The Greening of Shareholders
Real Concept's Green Series
Let me explain further, although I'm sure I don't need to … this is what the greening of America means to shareholders…
A little too honest? Too straightforward? Any shareholder, CEO, or CFO would be more than happy to go to all shades of green as long as the weigh-in at the end of the day fell to profits. As a shareholder, I would expect nothing less.
This week I attended an Urban Land Institute session on Green Buildings + Design – How the Green Movement Influences Real Estate Development and Architecture. The panelists included:
Stanley Daniels – Chairman, Jova/Daniels/Busby Architects - Atlanta
Betsy Del Monte – Principal, Beck Group – Architects, Construction, and Development, Dallas
Richard Feiss – Pace Home Builders – Luxury, Atlanta based builder
Jap Spivey – Director of Analytics, CoStar Group – Bethesda, Maryland
It was an excellent panel and after the obligatory discussions on the topic du jour we went to audience questions and they provided honest forthright answers. The following were the salient points I wanted to share:
- The motivations for going green vary across property classes. The most likely properties to be developed and built with a LEED's certification are income producing properties where the owner is responsible for the usually substantial expenses of the building, i.e. office buildings and hotels. Where operational expenses are passed along to the tenant, the motivation to go green greatly diminishes, i.e. apartments, retail, and industrial.
- We are in the infancy of experience when it comes to the financial benefits of green building. There is very little meaningful data as yet and it is hard to come by. CoStar is in the midst of completing a study based on a database of 1366 green properties built since 1990. These properties are compared to properties in similar locations and of comparable quality of finish. The study shows that LEED buildings are selling for $170 more per square foot – a 64% premium – than a non-green property. There is virtually no meaningful data available on the cost or returns on building green residentially.
- When building green homes one big hurdle is educating prospects and buyers as to the benefits of whatever green program is in use. In the home buying process the attention span for the green topics are generally very short and the eyes tend to glaze over during the green presentation. The rating systems for green construction can be complicated and technical and consumers lose interest. If a buyer has to go to class to grasp the benefits of green, you lost most of them at hello.
Everyone will agree that green building in whatever property class is a good thing and it is very important that we do our part to protect the environment. But developers and builders must find the profit in green before it will become mainstream. At the end of the day, green is self-serving. Only when energy efficiency and carbon emission reduction is mandated by the market or by regulators will we see the real estate industry embrace the world of green with consistency.
Real Concept's Green Series:
Inconvenient Green Truths - Rethinking Everything
"Vehicle Miles Traveled" Becoming a Zoning Issue as Governments Fight to Reduce Emissions
Builder's Facing Green Conundrum
Over The Top Eco-Iconic Architecture
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