The 3 "E's"

Second Session (6/17/10):

We began the discussion this evening with three questions:
How do we become more efficient, effective, and equitable from this point forward?

What are the challenges

We discussed green buildings and LEED certification. One interesting point that was made was that the initial cost of a Gold Level LEED certification is approximately 2% over conventional construction, and the long term savings approach 35%, whereas the initial cost for Platinum level certification is 10% to 20% more than conventional, yet the operational savings are not over 45%. Thus, there is a much reduced marginal return on investment for a very high level of LEED certification. Businesses therefore should be seeking other goals, such as public relations or marketing, from a Platinum certification. There was further discussion of the constantly evolving and more stringent standards for LEED levels, and whether or not those standards become more stringent in tandem with technological advantages that might enable reaching those standards.

Class readings included discussion of the achievable market premium for LEED certified buildings becoming more prevalent. There are interesting elements to LEED design, and this website offers examples of LEED Platinum certified buildings: http://www.jetsongreen.com/2008/12/leed-platinum-p.html

Other interesting issues regarding green building and LEED include the role of underwriting (and education of underwriters and lenders) in including the value of LEED in either the LTV ratio or the risk premium, and the value of educating brokers about the value added for tenants by LEED. All these questions revolve around identifying and promoting the relative cost benefits of LEED.

Further discussion involved the value of transparency in terms of energy/utility costs for commercial buildings. Would ready availability of this information allow more rational decision making and improve sustainability over the long term? Certainly, to whatever extent a tenants as a whole value energy cost savings over other factors, energy efficient buildings would command higher occupancy as well as rent premiums. Over time, this could provide additional incentive for the development community to include ever higher efficiency standards in new development as well as remodeling projects.