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| ICSC President Michael Kercheval Spoke on Green Building at Last Week's Centerbuild Conference |
The International Council of Shopping Centers (ICSC) is promoting the importance of green building to its 70,000 members. But ICSC leaders acknowledge they still have their work cut out for them.
ICSC President Michael Kercheval delivered the opening address at last week's Centerbuild conference, one of the organization's largest of the year. Kercheval aimed his remarks squarely at developers on the topic of shopping centers going green.
Kercheval cited numerous studies on the necessity and impact of green building, and praised the U.S. Green Building Council's (USGBC) Leadership in Energy and Environmental Design (LEED) certification programs, saying "a trend toward building and utilizing structures that are environmentally friendly is growing quickly." He wrapped up his Centerbuild presentation by citing a report by Pricewaterhouse Coopers that found that building green retail projects can add up to 10% more to the construction cost but result in nearly 35% of energy savings. (For details on the USGBC's current programs gauged specifically for the retail industry,
follow this link to read last week's CoStar Green Report, "Retail Industry Will 'Walk the Talk' of Green Building in 2008.")
Despite growing awareness of green issues among retailers, shoppers, developers, owners and operators, Kercheval said he foresees legislation as having the most impact on green building in the future, "Consumers may not be the most durable or pervasive force for corporate change…governments will impose on industry ever-stronger environmental regulations and ever-higher penalties for polluting. Environmental legislation will require companies that hope to expand to be squeaky clean; it will encourage ways to avoid the need for troublesome new power stations and plants; above all, it will raise the expense and difficulty of getting rid of rubbish. First society will demand cleaner industrial processes; then it will want cleaner products. It will shun those companies that do not respond while rewarding those that do."
"No one side can have it all -- not the various governments of the world, not industry, not the environmental organizations...Trade-offs between benefits and costs must be weighed carefully. With cooperation and compromise from all parties, I am confident that we can work out reasonable solutions to protect the environment and build better shopping centers," Kercheval concluded.
Want to share your opinion on green building in the retail industry or the CoStar Advisor newsletter? We'll post pertinent comments as updates in this story throughout the day. Reach the editor, Sasha Pardy at spardy@CoStar.com.
ICSC's Sustainability Initiatives
Kent Jeffreys, legislative counsel for ICSC told CoStar that some of its members are already building green, and ICSC is working to encourage others to strive for sustainability through several initiatives.
SEED Program
To promote green construction, ICSC has launched the Sustainable Energy and Environmental Design (SEED) program, encompassing education, best practices, recognition, conferences, sessions, publications and legislation.
In March 2007, ICSC completed its first SEED survey, asking ICSC members about their design, development and operation practices. The goal was to find a baseline on where the shopping center industry currently stands on "green” issues, as well as to evaluate the direction it may be heading. According to the survey:
- Share of shopping center industry implementing best practices for sustainability: Currently using energy efficient technologies (52.6%); Recycling (40.8%); Systems maintenance (36%); Janitorial maintenance (29.4%).
- When selecting building materials, 55.7% of respondents said the most important factor in decision making is performance, followed by cost (33.2%), sustainability (3.4%), and availability (2.4%); however, only slightly more than 40% of respondents an energy audit of their properties to evaluate the actual costs/savings of sustainability initiatives.
- Only 38% of respondents indicated they had obtained government incentives for sustainable development.
- About 43% of respondents rejected a design (or design element) with superior environmental qualities because of higher cost.
Jeffreys explained to CoStar, "Until tenants demand environmentally sustainable building designs, developers will hesitate to produce them out of fear that higher initial costs will place them at a disadvantage in the competition over tenants." Jeffreys pointed out that the overriding factors for a tenant's decision to sign a lease is still based on accessibility, traffic and rental rate; and until tenants are willing to pay more to be in a green shopping center, developers will shy away from building green.
Jeffreys makes a case that more benchmarking and evaluation of actual costs- vs.-savings is needed to persuade skeptical retail developers. Jeffreys acknowledged that there are several studies that document the costs and benefits of building green office buildings, but said the findings could be completely different for shopping center owners because of the retail industry's extremely competitive landscape.
Jeffreys told CoStar ICSC is planning to launch a SEED web portal that will bring sustainability research, conference session presentations, case studies, resources, ICSC publications and programs together to give members a central place to learn about green building.
ICSC / EPA Awards Program
For the past two years, ICSC has teamed with the U.S. Environmental Protection Agency (EPA) to recognize outstanding efforts by the shopping center industry to conserve resources, recycle materials, and purchase recycled content products; which doesn't necessarily mean LEED-certified buildings.
One of the awards, "America's Marketplace Recycles!" recognizes strong recycling programs, supporting those who realize that "shopping centers generate a variety of materials that are prime candidates for recycling including corrugated cardboard, mixed paper, glass, plastic, metals, food waste, landscape trimmings, and shipping pallets," said Kercheval.
ICSC continues to work on developing programs to educate and reward companies for implementing certain sustainability elements, as opposed to achieving perfection or "Net Zero, Zero Waste," etc. "We don't want to turn our members off by telling them to be perfect," said Jeffreys. "As a general principle, we believe you should look at performance standards, rather than a specific certification entity. Our bottom line is 'does it perform the way you want it to?', not 'did you get certification?' Target is a great example. Their standard store for 2009 would score about 25 points on LEED certification, without doing anything additional," Jeffreys asserted.
Green Pavilion
ICSC had its first "Green Pavilion" at this year's worldwide convention, the organization's largest conference held this past May in Las Vegas that drew about 50,000 attendees. At the most noticeable point, in the lobby of the leasing mall, The Green Pavilion showcased a few hundred products, services and best practices in environmental sustainability, serving as a platform to educate attendees about sustainable design with booths occupied by shopping center owners and retailers that have successfully executed green building projects, as well as vendors showing cutting edge environmental technologies. A "Green Zone" in the leasing mall was also established. "We didn't allow high in the sky dreamers saying 'here's what I would do if you give me the money', these had to be projects that were already built or products used in existing projects," said Jeffreys.
Green Sessions
Topics in sustainable building have become regularly scheduled programs at ICSC's 200 meetings and conferences it holds annually around the world. Jeffreys told CoStar that vendors in the sustainability industry or companies that have already engaged in green building present at informative sessions to educate attendees about different options in green building, as well as how to execute a green building project successfully.
When asked if he saw an entire conference dedicated to green building in ICSC's future, Jeffreys said ICSC had already done so -- in the summer of 2006 in Europe when ICSC held its first conference devoted exclusively to sustainable design. Jeffreys did say he sees an exclusively green conference as a future program for the U.S., "I don't think there's any doubt that we'll have a dedicated green conference - maybe even next year." Jeffreys said if one is put on, it would have to be fall 2008 because of the time it takes to put a conference together.
Lobbying for Legislation
As legislative counsel for government relations for ICSC, Jeffreys said ICSC continues to lobby for issues affecting green building. Among them is a broad coalition to reauthorize the brownfields legislation and another for a commercial building tax deduction for energy efficiency standards that would be extended for a longer period of time with bigger incentives to get more people involved.
"An example of where we're talking to folks to see if its feasible and something we should lobby for is an incentive to generate more power than you consume. In Europe, you can sell excess power on the existing grid, just like the power company does. That creates a lot of good things if you're doing it with non-carbon emitting green power. You create distributive energy that could reduce blackouts, etc. The retail industry could be part of the solution for overall energy solution by making it possible to generate more power," said Jeffreys emphatically.
Want to share your opinion on green building in the retail industry or the CoStar Advisor newsletter? We'll post pertinent comments as updates in this story throughout the day. Reach the editor, Sasha Pardy at spardy@CoStar.com>.
Research Scholar for Retail Real Estate Sustainability
ICSC recently named Jerry Yudelson, PE, MBA, LEED AP as its first Research Scholar for Retail Real Estate Sustainability. Yudelson is president of Yudelson Associates, a green building and sustainability consulting firm headquartered in Tucson, Ariz, and is also chairman of Greenbuild, the USGBC’s annual conference held last month in Chicago
(click this link for a review of Greenbuild 2007) He is also the author of three books on the green building movement, including "The Green Building Revolution", which was just released at Greenbuild 2007.
In his capacity as Research Scholar for ICSC, Yudelson will lead ICSC's effort to provide members with up-to-date research on sustainability topics affecting retail real estate; working with the organization's research department to publish books, articles, white papers, as well as speaking at some of ICSC's meetings and conferences on the topic. Yudelson is also called upon by members to field questions pertaining to sustainability.
ICSC White Paper: LEEDing the Retail Sector Green
The first product of Yudelson's new position this publication, which covers the basics of what the USGBC is doing to accommodate the retail industry in its LEED certification program; gives retailers, developers and owners reasons the benefits of going green, includes case studies of companies that have done so, and addresses the challenges the industry faces in green building.
"Costs are real and present-tense, but benefits are speculative and future-tense," the study states in summarizing the fundamental obstacle facing the industry. The study acknowledges that green retail development does initially cost more, and that it remains unclear whether those costs can be re-couped through higher rents and faster lease-up. However, Yudelson stresses, "all developers have found that these cost premiums come down over time, as they gain more experience with green projects."
The cost premium Yudelson refers to is an estimate he provides of the hard cost premium on an entire project's cost for achieving LEED certification, which varies based on certification level. For basic certification, the premium is 0% - 2%; for silver, 2% - 4%; for gold, 4% - 6%; and for platinum, above 6%. Further, Yudelson provides a rarely seen soft cost estimate, as follows. Design services are estimated to cost 0% - 10% of total project cost, depending on the builders experience; building energy modeling or prescriptive design analysis cost between $15,000 to $30,000; for building commissioning, expect a minimum of $20,000, or 40 - 70 cents per-square-foot; for a LEED consultant and certification effort, expect $25,000, which varies based on project size; and for LEED registration and certification fees to USGBC members, expect to pay $450 to register the project and 035 cents per-square-foot for certification review -- the maximum fee is $17,500.
"In terms of greening the retail sector, there's little doubt that the retail landscape will look much different by 2010," according to the study. "The number of large retailers announcing building initiatives will accelerate in 2007 and reach a crescendo in the 2008-2009 period. The number of shopping center developers in the U.S. and Canada building certified green retail centers will increase, so that we should be seeing hundreds of new projects registered each year and dozens being completed. The engagement of center developers with the public sector, in terms of entitlement benefits and green project requirements, will feed this trend."
Yudelson told CoStar about discussions at a recent meeting with ICSC's government relations committee. "The main interest on the development side of retail is monitoring and tracking what's going on. And there's concern from retail developers on whether LEED certification is going to be mandated for shopping centers. For example, in California, we're beginning to see pressure from some governments in the entitlement process to commit to a LEED certified build. In California, where shopping center development is a very long process, this is an opportunity because a developer can offer up LEED certification as one way to get to the head of the line on development approvals. It’s a negative if its imposed on you, but its positive if the incentive is out there and you can take advantage of it."
When asked if the retail industry could have more impact on greening the country than other property types, simply because of its shear size and consumer access, Yudelson said, "Retail is the second largest commercial building sector after office, the number is roughly $25 billion per year in new and renovation construction for retail and $31 billion for office; so retail is huge in terms in the amount of building and the number of building. And, retail does touch the consumer more directly." Yudelson went on to say that especially stand-alone retailers will be changing their prototypes to have a better store for not only consumers, but also employees. He stressed the latter, pointing out that the retail industry is facing a "fierce battle for talent, particularly amongst Gen-Exers", which he says are the ones that are very productive and want to work for a company that "not only shares their values, but exemplifies them."
"This is just the beginning of a major transformation for the retail sector. Right now retailers recognize the world is changing and that people expect corporations to step up, so they are saying, 'what can I do?'" Yudelson explained that, for retailers, its harder to start by moving suppliers to change their products than it is to change how they build their stores, so green building is what they're starting with. "Retailers are working to get their house in order first. Products will follow," he says.
Want to share your opinion on green building in the retail industry or the CoStar Advisor newsletter? We'll post pertinent comments as updates in this story throughout the day. Reach the editor, Sasha Pardy at spardy@CoStar.com.