Buildings have an enormous carbon footprint. According to one study, they consume 33 per cent of Canada’s annual energy production and are responsible for 35 per cent of our greenhouse gas emissions.
In response to market forces, many developers are changing the way buildings are designed, constructed and operated, although different industry participants are responding differently to sustainable development initiatives. While many office tenants have embraced these initiatives, retail tenants are generally less enthusiastic. Home buyers like the concept of green features, but are reluctant to pay a premium for them.
Regardless, local governments are increasingly mandating that developers build to certain sustainable standards or, at the very least, adopt sustainable practices. For example, the City of Vancouver’s current policy requires LEED Silver when private buildings are rezoned, but the City is planning to raise the bar to LEED Gold in 2010. Meanwhile, the Resort Municipality of Whistler’s "Whistler Green" guidelines, developed after extensive research and public review, are awaiting formal council endorsement. Staff are recommending that all applicants for residential development approval complete a green checklist and, while compliance will initially be voluntary, the municipality plans to research opportunities for mandatory green building measures to be introduced in the future. Other local governments are engaged in similar exercises.
Developers and consumers alike must adapt to the new reality.
Through third-party certification programs, the most well-known of which is the Leadership in Energy and Environmental Design (LEED) Green Building Rating System, developers of new buildings may achieve different levels of green certification by incorporating sustainable design, construction and operational features into their buildings. Points may be earned in categories such as sustainable site, water efficiency, energy efficiency, materials selection, and indoor environment quality, while developers may achieve four different levels of LEED certification: Certified, Silver, Gold and Platinum. Following construction, project documentation is submitted to the Canada Green Building Council for review and certification.
Drawbacks with the LEED process include the soft costs associated with the certification process and, of course, the hard costs associated with constructing a building to LEED standards. However, the LEED designation provides a developer with a green seal of approval and a marketing advantage.
According to Tony Astles, Executive Vice President at Bentall, his company aims at LEED Gold as the minimum standard when constructing new office buildings. Many of the tenants that landlords want to attract to high-calibre buildings are institutions and corporations whose internal corporate social responsibility policies require them to reduce their impact on the environment. For these tenants, signing on to a LEED-rated building is an easy - and perhaps even mandatory - decision.
Green buildings consume less water and energy, and tenants benefit from lower operating costs as a result. New technologies used in green buildings decrease the risk of obsolescence. For example, water-based heating systems are more energy-efficient and more adaptable to any future heating technologies than any electrical-style heating. These factors (plus the increased interest from tenants) all support the economic case for "building green." A 2008 study by CoStar indicates that green buildings make for good business investments: they outperform their non-green peer assets in key areas such as occupancy (4.1 per cent higher), rental rates ($11.33 more per square foot for LEED buildings), and sale price ($171 more per square foot for LEED buildings).
To address tenant demands, many landlords of existing buildings have introduced energy-conservation and waste-reduction measures, such as enhanced recycling programs and the installation of separate energy meters, that make their buildings more competitive from a green perspective, but do not require major capital expenditures. The Building Owners and Managers Association’s (BOMA) newly launched "BOMA BESt" certification program, which evaluates the environmental performance and management of existing commercial buildings, has become a popular tool for landlords to improve environmental practices in existing buildings.
According to Alan Lee, Director of Engineering at SmartCentres, many of their anchor tenants are already investing in very energy-efficient store design and construction methods in order to keep operating costs down. However, certification to a standard such as LEED has not caught on due to a lack of retailer demand and to price-sensitive shoppers, whose shopping excursions are relatively short compared to the time spent by office workers and residents in their respective buildings.
While there is little demand from shoppers, municipalities do often look for shopping centre developers to adopt certain green measures (for example, management of stormwater drainage) as part of their projects.
To the average home buyer, price and location are the major considerations in selecting a new home. All other factors being equal, most home buyers will probably not pay more for sustainable housing.
The SFU Community Trust is the master developer of UniverCity, a model sustainable community adjacent to Simon Fraser University. Gordon Harris, CEO of the Trust, agrees that sustainable features alone are insufficient to attract purchasers. To be successful, a green development must be coupled with other incentives and, as a result, UniverCity offers green amenities to purchasers such as discounted transit passes. Now in its third year of operation, the transit program is subscribed to by 50 per cent of UniverCity residents.
Roger Navabi, President of Qualex-Landmark, a 2007 UDI award winner for its "Pomaria" development, has found that, because the LEED program was primarily designed for commercial buildings, it has not gained wide acceptance in the residential construction industry to date. LEED has, however, since adapted its program to accommodate residential buildings, so residential developers may begin to see LEED certification as a meaningful competitive advantage.
Building green may cost more upfront, but in the experience of Dale Mikkelsen, Manager, Planning and Sustainability of the Trust, once a developer builds green, the costs for the next green project decrease as the process is duplicated and the developer and its contractors gain more experience.
In summary, office landlords and tenants find themselves at the forefront of the green building movement in Canada. As municipalities mandate sustainable building standards and practices, and if green buildings are able to deliver on the promise of reduced operating costs, retail and residential developers and consumers will have no choice but to catch up.
Adapted from an article by Elizabeth Yip published in the December 11, 2009 issue of Lawyer's Weekly