Commercial Real Estate Goes Green
Ron Koenigsberg, CCIM
President at American Investment Properties | Sharing my thoughts on Commercial Real Estate and Sales | 30+ years experience
Going green has been a popular initiative for some time, but the commercial building sector had been slow to pick up the trend. However, now more commercial buildings are “going green” in a variety of ways, and are doing so for both financial and environmental benefits.
As people are becoming more economically responsible, clients and tenants are now seeking more eco-sustainable or “green” buildings or are requesting these types of upgrades and improvements to their current buildings. In the United States, there is a rating system called LEED (Leadership in Energy and Environmental Design) that sets the standards as far as green efficiencies go.
Let’s take a look at some statistics when comparing green buildings to commercial buildings in general. Eco-sustainable buildings cost less to maintain by 19% on average, use less energy by 25%, and less water by 11% on average. They also emit less carbon dioxide by 34% on average, and have more satisfied occupants by 27% on average.
Going green is a wise way to cut costs in operating office buildings, retail stores, manufacturing facilities and malls. Commercial buildings are one of the main energy consumption sources, and can become green in aspects such as heating, ventilation, air-conditioning, lighting, solar and water conservation. If you can’t make a commercial building green from the start, you can always take steps to retrofit an existing building.
Here are five ways in which an existing building can make improvements towards being more eco-sustainable.
Lighting
One of the ways commercial buildings are going green is through lighting. Light-emitting diodes, or LED light bulbs, are gaining significant momentum as alternatives to incandescent and fluorescent lighting in commercial buildings, particularly as the cost of LED lighting technology is going down. Updating old lighting to LED lighting save up to 75% of overall energy use.
Air
Improve overall air quality of a building by implementing more thorough cleaning practices, including dusting regularly with microfiber cloths, using eco-friendly cleaning supplies, and cleaning or replacing floor mats and rugs regularly. Taking this a step further, installing indoor hanging gardens or “living walls” also known as “biowalls” improve air quality by absorbing carbon dioxide and releasing oxygen.
Solar
Consider installing solar panels or solar window films. Solar window films reduce indoor temperature in order to cut cooling costs. Commercial solar installations have increased by 487% in the past 5 years and have reduced energy bills by as much as 90%.
Water
Conserve water by fixing leaks and installing low-flow fixtures. Some commercial builders take water conservation a step further and install a specific plumbing system designed to conserve water known as a dual plumbing or dual piping system. This system separates water into two types: potable and reclaimed. Potable water is safe for drinking, cooking and washing while reclaimed water can be used for toilet plumbing or plant irrigation.
Heating & Cooling
HVAC systems use more energy than anything else in a commercial building and air conditioning also results in tons of carbon dioxide emissions. Reduce overall energy consumption by 10% by simply turning down your heating and cooling system when you or your tenants are not in the building. There are also alternatives to traditional HVAC systems such as a chiller boiler system. Typical HVAC systems use forced air to heat and cool, but a chiller boiler system is hydronic, meaning that it uses water, which is more efficient because it provides even temperatures using radiant heat. These systems are attached to the water supply in the building.
Although the tasks of implementing sustainable efficiencies may at first sound like a financial burden, it is important to note that the costs would be recouped easily from more efficient operations resulting in lower operating costs. Green buildings have even proved to more than make up for the expenses with reduced energy and water bills, and operations and maintenance costs. And not only do green buildings save investors money over time, it could also allow for tax breaks, rebates, grants and other incentives in the future.
Board member PhillySolar.org, CoStars supplier, Solarize PA, SalesEng. Exact Solar, Ntl Cap. Res. Advisor, member GreenBuildingUnited, S.U.N, PA SolarCenter - [email protected] [email protected]
7 年Great to see "green" and real estate as a topic in your post. You list a few samples of what can be done to start down the road toward cleaner, greener energy. We use energy data intel & measure and monitor your energy usage, so you know exactly where & how your energy is being used. This creates a road map for building owners to follow in order to get the highest returns on their energy activity. And a significant gain from energy efficiency or solar or green action is, according to an article by Mark Jewel in Selling Energy: create-value-cap-rate.jpeg "When you’re selling an efficiency project in a commercial landlord/tenant setting, one of the most valuable (and frequently omitted) pieces of data that you should consider in your financial analysis is the property’s capitalization (or “cap”) rate. Why is cap rate so important? Let’s use a hypothetical scenario with a cap rate of 10% to demonstrate: Let's say you invest one dollar per square foot on an efficiency project that yields roughly 35 cents a square foot in savings per year. What’s the payback? Some people would say three years. A three-year payback is decidedly unsexy; many people wouldn’t even think of approving a project with anything over a two-year payback. (Such myopic focus on simple payback is silly; however, that’s a topic for another blog.) If you add 35 cents per square foot per year to the net operating income of an income-producing building (e.g., through higher base rents, increased tenant attraction/retention, or decreased landlord share of operating expenses), a cap rate of 10% would help you support $3.50 more per square foot in asset value. Using the “Direct Capitalization Approach to Appraisal,” you would divide that incremental NOI by the 10% cap rate. How much did you invest to do this? One dollar. How much did you increase the value of the building? Three dollars and fifty cents. Now that's a sexy investment. The minute you make these connections with a commercial real estate player, it becomes a whole different conversation. Remember, it’s not just about the simple payback period. You should always be looking for ways to create value for your customers, and this is one of the many ways you can accomplish that goal." Thanks, David Hammes, Energy Without Borders
Energy Solutions Provider Utilizing a Holistic Energy Solutions Approach to The Energy Transition With: Distributed Generation, Renewable Energy, Energy Efficiency and Retail Energy Supply
7 年Ron Koenigsberg, CCIM great piece! The financial benefit should be the definite lead in and the way we discuss this with building owners is this is a financial investment with great returns that by the way also meet environmental obligations. Glad to see someone like you in the real estate community taking notice of the benefits.