DO GREEN BUILDINGS MAKE DOLLARS AND SENSE?

Speakers:Dr. Norm Miller, Burnham-Moores Center for Real Estate,University of San Diego and CoStarDavid Pogue, National Director of Sustainability, CB Richard Ellis, Inc

An on going study started in 2009

• An analysis of energy costs, energy savings, worker productivity and commercial office tenant attitudes towards sustainable real estate.

• The CBRE Commitment– Green Knights– Carbon Neutral

• The University of San Diego Commitment with CoStar support– The Journal of Sustainable Real Estate, see

www.josre.org

2

Data 154 buildings, 755 tenants responding

Operatin 3

Key Findings

Green buildings tend to be more intensively managed, making overall operating expenses equivalent to non-green buildingsAverage occupancy has been higher than market (until recently)

Average rental rates higher than marketThose surveyed agreed employees are:

More productiveTake fewer sick days

Tenants will seek green buildings for future space

4

NORM MILLER

Building Profile

Recycling is an increasing priority

Buildings That Recycle

80%

60%

40%

20%

100%

Pape

r

Car

dboa

rd

Alu

min

um

Gla

ss

Green Building Operations

65%

50%

30%

15%

80%

Wat

er C

onse

rvat

ion

Operations

Among others, water conservationpractices are also prevalent

Res

tric

tive

Plum

bing

Inte

grat

ed P

est

Mgm

t

Mot

ion

Sens

ors

NORM MILLER

Green Cleaning Practices

CRICertified Chemicals

CRICertified Floor Equipment

Microfiber Wipes

81%

Green Cleaning ProductsOperations

High use of green products by cleaning staff

NORM MILLER

Operating ExpensesExpenses

Costs were about the same at $10-12 PSFSurvey Set had fewer “fat tails”

Overall, operating expenses were about the same between the Peer Set and other CBRE managed properties, including a similar average ENERGY STAR scoreMost commonly reported expenses for both sets ran about $10-12 PSF per year

Survey Set buildings had less extremes at high end of distribution (e.g., the peer set had more poor performing outliers or “fat tails”)

NORM MILLER

$ PSF/Year for Electricity ENERGY STAR

Improvement from 50 to 80 points would save an average of almost 25% in electricity costs

Each higher point in ENERGY STAR score saved approximately .83% in electrical costs PSF/yearExample:

ES Score Cost/PSFDenver 50 $2.75

80 $2.00

Atlanta 70 $2.4090 $1.40

.75 PSF

$1 PSF

NORM MILLER

Separate MeteringSavings

Average 21% savingsComputers and lights get turned off when energy is measured

Significant impact on electrical and gas savingsSaved an average $.42 PSF/year over comparable non-separately metered buildings –green or not

Metered buildings generated an average21% savings for high ENERGY STAR buildings

NORM MILLER

NORM MILLER

Mean Wage of EmployeesTenant Profile

Survey Set building occupants earn more than any other SIC employee category

70K

65K

90K

45K

62K58K

75K

30K

39K

110K

60K

Construction & Extraction

GREENBUILDINGOccupants

Office and Administration

Real Estate Brokerage

Insurance SalesHeathcare

Education

Legal

Architecture & Engineering

Computer/Math Financial Ops

Perceptions

Nearly all the public companies had sustainable mission policy statements, and many strongly agreed with it

Public and Client Image

StronglyAgree34%

Neutral25%

Disagree, 1%

Agree40%

NORM MILLER

Written Policy Shared with EmployeesCommitment

Yes34%

No66%

About one-thirdshared commitment with their employees

NORM MILLER

Staff Dedicated to Sustainability IssuesCommitment

Approx. same number has a dedicated “green”staff Yes

32%

No68%

NORM MILLER

Disagree, 2%

Productivity55% agreed that productivity increased after moving This 4.88% average boost translates to about $20 PSF/yearfor those who agreed

Employee Productivity

NORM MILLER

Strongly Agree12%

Agree43%

Neutral43%

NORM MILLER

Average 2.88 decrease in sick days, or about $5.00 PSF/year

Fewer Sick Days vs. Previous Location

Neutral44.5%

More10%

Productivity

Agree45.5%

PerceptionsWhile early in leasing and management of buildings with green features & policies, 71% say important Best practices will become inherent in leases

Sustainable Practices in Lease Renewals

DAVE POGUE

NotImportant

29%

Important56%

VeryImportant

15%

Perceptions

Current leases focus on just a few aspects of green occupancy

Lease Provisions for Sustainability

72%After Hours Lighting and

HVACProvisions

23%Requirements for RecyclingParticipation

5.4%Parking for

Alternative Fuel Vehicles or

Hybrids

DAVE POGUE

DAVE POGUE

Would Pay Higher Rent for Green SpaceCommitment

While encouraging compared to earlier surveys, most tenants pay more rentfor green buildings independent of their survey response – see the results on the next few slides.

No82%

Yes18%

Green buildings tend to be more intensively managed,have stronger occupancies & lower utility costs (including lower experience of much higher expenses)Separate metering has more impact on energy savings (21% savings) than almost any other factorEach point higher in ENERGY STAR saves .8-1%in electricity

DAVE POGUE

SummaryOperatio

ns

Green buildings observe higher claims of productivityin comfort, air, lighting and sick days Higher reported productivity + gains from fewer sick days = nearly $25/PSF improvement for those responding yes (nearly the amount of average rent)

Productivity

Most tenants won’t admit to paying more for green features, yet evidence shows that they do (and will)pay more for greenGreen lease provisions are increasingly important (70%)Healthier indoor environments matter to tenants for staffretention (61%) and client image (74%)

SummaryCommitm

ent

DAVE POGUE