It Isn’t Getting Easier Being Green

Real estate loves its clichés.

Take, for example, the cliché that going green is inherently more expensive than continuing to build and operate your properties without regard for sustainability. Yes, investing in green is just that, an investment. But, with more and more evidence out there about the benefits of going green, failing to make that investment will put your properties at a disadvantage in the marketplace. Or, to paraphrase the late Jim Henson whose line on the difficulties of being green is repeated at every green real estate program, sustainability “is in the eye of the beholder and it may be necessary from time to time to give a stupid or misinformed beholder a black eye.”

If you are eyeing the sustainable real estate movement and waiting for stronger evidence than the 25 to 50 basis point cap rate premiums being achieved by green certified buildings, now is the time to get off the fence because it isn’t getting easier being green. As the cost of sustainable real estate services and products continues to fall, the bar is being raised by the biggest green benchmarks.

We are in the reporting period for the 2012 Energy Star ratings and many property owners will be challenged to maintain or raise their scores due to changes to the system. In particular, the U.S. EPA now requires that office properties separately submeter data centers or add those high-energy use centers into their overall office efficiency score. Depending on the size of the data center, that could have a huge impact on a property’s Energy Star performance. Or course, getting data center tenants to agree to submeter won’t be easy and may force property owners and managers to look elsewhere for energy savings to make up the difference.

Another big change on the horizon will come courtesy of LEED 2012 – or LEED 2013 depending on when the U.S. Green Building Council finalizes the latest version of the green building certification system. LEED is getting progressively more complex as the USGBC increases the stringency of its requirements, pushing toward the goal of net-zero properties.

The proposed revisions to LEED point distribution likely will seek to close the gap between building design and performance, addressing a common refrain by critics of the rating system.

Such cynics might point to 2010’s 80 percent jump in existing buildings certified under the LEED system as a means of avoiding the more stringent LEED requirements to come – you’ve got at least until November 2012 to get rated under the existing system. A more optimistic point of view, however, might see that 80 million square feet of newly rated buildings as a reflection of the next-generation effort to create value as Sustainability Strategies 2.0 spreads throughout the business world.

Or, to return to everyone’s favorite frog-based cliché, avoid the challenge of being green and you will no longer blend in in the marketplace, but stand out because of the increased costs and risks to your real estate investment portfolio’s value.

This piece was originally posted at Zurich RealTalk at http://www.zurichrealtalk.com/ under The Green Report by AGS Managing Partner Michael Gottlieb