Cushman & Wakefield, in collaboration with the Northwest Energy Efficiency Alliance’s BetterBricks Initiative, recently released its second annual Green Building Opportunity Index. The Index calls itself the first office market assessment tool to provided weighted assessments of the top 30 U.S. office markets on the basis of both real estate fundamentals and development considerations. It ranked each market on a scale across six different categories: (1) office market conditions; (2) investment potential; (3) green adoption and implementation; (4) local mandates and incentives; (5) state energy initiatives; and (6) green culture. The country’s top 10 green real estate markets as determined by the Index are:
- San Francisco
- Midtown New York City
- Washington, D.C.
- Midtown South, New York City
- Los Angeles
- Downtown New York City
New York City’s Midtown, Midtown South, and Downtown submarkets cracked the top ten, placing second, fourth, and seventh, respectively in the Index, which (among other goals) aims to assist urban planners and policymakers in examining data to understand what new policies and incentives may be useful in accelerating green building practices at the local level.
Specific rankings (again, out of 30 markets evaluated) within each of the Index’s six categories for New York City’s submarkets are:
- Midtown: 3rd in office market conditions; 3rd in investment potential; 5th in green adoption and implementation; 4th in mandates and incentives; 9th in state energy initiatives; and 3rd in green culture.
- Midtown South: 2nd in office market conditions; 2nd in investment potential; 25th in green adoption and implementation; 3rd in mandates and incentives; 8th in state energy initiatives; and 2nd in green culture.
- Downtown: 7th in office market conditions; 7th in investment potential; 20th in green adoption and implementation; 6th in mandates and incentives; 10th in state energy initiatives; and 4th in green culture.
Some of these individual rankings may seem somewhat inconsistent to you (for example, every new commercial office building at the rebuilt World Trade Center site will be LEED Gold-certified, which makes Downtown’s ranking for green adoption and implementation seem unfair). But a closer review of the 10-page national overview should provide some context and clarity to the bare statistics referenced above.
This year’s Index also – for the first time – separately profiled 2 of the top 10 markets, including Midtown Manhattan, in significant detail. The Midtown Profile Report analyzed a variety of factors specific to the Midtown submarket, including general and green office market statistics, major leasing transactions, and a review of the submarket’s LEED-certified and Energy Star-rated commercial office buildings. We’ve reviewed the Report and, below, present some of its conclusions for your consideration in order to suggest some anecdotal conclusions about the state of the Midtown market vis-a-vis green.
Overall Market Inventory & Investment Outlook
Manhattan is the country’s largest office market with a total of nearly 393 million square feet of inventory. 241 million square feet of that space is located in the Midtown submarket. In Midtown, 20.3 million square feet of that space is LEED-certified (8.4 percent of total inventory) and 50.3 million square feet of space is Energy Star-rated (20.9 percent of total inventory). We expect these figures to continue growing. More energy efficiency initiatives will be enacted under the Greener, Greater Buildings Plan, ultimately driving down learning curves and costs of compliance. And large owners and operators like Vornado, SL Green, Durst, and Malkin are likely to remain committed to greening their portfolios.
LEED-Certified Commercial Office Buildings
According to the Report, there are currently 28 LEED-certified commercial office buildings in Manhattan, which total 24.1 million square feet of space. 23 of those buildings are located in the Midtown submarket and constitute 20.3 million square feet of space. 18 of those 23 buildings are certified under the LEED for Existing Buildings rating system; 5 buildings under LEED for Core and Shell.
So far in 2011, the following 9 properties in the Midtown submarket have earned formal LEED certification from USGBC:
- 900 Third Avenue (LEED-EB: O&M Gold; May 5, 2011; 515,200 square feet)
- 250 Park Avenue (LEED-EB: O&M Gold; May 5, 2011; 471,260 square feet)
- 125 West 55th Street (LEED-CI 2.0 Gold; April 20, 2011; 48,000 square feet)
- 909 Third Avenue (LEED-EB: O&M Silver; April 20, 2011; 1,125,000 square feet)
- Two Penn Plaza (LEED-EB: O&M Silver; April 19, 2011; 1,500,000 square feet)
- 1740 Broadway (LEED-EB: O&M Silver, April 8, 2011; 412,704 square feet)
- 11 Penn Plaza (LEED-EB: O&M Silver, April 7, 2011; 1,987,328 square feet)
- 1290 Avenue of the Americas (LEED-EB: O&M Silver, April 7, 2011; 1,987,328 square feet)
- 1120 Avenue of the Americas (LEED-EB: O&M v. 2009 Silver; February 23, 2011; 400,000 square feet)
99 buildings in Manhattan earned Energy Star accolades in 2010, and the total number of Energy Star-labeled properties has more than doubled since the last Green Building Opportunity Index was released in 2010. The Report identifies the Greener, Greater Buildings Plan as a major catalyst for the increase.
Midtown currently stands heads and shoulders above the other New York City submarkets in terms of LEED and Energy Star adoption, ranking 5th overall in the Index with Downtown and Midtown South trailing at 20th and 25th, respectively. While the Midtown South submarket lacks Midtown’s volume of Class A trophy properties that have almost uniformly pursued LEED-EB: OM ratings, we do expect Downtown to perform better in future Indices as the new World Trade Center towers come online.
Mandates & Incentives
This section of the Report starts by noting that “New York’s passage of the Greener, Greater Buildings Plan in late 2009 has already had a definitive impact on commercial office properties, as the number of Energy Star certified properties in Manhattan has more than doubled since the last iteration of the Green Building Opportunity Index a little over a year ago.” Specifically, it focuses on the first private sector phase of the Greener, Greater Buildings Plan: the benchmarking law that is requiring all residential and commercial owners of buildings larger than 50,000 square feet to benchmark their energy and water usage against 2010 results. The Report also points to two public initiatives that we’ve yet to discuss here at gbNYC:
- Back in March, Con Edison announced that Lockheed Martin would run its Industrial Energy Efficiency Programs, which provide cash rebates and incentives to facilitate reduction in gas and electricity usage by its commercial and industrial customers. Thus far, more than 250 applications have been received which are generating over $3 million in rebates and incentives for Con Ed customers.
- Second, NYSERDA’s Focus on Commercial Real Estate Program (FOCUS CRE) is another program we’ve yet to note at gbNYC. The program provides building owners with a variety of strategies to assist them in assessing various performance factors, including energy consumption, efficiency, and how costs and savings will accrue to the owner as opposed to tenants. It’s a great resource for owners and tenants alike that are interested in greening their leasing practices.
Finally, we were also pleased to note that the Report identified Mayor Bloomberg’s Green Leasing Language in this section, as well as the city’s commitment to including the language in all new leases in which the city is a tenant.
Overall, Midtown ranked second among the thirty markets surveyed (behind Washington, D.C.) in the Mandates & Incentives category.
The Index’s Green Culture category seems inherently more subjective than the others. Nevertheless, Midtown ranked first in the Transit Ridership and second in the Walk Score subcategories that were used to produce each submarket’s overall Green Culture score. According to the data that the Index pulled from SustainLane, “New York City’s per capita emissions are a third of those in the rest of the country because of public transit use, densely packed buildings, and smaller homes.” SustainLane is a peer reviewed study whose results, factors, and methodologies are available here.
Ranking cities in the Green Building Opportunity Index is an important step towards promoting competition and improvement among the 30 markets that participated. We’re pleased that New York City has performed so well thus far, but work remains if Gotham is to be as successful in 2012. For example, we hope to see both Midtown South and Downtown improve in the number of Energy Star-labeled and LEED-certified buildings. But as the Report notes, the Manhattan office market “is one of the healthiest in the country, with investor demand in core central business district markets continuing to put upward pressure on property values.” As the commercial real estate climate continues to – hopefully – improve into 2012, we do expect New York City to fare just as well in next year’s Index. What we do hope to see regardless are detailed Profile Reports for the Downtown and Midtown South submarkets, which could identify specific green pressure points within each local submarket.
Again, a fully copy of the Midtown Profile Report is available here for your download and review.
This article compiles two recent pieces that were published at gbNYC Magazine.