or $10/SF higher rental rates for LEED class A buildings

4.2% Lower vacancy rates for LEED office buildings

2.5% Lower vacancy rates for LEED buildings – all types

LEED Market Value

Source:. CoStar Study, March 2008

37% Or $11.33/SF higher rental rates for LEED buildings

64% Or $171/SF higher sales price for LEED buildings (Peer Building Selection Approach)

9% Or $24/SF higher sales price for LEED buildings (Hedonic Model Approach)

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

Human Performance

44% of C-level executives believe green buildings help attract and retain employees

Source:. McGraw Hill Construction, 2007 Corporate Real Estate Smart Market Report

Office Cost Distribution

Productivity Value

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

LEED Buildings Make Money Sense

Customer retention and attraction73%Drop in operating costs71%Greater productivity62%Employee retention and recruitment61%More tax incentives39%

Expected Business Benefits from Sustainability Adoption

Data Source:. McGraw Hill, 2009 Greening of Corporate America

The Conclusion on LEED Certification

You may be able to design/build/operate a green building that meets or even exceeds LEED criteria, but if you don’t pursue certification, you would miss out on a host of LEED benefits:

1. 3rd party verification holds the entire project team accountable2. LEED Commissioning proves the quality of the installation and assures

high performance3. Public recognition of your project builds your brand4. LEED certification demonstrates Leadership5. Tax abatements and credits, accelerated permits, reduced permit fees,

density bonuses, fee waivers, grants, loan funds and other financial incentives in place in many cities/states for LEED-certified buildings

6. LEED buildings experience lower vacancies and higher rents7. Occupier benefits in talent attraction and retention, and work

productivity, are tremendous

The benefits far outweigh the potential costs – don’t miss out

ADDENDUM?

• COST OF LEED CERTIFICATION

Two LEED Cost Studies

“there is no significant difference in average cost for green buildings as compared to non-green buildings.”Data Source: : “Cost of Green Revisited”, Davis Langdon, July 2007

Data Source: “Costs and Benefits of LEED-NC in Colorado”, Governor’s Office of Energy, March 2007

1 to 6% LEED premium