Green Light for Green Buildings
 
December 17, 2002
 
William "Bill" Kominers- Bethesda

In the past, the mere mention of “green” design from government planners would cause developers, engineers and real estate lawyers to roll their eyes.  But now, with federal, state and local governments encouraging such development through tax credits and real incentives, the concept is becoming mainstream.

"Green" Defined

Green design techniques encompass a wide range of design elements.  Physical considerations include such mundane factors as building near areas served by transit, minimizing site disturbance, incorporating building apertures that let in the maximum amount of natural light, and installation of bike racks.  Other more advanced techniques include utilizing locally produced products rather than exotic, foreign products and recycling or using recycled materials in construction.  More innovative design features include “green” roofs – the roof of a building is planted with sod to reduce heat build up and stormwater run-off, waterless toilet facilities, or recycling run-off from the building as “gray-water” for irrigation  and other non-potable uses.

Federal Government Buildings Go Green

The General Services Administration (GSA) is now requiring specific green features in its new buildings and the Pentagon is being refurbished based on green construction standards.  In addition to build-to-suit structures for environmental organizations like Maryland’s Chesapeake Bay Foundation, some green speculative office buildings are now being designed and constructed.  Thus, what were tentative steps are becoming a new trend as more and more tenants are focusing on the health of their workforce, as opposed to simply the cost per square foot.

What Makes a Building Green?

For years, green buildings have been dismissed as too expensive or, worse, too esoteric to be successful in the traditional real estate market.  However, as the construction industry has changed, as new techniques have developed, and as local governments have mandated rigid recycling and disposal laws, the perception of the green building is changing.  The theory behind what makes a building green has also evolved, moving from consideration of only mechanical systems and energy conservation, to the use of a significant amount of recycled product in the building construction and designing the building to work closely with the natural environment.  By doing so, the workers environment is more comfortable and, so the theory goes, the workers are more productive. 

One new question that arises is what and how much makes a building “green?”  Several years ago, the U.S. Green Building Council established a rating system for “green” buildings. Leadership in Energy and Environmental Design, known as “LEED,” has produced a scorecard to rate buildings, either before or after construction, on their environmental sensitivity.  The ratings are based on energy conservation, indoor air quality, environmental impact in and around the building, water conservation and environmentally friendly building materials.  Based on the scorecard, LEED issues rankings ranging from “certified,” the lowest standard, through increasing levels of “silver,” “gold” and “platinum.”  GSA requires all of its new buildings to achieve a LEED silver rating or better – a strong incentive to the marketplace.

Higher Costs No Barrier

There are usually additional, upfront costs to be green.  Even the construction of a LEED-Certified building (as opposed to the higher ratings) involves extra costs not associated with a traditional office building and these costs, traditionally, cannot always be recouped in the rental prices.  GSA leases allow the developer to amortize the costs of the build-out through the rental agreement, as do other build-to-suit construction deals.  However, speculative green office buildings are now being constructed to compete directly with traditional office buildings, and although the rents are generally higher, the space is leasing.  For example, a local Metropolitan Washington, D.C., developer recently constructed two new office buildings in the region.  Both were competing directly with traditional office buildings in the immediate vicinity.  However, the unique design elements of the green buildings attracted high-profile, credit tenants interested as much in the nuances of the building design and the precedent the companies were setting, as environmentally and worker-friendly, as in the cost of the space.  (Subsequently, both were nominated for Green Building of the Year.)

Green Incentives

To encourage more green buildings like these, state and local governments across the country are implementing tax credits and/or other incentives, such as bonus densities or other land use incentives, to those developers planning a green building.  In some jurisdictions, bonus densities, reductions in development standards or a streamlined permitting process is available to buildings passing various levels of LEED certification.  Other jurisdictions offer direct income-tax credits, low-interest financing or other incentives for use of the LEED guidelines.  In some cases, depending on the level of support for environmentally sensitive buildings at the various governmental levels, developers can take advantage of more than one available inducement.  New York, Maryland, Pennsylvania, California, Florida, Minnesota and Oregon have state-level programs supporting green development; localities as varied as San Jose, California; Portland, Oregon; Seattle, Washington; Arlington, Virginia; Miami-Dade County, Florida; Boulder, Colorado; and Austin, Texas, also have programs designed to encourage green buildings.

Programs to encourage “green” design are also offered for redevelopment projects and residential development.  The state of Illinois offers a direct subsidy to nonprofit housing developers.  The Texas Veteran’s Land Board offers reduced-rate mortgages to veterans who build to the program's green standards.  The Board declared that these homes are “better, cheaper, and easier on the earth,” and considers the dwelling and the loan recipient to be a “better risk.”  Home Depot also offers grants to nonprofit associations constructing green buildings.  Similar programs exist to foster green redevelopment of commercial and residential buildings.

"Smart Growth"

Another factor in the emergence of the green building is focus on “Smart Growth” and responsible infill development.  As urban centers, and to an increasing extent, suburban centers, approach build-out, redevelopment and infill opportunities become the norm.  The consequent complexity of the development requires unique approaches to building design and construction.  And, an increasing number of jurisdictions now focus on “Smart Growth” objectives, which encourage several of the principles underlying the LEED standards, including accessibility to transit and responsible building design for the building’s life cycle – not only of the building operation, but of the materials that comprise the building itself.

Expect the Green Trend to Continue

With the government leading the way, the trend toward green building will continue.  GSA requirements alone will drive an increasing focus on green design and will draw greater attention to the LEED standards.  The need to meet the GSA standards for LEED silver ratings, as well as the local and state government initiatives, will encourage the industry to create new techniques and materials.  Technology advances will also contribute to the increasing affordability of the green buildings, both for construction and operation, and, therefore, rent.  What began as a vision of a few has become visionary, and has evolved into the view of those decision makers who place worker health and productivity alongside the long-term health of the world and the environment in which the work is done.

For more information, contact William Kominers or Erica Leatham, toll free, at 888-688-8500.