milliCare - Taking the Virtual Pulse of Green

Taking the Virtual Pulse of Green

If you are reading this then you are probably a little like me.

I am wired into dozens of online news aggregators, social media discussion groups, blogs, websites and other digital information sources to stay abreast of the market. Not everyone has the patience to weed through a couple hundred emails and check into everything from the Wall Street Journal to the latest posting from a quality green blogger on a daily basis, but the market intelligence I glean from these virtual sources is almost as valuable to my business as the face-to-face meetings I have with my network and clients. It also doesn’t hurt that I happen to like doing it.

It isn’t easy to cull out actionable information from the waves of content that slosh around the Internet every day, but sometimes you uncover a pearl like I did recently. In one of the approximately 30 LinkedIn groups that I participate in, a group member posted the following question a month ago: “All kidding aside does a LEED designation add value to a project?”

The debate that ensued perfectly reflects the divided opinions that bookend the debate surrounding green real estate in the marketplace. Over the course of several weeks, the debate pushed back and forth between the members of the group – some 40,000-plus – over whether going green adds value to real estate assets. The conclusion, if you can call it that since the debate is continuing, is that the value proposition remains unsettled. For every study on the NOI impacts of sustainability cited, or anecdote about rental premiums obtained or well-reasoned argument over operational efficiency, another person would challenge or dismiss that evidence as unproven in their experience.

Do a few of the commenters have a political axe to grind? Sure. This was not a debate over whether global warming is real or whether we are ruining Earth for future generations but those issues were raised. The vast majority of comments that I saw challenging the value of going green were sober, thoughtful and clearly based on professional experience. More significantly, the comments parallel precisely our business experiences. The interest in green is deep and widespread in real estate, particularly here in California. Most people are familiar with LEED, or LEEDs, or LED – folks, there are many LEED certifications but it is neither pluralized nor is it a type of light bulb – and most people acknowledge that going green can provide some benefit.

Yet, the green divide persists in the marketplace. In a 2011 update of a multi-year study launched in 2009 by CB Richard Ellis, the University of San Diego’s Burnham Moores Center for Real Estate and McGraw-Hill Construction, the analysis found increased demand for green among the 150 buildings in the survey. These buildings saw both higher rental rates and building occupancy versus the general market. However, among the 2,500 occupants of these buildings surveyed, 94 percent of tenant managers registered higher employee satisfaction in green office space. Meanwhile, just 19 percent of tenant occupants reported increased productivity.

Ultimately, the decision-making process for even the most environmentally minded people boils down to one thing: the bottom line. As long as the payoff remains uncertain because the definitive study on green building NOI, rental rates or occupancy has yet to be completed or because of the split incentive problem hasn’t been solved or because misperceptions persist, this debate will continue to cast a shadow over sustainability’s time in the limelight and be a drag on the green real estate marketplace.

Why just this week I got involved in another LinkedIn group debate over green real estate code requirements and there looks to be no end in sight. Good thing I like this stuff.

Originally posted on Zurich Real Talk March 2012

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