LEED is good for business

Green building is good for the environment. It is good for our health. It is essential for the future.

But for a benefit that will impress even the bean counters among us, consider this: Green building will boost your bottom line.

How LEED certification can help your business.

1. It sets you above in a competitive landscape.

Green buildings are attracting attention from a growing number of buyers and tenants who prefer lower operating costs and healthier indoor environments. When developers chose green for new construction, occupancy increases 6.4 percent and rent 6.1 percent for new construction. For existing buildings undergoing green updates, occupancy increases 2.5 percent and rent increases 1 percent. See the cost benefits of green building, according to building owners, in the chart below.

Source: McGraw Hill Construction (2010). Green Outlook 2011: Green Trends Driving Growth.

Occupants also tend to appreciate the “bragging rights” that accompany a LEED badge of honor.

"With LEED certification, Best Buy gains the advantage of third-party verification. We like that stamp of approval,” says Danielle Tallman, associate development manager at Best Buy. “It sets us apart from other retailers and allows us to promote the very tangible difference that we're making.”

2. It reduces risk.

LEED certification goes beyond minimum building code requirements. Third-party verification of your building’s ability to protect indoor air quality, for instance, can protect you against health-related lawsuits.

"We now have a large enough, detailed enough body of data to say that the presumption is 'why wouldn't you do a green building?’” says Greg Kats, senior director and director for climate change policy at Good Energies. “It's very cost effective, and it reduces risk in a number of areas including health, exposure to energy and water prices and obsolescence."

LEED certification can also help protect against financial risk through faster sales and leasing of green buildings compared to similar buildings in the same town. Green buildings are, on the whole, easier to rent and sell.

3. It’s worth saying again: LEED attracts tenants.

Savvy tenants are looking for the benefits that green buildings offer.

“We have large tenants, 300,000-square-foot users, who come to us and the first thing they ask is if we are LEED-certified. These blue-chip tenants can use their new LEED office as another bullet point to promote how they are sustainable; it's a built-in marketing package for them,” says Bentley Forbes, vice president and general manager of Prudential Plaza Chicago.

Today’s Class A office space is green. Lease-up rates for green buildings typically range from average to 20 percent above average.

4. It’s cost effective.

Green building pays. LEED can help it pay even more.

When the property management firm for Adobe decided to seek LEED certification for Adobe’s San Jose headquarters, it did so mainly for recognition and third-party validation of the green building features it had already instituted. It ended up with much more.

“Through our energy conservation and related projects up to that point, we had already realized savings of $647,747 per year with an annual return on investment of 106 percent. We had even had several engineering firms tell us we had pretty much done all that there was to do,” says George Denise, global account manager at Cushman & Wakefield. “As it turned out, LEED is such a rigorous and methodical process, through the process of certifying our buildings we found another $534,398 in annual savings with an even better annual return on investment of 148 percent!

“LEED is more than a standard to benchmark against. It is in a very real sense a blueprint for achieving energy and related conservation savings."

Per square foot, the cost for buildings seeking LEED certification falls into the same range as buildings not seeking certification. On average, an upfront investment of 2 percent in green building design results in lifecycle savings of 20 percent of the total construction costs — more than 10 times the initial investment.

Additionally, sale prices for energy efficient buildings are as much as 10 percent higher per square foot than conventional buildings.

5. It offers “green magic.”

A 2008 CoStar Group study found that green buildings outperform their non-green peers in key areas such as occupancy, sale price and rental rates. Sometimes, by wide margins.

LEED buildings command rent premiums of $11.33 per square foot higher than conventional buildings and boast 4.1 percent higher occupancy, according to the study. Rental rates in Energy Star buildings represent a $2.40 per square foot premium over comparable non-Energy Star buildings and have 3.6 percent higher occupancy.

"Call it green magic,” writes Adam Aston in Business Week. “According a pair of studies that offer the first broad-scope examination of the economics of green buildings, green buildings really do it all: lower operating costs, boost rental rates, increase sales values and even improve occupancy rates."