June 27, 2009

Wiki: LEED. The Leadership in Energy and Environmental Design (LEED) Green Building Rating System, developed by the U.S. Green Building Council (USGBC), provides a suite of standards for environmentally sustainable construction. Since its inception in 1998, LEED has grown to encompass more than 14,000 projects in the United States and 30 countries covering 1.062 billion square feet of development area.

Green Matters

Green can increase asset value, increase rent rates and lower vacancy rates. LEED buildings are first being understood as viable investments, in spite of the often increased upfront build out costs. Investors have noticed the better performance of green developments. Since 1994, LEED has grown to more than 14,000 projects in the United States and worldwide.

For example, AFIRE has just released its 17th annual survey and foreign investors holding more than a trillion dollars in US real estate were asked to what extent a building’s “green” attributes influenced their decision to purchase a property. 11 percent said “significantly so,” and 60 percent said “somewhat so.” In almost the exact same percentages, investors said that green attributes were worth a greater rental premium.

Green Cuts Operating Expenses

Building and operating green reduces costs and increases profitability. In fact, it is suggested that the industry is nearing a tipping point where green is the normal prudent choice

Green Increases Value

(Via National Real Estate Investor) A 2008 study by CoStar Group reports that green buildings outperform conventional buildings in terms of occupancy, sale price and rental rates, sometimes by significant margins. Specifically, the CoStar study found that LEED buildings command rent premiums of $11.33 per sq. ft. more than non-LEED buildings and have 4.1% higher occupancy.

Similarly, the study found that rental rates in Energy Star buildings have a $2.40 per sq. ft. premium over comparable non-Energy Star rated buildings, and as well have a 3.6% higher occupancy. In terms of increase in asset value, LEED-rated buildings commanded $171 more per sq. ft.

Other studies suggest higher initial costs can be offset by savings over time due to lower-than-industry-standard operational costs. Studies have suggested that an initial up front investment of 2% extra will yield over ten times the initial investment over the life cycle of the building.

Green Landlording

Green leases are traditional leases that also contain rules on green practices. Anything from energy efficiency, water conservation, recycling, green products, and indoor environmental quality.

Higher costs to convert an existing apartment to a more energy efficient platform are a problem. Everything from more expensive energy star appliances to better insulation and replacing or upgrading old doors and windows to energy efficient double pane gas filled beauties.

The benefits are to be measured. Adding costs to existing homes and apartment buildings are long term investments that are proven to pay off, throwing off higher rent rates and lower vacancies. Buyers are also interested in lower living costs and operating efficiencies. In tough markets anything that gives your property resale appeal is worth considering.

Howard Bell


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