According to a recent study by CoStar Group, LEED or Energy Star certified buildings have higher lease rates and lease for more dollars per square foot than similar buildings that are not certified.CoStar Group is a company that provides information services to the commercial real estate industry.
CoStar tracked the number of LEED or Energy Star certified buildings since 2006, and compared lease and occupancy rates to similar non-certified buildings.For example, LEED certified buildings had a 92% occupancy rate, and averaged a lease rate of $42.38 per square foot. In comparison, non-LEED buildings had an occupancy rate of 87.9%, and an average lease rate of $31.05 per square foot. In a building with 50,000 square feet of leasable space, that would mean a difference of over $500,000 in income.
Energy Star certified buildings, in comparison, had an average occupancy rate of 91.5%, with lease rates averaging $30.55 per square foot. Non-Energy Star buildings were at 87.9% occupancy, and leased at $28.15. While the difference here is smaller, it still means $160,000 in additional income in a 50,000 square foot building.
When you look at the potential income lost, $500,000 for LEED certification and $160,000 for Energy Star, it almost begs the question as to why NOT build this way. In many cases LEED certification can be achieved for little or no extra up-front costs, if the design is done right. Energy Star certification is even less expensive than LEED, and, in some areas, has been adapted into the local building code. In their study CoStar argues that, “Non-green buildings are going to become obsolete.” The numbers speak for themselves.
The study also looked at the types of tenants leasing space in green buildings. The top leasers were law firms, financial institutions, business service firms, and the insurance industry. If a building is looking to attract these tenants, sustainability had better be in the proforma.
It is great to finally have some real data to back up what those of us in the industry have been touting for so many years: green building is worth it. Not only does it bring monetary benefits, but it saves natural resources, prevents pollution, and creates a healthier work environment. When we think about the fact that the buildings we are constructing today will be used by our grandchildren, why would we do it any other way?
Resources
Environmental Building News, May 2008, www.buildinggreen.com
“Commercial Real Estate and the Environment,” CoStar Group, Inc,
LEED certification, US Green Building Council, www.usgbc.org
Energy Star, www.energystar.gov
As a real estate professional working for an engineering firm that certifies green buildings for energy tax credits whether federal, state or on the county level, I have to agree. It typically only costs 2-3% more to build “Green” and it brings many advantages and savings!
As a real estate professional working for an engineering firm that certifies green buildings for energy tax credits whether federal, state or on the county level, I have to agree. It typically only costs 2-3% more to build “Green” and it brings many advantages and savings!