In this down economy, owners and developers are looking to save money wherever they can. With rent prices dropping and tenants asking for more and more concessions, pursuing Leadership in Energy and Environmental Design certification for an existing property or a new development might seem like a needless expense. When developers can no longer obtain construction loans for projects, making a building green is the last thing on their mind.
But owning an environmentally-friendly building can be a huge deciding factor to tenants. "We’re finding in this economy that we might not be getting higher rent” for our green buildings, says David Birdwell of the Atlanta-based developer IDI, but sustainable buildings nonetheless are easier to lease than their non-green counterparts. "There’s a real value to leasing a building now versus a year from now.”
IDI, which formed in 1989, has been practicing some measure of sustainable building since the beginning. In the early ’90s, there was no such thing as the green movement. "People were building purely for the lowest rental rate they could get,” he says. "We were building, thinking about the long term, so the buildings wouldn’t become functionally obsolete.” When the U.S. Green Building Council’s LEED ratings were developed in 1994, focus gradually shifted to achieving certification for the firm’s properties. IDI also made the commitment to staff each of its eight offices with at least one LEED-accredited developer.
Early on, the firm figured out it was better to build for the investor than the tenant. If the firm presented the owner with a plan for a development that would house multiple generations of tenants, it was an easy sell. "We were building buildings not just for the first user,” Birdwell says. "A lot of people did that, but we would sometimes spend money that we knew the tenant wasn’t going to pay for right away, but we thought the investor would.” Through the years, as technology and construction practices improved, environmentally-friendly building grew cheaper. "When we first started [building green properties], you were only doing it to do the right thing. You weren’t doing it because it made money. You couldn’t run the numbers and make it work,” Birdwell says
In March, IDI moved into its new headquarters in Midtown Atlanta, a space that mirrors the firm’s green predilections. Among other things, IDI recycled 98 percent of the construction waste during the project. When certification of the space is complete in September, Birdwell expects the office to meet gold standards for interiors. "We felt like, if we’re selling this to our tenants, we ought to do it ourselves,” he says. "We have a showcase right here that we live in everyday."
IDI deals with industrial buildings, but retail developers are also getting into the LEED spirit. Greenville, South Carolina-based Fox Capital Partners is currently developing the Harris Teeter-anchored Rivertowne Place shopping center in Mt. Pleasant, South Carolina. Completion is expected next summer. Turning a grocery-anchored retail project completely green is a relatively new idea, because of the enhanced costs developers have to shoulder. "The energy modeling alone is a fairly extensive and expensive process,” says Tom Fox of Fox Capital. "[Harris Teeter uses] so much refrigeration and so much lighting that the additional costs to satisfy LEED in that regard are a fairly substantial premium.”
Rivertowne is Fox’s first LEED project. When Harris Teeter approached the company with a plan to make its new store environmentally friendly, Fox and his staff had a meeting. The choice: pursue LEED certification for only the grocery store or make the investment to green the entire project. Fox says that making Rivertowne entirely sustainable was the right thing to do. "Any time that you can conserve resources, that’s not a bad thing. If it isn’t too cost prohibitive, why wouldn’t it make sense?” he says. "There are a lot of little things that can be done that don’t cost any more than it would to build a shopping center the way that shopping centers are normally built.”
Fox has a number of other projects in the pipeline, and depending on how his Rivertowne experiment turns out, Fox Capital Partners may find itself creating more LEED-certified shopping centers. But the developmental paralysis felt across the industry is always a factor. "Rents are down, borrowing rates are up. The return is being squeezed. If there’s an opportunity to save some money by reducing costs, a lot of people will do that,” he says. "I have yet to meet a developer who does this for free. The LEED process, while not cost prohibitive, certainly is an extra cost. A lot of people will take a look at it more closely.”
Even with the small reluctance the recession has fostered among tenants and owners considering LEED certification, Birdwell is sure green building will become the status quo for construction. In fact, he says that even with the extra cost, when IDI starts building again, the firm will start right back into its LEED tendencies.
"You can’t talk to an architect, an engineer or a contractor that isn’t dealing with LEED with at least the majority of their institutional clients,” Birdwell says. "It’s not going away. It’s here to stay."
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