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Holiday Closure

The OREA office will close for the holidays at 12 p.m. Tuesday, December 24th.  Normal business hours will resume on Thursday, January 2nd.  Happy Holidays!

February 5th - 2006

Being green is getting easier

You are an owner and occupant of an older office building. You have high operating costs, high ongoing capital costs, and your employee productivity is low, partly related to high absenteeism.

You are an owner and occupant of an older office building. You have high operating costs, high ongoing capital costs, and your employee productivity is low, partly related to high absenteeism. You may be thinking about going “green”.

Considerable interest is growing with respect to the economic viability of making new and existing buildings environmentally responsible, profitable and healthy places to live and work. For many, the business case is now sound for making new and many existing buildings “greener”. Are these measures economically viable for an owner to consider implementing today or not? Do they create more value?

According to a panel at the Real Estate Forum, November 29 to December 1 in Toronto, the answer is yes. Green buildings make sense and can make money.

A study by Royal LePage Advisors looked at the economics of green buildings, reviewing over 300 texts, best practices and asset values and questioning if there is a relationship between green features of a building and related performance. The study included a detailed survey of key stakeholders involved in 12 green building developments or renovations across North America, asking what each stakeholder looked for in performance. The value the stakeholders sought varied:

  • Developers want to maximize returns.
  • Owner/investors want longer returns, decreased operating costs and increased tenant retention.
  • Owner/occupiers want healthy work environment and increased productivity and increased employee retention.
  • Tenants want a healthier environment and low rents, higher employee retention and lower operating costs.
  • Financiers want long term greater security of capital, stability in income/debt service.

Some of the results of the survey: of the 12 buildings owners felt that buildings met or exceeded expectations, in most areas, ranking occupancy and tenant retention high. In terms of health and productivity occupants, more interested in the impact on employees, felt that the buildings exceeded expectation.

All of the buildings studied rent for at least 5 per cent greater than the market for their area, and from a social perspective there were significant media and marketing benefits from these projects.

Invest in quality
David Wick of the real estate company Hines, echoed the results in his presentation. “Why do green?” he asked. Wick said that once a green building is up and running it will have lower operations costs than its competitors. Wick also said that LEED (Leadership in Energy and Environmental Design) Green Building Rating System® is becoming a quality standard in the U.S. and there are investors who want it. The LEED system is a voluntary, consensus-based national standard for developing high-performance, sustainable buildings. Members of the U.S. Green Building Council representing all segments of the building industry developed LEED and the rating system can be applied to commercial and residential properties.

Hines, said Wick, benefits from the strong tenant retention of their green buildings. The environmental benefits include waste reduction, improved air quality, and resource conservation, and, said Wick: “We get good press as a good corporate citizen.”

Wick said that employee retention is a key issue, especially if, in the near future, we are looking at a worker shortage. One of Hines’ clients, Union Pacific, already faced this issue. In 1999 the 140 year-old company’s work force was aging, with two-thirds of the workers aged over 55. The company wanted its building design to attract a younger work force. The green design, completed in 2004, includes a lot of natural light, and a large atrium. “The building is extremely efficient and is performing extremely well in terms of energy conservation,” Wick said.

Jonathan Westeinde, Windmill Development Group, spoke positively about his company’s projects turning brownfield buildings into green buildings. “The social benefits are good,” he said. The projects are looked at favourably, obtaining government assistance and good co-operation for development fundamentals such as zoning policies.

William McDonough, Founder and Principal, William McDonough + Partners, Architecture and Community Design said that his studies show that green buildings use 3 per cent less energy and gain 1 per cent productivity, which translates to $1000 per year in some cases.

Attendees at the forum also learned that there is a growth in demand for “green-tilted” real estate investments, according to Susan McGeachie, Director, Innovest Strategic Value Advisors Inc. “Investors are asking the questions,” she said. Going green gets a “first mover” advantage, giving the marketing benefit now to be one of the leaders in this area, and green buildings are perceived as superior quality.

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For more information contact

Ontario Real Estate Association

Jean-Adrien Delicano

Senior Manager, Media Relations

JeanAdrienD@orea.com

416-445-9910 ext. 246

Ontario Real Estate Association
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