The Recession and LEED®

Of late, the housing market has begun to show some signs of turning the corner.  The media has begun to focus on the commercial real estate market and the growing concern that many of the toxic assets on bank balance sheets are secured by commercial buildings that continue to lose their value.In this economy, building owners and operators face many challenges.  As companies cut employees and reduce operations, vacancy rates are escalating at an alarming pace.  Building owners face tough economic decisions.Many commercial real estate owners have begun to seek green solutions.  On one hand there is the mystique of green conversion and new construction costs.  On the other hand, there are undisputed energy savings, healthy workplace incentives and environmental benefits.  Striking the right balance between investing in sustainable conversions and practical, financial outlay involves imposing considerations.Data indicates that Leadership in Energy and Environmental Design (LEED®) certifications do increase the cost of new construction as well as increase the cost of renovations.  Estimates run between 5 and 10% and in this economy, owners are rightfully cautious.But, the proof is in the pudding.  Tenants want sustainable design and LEED® certifications.  And, they are willing to pay for them.  In 2008, CoStar conducted a survey and released the following facts:•    Certain LEED® buildings generate $11.24 per square foot more in rent than conventional buildings of the same size.•    LEED® buildings have a 3.8% higher occupancy rate.•    On average, LEED® buildings are selling for substantially more per square foot than non-LEED® certified properties.•    LEED® certified buildings are operating with 30-40% less energy than non-LEED® certified buildings.Green buildings are commanding higher rents and higher selling prices.  These sustainable buildings are les costly to operate, provide healthier work environments and have expanding tenant appeal.In the recession, one way to convert those toxic assets into premium value, in-demand assets is to commit to LEED® certification guidelines.  In addition to environmental benefits, many communities are encouraging sustainable development with generous tax incentives.  Perhaps sustainable design will help the commercial real estate market turn the corner through its win-win initiatives.

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