CoStar Reviews the Most Compelling Storylines in Sustainable Building from the Past Year
It stormed onto the scene in 2006 and came of age in 2007, but not until 2008 did green building truly legitimize itself in commercial real estate.
In a year where little else went right in the property industry, green building shined. Retaining all of the urgency that helped propel it to extraordinary popularity last year, the trend added a touch of deftness in responding to the economic downturn. Rather than run from the economy, green building advocates dug in and pitched the financial benefits of sustainability and energy efficiency. The strategy worked, and experts are predicting another robust year for green building in 2009.
Looking back, our top green stories of 2007
focused heavily on events within the real estate industry: sustainability initiatives at CB Richard Ellis and GE, the meteoric rise of LEED certification, and the burgeoning investment market for green buildings. For 2008, our list falls mostly outside the industry, underscoring how the trend has blurred its boundaries and intersected with other sectors such as government, manufacturing, engineering and insurance -- often to the benefit of all parties involved. We hope you enjoy.
#1 | Green Building Trumps the Recession
If 2008 was the year when green building became inevitable, sustainability advocates may point to the deepest U.S. recession in at least a generation as the reason why. The downturn provided the ideal backdrop for a trend that had moved aggressively (and strategically) over the past 24 months to shed its pricey, boutique image and recast itself as a money-saver, which resonated well with landlords, tenants and developers looking to cut energy costs or increase the marketability of their properties. The building labeling programs LEED and Energy Star both posted record participation numbers this year, and McGraw Hill Construction said in November that the value of green construction could triple in the next five years to nearly $150 billion, despite the downturn. By the time government economists confirmed on Dec. 1 that the recession had officially began a year ago, the question of green building’s durability had already been answered.
#2 | The LEED Economy
The most popular four-letter acronym in green building isn’t just for commercial property anymore. As the U.S. Green Building Council’s sustainable property rating system has grown -- more than 18,000 buildings are registered or certified -- it has also reached across industry lines. Six platforms are available now for commercial real estate, schools and homes, and new platforms for healthcare, retail and entire residential neighborhoods are in pilot. Meanwhile, almost 70,000 people have achieved the LEED-Accredited Professional designation (a special title conferred after successfully completing a course on LEED) in sectors as diverse as law, government, engineering, retail and manufacturing. More than $10 billion of green building materials are directly tied to LEED-certified projects, according to a recent study, while the vast consulting industry that LEED has spawned is yet to be measured.
#3 | Rise of the Green Lease
Property owners won’t pay for energy efficiency retrofits when tenants are the sole benefactors under net leases, and tenants certainly won’t pay for them when they’re charged a pro-rated share of building utility costs under gross leases. The solution: a green lease, where both parties share the benefits. Under a green lease signed this fall by NAI BT Commercial for its new LEED-certified office in a San Francisco building, the real estate brokerage company is installing submeters on its floor and will be charged only for its own electric usage, which should be less than that of other tenants because of the certification. The landlord, green-savvy Glenborough, gets a LEED-certified floor in its building. And everyone is happy.
#4 | Buildings Without (Environmental) Footprints
What do you get when you combine the nation’s top scientists with 11 commercial property firms and more than $1 billion in federal funds? The Zero-Net Energy Commercial Building Initiative (CBI), a Department of Energy (DOE) program that was launched this year to accelerate the development of cost-effective, zero-net energy buildings -- those that produce as much energy as they consume. President Bush signed CBI into law last year and the DOE has already committed the first $15 million of funding. The program will examine new approaches to renewable energy, which can be difficult and costly for building owners to employ but is essential to net-zero energy buildings. "This is an excellent opportunity to take a hard look at our building design and assess it in a way that we wouldn’t otherwise be able to," Sarah Martinez, a sustainability analyst for ProLogis, one of the participating companies, told CoStar.
#5 | Green Building on the Stump
Of all the head-turners during the 2008 election cycle, one of the most unexpected was the constant, fiery debate on energy and the environment -- issues that typically rank just below farm subsidies on a candidate’s list of talking points. The campaigns of John McCain and Barack Obama both included robust platforms on energy policy that frequently cited the need for buildings that are more energy efficient. In June, each sent surrogates to the 2008 Energy Efficiency Forum in Washington, DC, where green building was a dominant topic. "Federal focus on these issues absolutely will increase, regardless of who is our next president,” Brenna Walraven, the former chairman of the Building Owners and Managers Association (BOMA) International who attended the event, told CoStar afterward. Obama may have won the election, but both candidates deserve praise for bringing green building into the living rooms of millions of Americans.
#6 | Capital Gains With Energy Star Benchmarking
Sworn in just a week after Washington, DC’s LEED mandate was signed into law two years ago, District Mayor Adrian Fenty this summer signed The Clean and Affordable Energy Act of 2008, making Washington the first city to require the annual energy benchmarking of commercial buildings. Beginning in 2010, private property owners will need to generate an energy efficiency “score” through the EPA’s Energy Star program, which will be posted publicly by the district. The goal of the provision, which is similar to one passed last year in California, is to increase the energy transparency of buildings. "Most people have no idea whether or not their buildings are energy efficient. It's the old Peter Drucker quote: 'You can't manage what you don't measure,' " said Cliff Majersik, the program director for the Institute for Market Transformation (IMT), a Washington-based energy efficiency and green building advocacy group, who helped craft the benchmarking legislation.
#7 | Cities Sold on Green Real Estate
Besides energy benchmarking, cities are scrambling to find other ways to green their buildings. The trend emerged this year as a credible way to cut greenhouse gas emissions and energy use that is more politically palatable than alternatives such as a carbon tax. More than 14 percent of all U.S. cities with at least 50,000 people now have green building programs, which commonly include expedited permitting, LEED certification or financial incentives, according to a report from the American Institute of Architects (AIA). And some cities are getting creative: the city council of Berkeley, CA, approved a measure in September to give city-backed loans to homeowners who install solar-power systems, while the city of Portland, OR, is developing a “feebate” program that would reward LEED projects with fines collected from developers who do not achieve the certification for their buildings.
#8 | California Adopts Green Building Code …
The nation’s first green building code was adopted this summer by the state of California, a move that could set an important precedent for similar codes being considered elsewhere. It will require a 15 percent cut in energy consumption in all new construction and a 20 percent improvement in water efficiency when it becomes mandatory in 2010, although sustainability advocates clearly hope that by then, the code will no longer be the only one of its kind. A nearly 400-page report sent to President-elect Obama’s transition team last month by 29 environmental groups (including Sierra Club, Greenpeace and Environmental Defense Fund) recommended, among other climate-related actions, the development of a considerably more stringent building code when he takes office.
#9 | … But Another One Stalls
A national green standard being developed for building codes that, at least at one time, called for even larger energy reductions than the California code hit a major setback when its project committee was abruptly disbanded in October. Known as 189.1 P, the standard was under development for two years and targeted minimum building energy reductions of 30 percent. But ASHRAE, the mechanical engineering association that is co-developing the standard with USGBC and the Illuminating Engineering Society, dissolved the group after being pressured by trade groups who were not involved in the standard’s development, according to reports. ASHRAE is in the process of reconstituting the development committee, but a new timeline for the standard has not been announced.
# 10 | Insurers Launch Sustainable Property Coverage
Who’s going to insure all of these green buildings? The answer is Travelers, Liberty Mutual, Great American and even the beleaguered giant AIG, all of which introduced green building coverage this year. The policies cover everything from the replacement of Energy Star-labeled equipment to crisis management consultant costs if your green building experiences adverse publicity. In the event a building would need to be recertified through LEED, Liberty Mutual’s policy would cover the cost to increase the property sustainability rating by one level (for instance, LEED Silver to LEED Gold). Fireman’s Fund was the first insurer to offer green building coverage in 2006.