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
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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