The case the business builds for building green.

Until recently, building owners could be forgiven for thinking that green building meant installing a vegetated roof and waterless urinals. Within the last year, however, increasing numbers of America's major newspapers and business magazines confirm that sustainable green building practices are resonating with an ever-widening audience and gaining marketplace acceptance. Although this momentum may partially stem from agreement with Al Gore's An Inconvenient Truth and other environmentalist arguments, it also appears driven by stakeholders who view green building as a smart business decision.

Corporate recognition and commitment to green building has grown exponentially in the past few years. Many top companies have embarked on major projects that follow the US Green Building Council's Leadership in Energy and Environmental Design (LEED) Green Building Rating System, and the numbers are only increasing. From 2000, when LEED was first released, through early 2006, some 430 projects earned LEED certification.

Now almost 800 projects are certified and nearly 6,000 are registered representing almost one billion square feet of commercial building space.

Insurance companies and investors are also buying in. Last year, the Fireman's Fund announced it would offer a 5% discount for property insurance on LEED-certified buildings, and REIT and SRI (socially responsible investment) funds--that count nearly $2.3 trillion in assets under management--are actively looking to invest in "responsible" real estate development.

In addition to private sector development, the U.S. Council of Mayors adopted the 2030 Challenge for all public sector buildings, which aims to reduce building fossil-fuel consumption 60% by 2010--with further 10% reductions every five years until a fossil-fuel free, carbon-neutral building standard is achieved by 2030.

Mayor Bloomberg unveiled his own 2030 Challenge for New York City in December, and in January, Local Law 86 took effect requiring all City-funded projects to achieve LEED Silver certification, which will affect more than $12 billion in construction projects. Nationwide, 53 city and 17 state agencies have instituted various LEED initiatives, legislation, executive orders, policies and incentives for municipal building projects.

Some cities, like Boston, also require private developers to follow LEED guidelines for projects exceeding a certain size. Other municipalities offer incentives, such as expedited approvals, for private-sector compliance.

The main concern voiced by private owners is that green building still costs too much. But independent cost studies belie this assertion. In 2003, the Kats Study showed that the average construction premium for 33 sampled LEED-certified projects was less than 2%.

An analysis of 30 green schools by the Capital-E Group in 2006 showed an average "green" premium of 1.65%. Note that these studies focused on first-costs only--not the subsequent long-term benefits, which are often paid back within five years.

Yet some still cannot comprehend how high-performance green buildings are only slightly more expensive than standard buildings. The answer is net savings are derived from a wholebuilding design approach that captures multiple benefits from single expenditures--i.e., doing more with less. For example, effective daylighting can significantly reduce lighting costs, which in turn reduces cooling loads, downsizes cooling equipment and reduces peak-electric demand.

If the building envelope is optimized for winter heating loads, daylighting could extend solar heat gain to occupants nearest the windows. This could potentially eliminate perimeter heating requirements.

Thus, one integrated design effort might address first costs for light fixtures, heating and cooling equipment, reduce energy consumption and improve occupant comfort.

The increased availability and quality of "green" building products and equipment also contributes to lower first costs. Additionally, consultant costs are stabilizing as increasing numbers of architects and engineers become proficient in designing sustainable buildings and earn LEED accreditation.

Gerald Hines and other real estate leaders predict that the industry definition of a Class A commercial building in the near future will include LEED certification.

Because it takes 2-3 years or more from design to occupancy of a typical commercial project, owners who do not seriously contemplate building sustainably today will likely be at a competitive disadvantage in the marketplace within five years.

Anecdotal evidence suggests that green buildings are leasing faster, enjoying positive tenant retention and seeing significant reductions in absenteeism, illness and turnover, all of which are resulting in employee productivity gains.

A green building will mitigate the risks of a down real estate market, exposure to occupant health issues and rising energy and operating costs.

The sustainable building movement, once relegated to small experimental projects, has emerged as one of the fastest-growing sectors of the US real estate and construction industries. Today, the relevant question is no longer how much "green building" will add to first costs, but what costs will be incurred by not "going green."

BY C. BRADLEY CRONK, RA, LEED AP

DIRECTOR OF PROJECT STRATEGY,

LEPATNER & ASSOCIATES LLP,