U.S. GREEN BUILDING COUNCIL: Commercial Markets Update

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Fall 2009

Greenbuild Sector Update

The U.S. Green Building Council’s Greenbuild International Conference & Expo convenes the industry’s largest gathering of representatives from all sectors of the green building movement. Three days of extensive educational programming, workshops, a vast exhibition floor and ample networking events provide unrivaled opportunities to learn about the latest technological innovations, explore new products, and exchange ideas with other professionals. The 2009 show will be held on Nov. 11-13 in Phoenix, Ariz.

Maximize your Greenbuild experience this year by attending events tailored specifically to the commercial real estate sector. Our programming team combed through over 150 educational sessions, specialty updates and LEED workshops to find the events most relevant for your career.

There are several specialty updates and workshops that may be of particular interest to commercial real estate professionals. Of the specialty updates, “Update on LEED Volume Certification for Existing Buildings: Operations and Maintenance” on Wednesday, Nov. 11, and “Integrating LEED into Your Leasing Process: Qualifying Buildings, Negotiations and Green Lease Clauses” on Thursday, Nov. 12, will both provide information on subjects USGBC feels are of particular interest to the commercial real estate audience. Among the workshops, “Benchmarking Building Performance Using LEED for Existing Buildings: Operations and Maintenance” provided by Green Building Services and “Operational Approach to Sustainability: How to Actually Implement a Sustainability Program in Your Organization” provided by The Ashkin Group focus on topics that are currently sources of discussion in today’s market.

Educational sessions at Greenbuild will earn current LEED Professionals GBCI-approved Continuing Education hours toward maintaining their credential, and GBCI has announced that the online tool LEED Professionals will use to record their CE hours will be live on GBCI.org on Nov. 1.

Find more Greenbuild sessions related to the commercial sector »

Introducing USGBC’s Green Office Guide

USGBC’s Green Office Guide is now available at www.usgbc.org/publications. The guide is priced at $40 for USGBC members and $55 for non-members.

This guide is specifically focused on helping tenants and landlords collaborate. The Green Office Guide will serve as a practical resource for project teams and real estate executives, helping them understand not only the business and environmental drivers behind green buildings, but also the nuances to successful execution. It will provide tools teams can utilize in the deal to manage the process to successful completion. It will help office tenants integrate green decision-making throughout the leasing process — encompassing team selection, site selection, negotiations, lease language, build-out and the tenant’s ongoing operations within the leased space.

The information and tools in this guide have been developed to assist tenants and their service providers (brokers, consultants, attorneys, design professionals) in reducing the environmental impact associated with real estate decisions and operations. The information contained within will also be useful for landlords and developers interested in preparing for negotiations with an understanding of the needs of tenants focused on obtaining LEED certification for their build-out.

The first two sections of the guide provide critical background information, highlighting opportunities and challenges at various stages of the process. The third section consists of functional tools that can be adapted and adopted for use in the leasing process.

USGBC will also be hosting an informative one-hour webcast highlighting the main content of Green Office Guide and featuring three of its authors: Mychele Lord of Lord Green Real Estate Services, Shannon Sentman of Sol Vista Consulting, and Holley Henderson of H2 Ecodesign Inc. The free webcast will be held Sept. 23 at 1 p.m. EDT.

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From the Desk of Frank Mobilio, AIA, LEED AP

In the commercial real estate world, interest in green buildings has increased over the past several years. In fact, understanding green and sustainability issues and how they apply to the commercial real estate landscape allows brokers to both strengthen and differentiate themselves while adding a competitive edge. Between client interest and a changing marketplace (state and local jurisdictions are adopting green policies and legislation while strengthening energy code requirements), clients signing five-, 10- or 15-year leases today will have those leases expire in a world where green office space will be very common, not the exception. How you help and educate those clients today may well determine whether or not you help with their renewal or relocation tomorrow.

Some tenants have a basic or general knowledge of the U.S. Green Building Council and its many LEED rating systems. Others have already been through it and have a good working knowledge of the LEED process and rating systems. Your ability to address the questions and concerns of both groups as well as your upfront strategic advice on green issues may have the most impact throughout their lease term.

Here are some basics to consider:

  • After rent and location, one of the largest tenant concerns is operating expenses – the two biggest variables being local real estate taxes and energy costs. Green buildings can help reduce some of these costs. In most areas, real estate taxes follow a steady upward curve of some kind. While the cost of energy, as seen in 2008, can fluctuate wildly, conventional wisdom indicates that energy costs will steadily increase. A building that is used in an energy-efficient manner theoretically has lower operating expenses and may also act as a long-term hedge against a rise in future expected and unexpected energy costs. Also note that commercial office buildings with low-flow water fixtures in the restrooms not only have lower water costs but also lower sewage and other such transfer fees creating yet another potential savings in operating expenses.

The question then is how can you best capture and explain these savings to your client?

  • This will depend on the type of lease you are negotiating (and your negotiating skills). In a triple net lease there may be options. One option is sub-metering electrical usage so your tenant pays only for their own actual electrical usage. The theory is that one will use less energy if one is paying the bill directly. In some markets renewable energy sources like photovoltaics may be an option. However, it is important to remember that addressing issues like netmetering, purchasing of renewable energy credits for “green power,” and other shared savings and expenses are up to you. You need to be aware they may exist.
  • Keep an eye on local legislation as well. These laws can greatly influence green requirements. As an example, does your jurisdiction allow sub-metering? Until recently, Washington, D.C., did not. However, a bill passed by the D.C. City Council in July 2008 not only established the availability of sub-metering but also established ENERGY STAR reporting requirements. Starting on Jan. 1, 2010, commercial office buildings over 200,000 square feet in Washington, D.C., will have to report their ENERGY STAR score. The threshold will continue to be lowered until 2013 when the base reporting size becomes 50,000 square feet. This new labeling will help you present potential buildings to your client on an “apple to apples” basis in regards to energy use.

Much of the green legislation across the United States is based on statutes similar to the D.C. Green Buildings Act of 2006 (Bill 16-515), which was enacted in early 2007. It was one of the first pieces of legislation to require participation by private-sector construction. This legislation is being “phased in” by first requiring District of Columbia owned and leased properties to start complying with LEED rating systems as appropriate in 2007 and 2008. It will then require that commercial office buildings over 50,000 square feet seeking a building permit after Jan. 1, 2012, must achieve a LEED Certified rating in either the LEED for New Construction or LEED for Core & Shell rating system two years after receiving the Certificate of Occupancy. This “phased in” implementation process is typical of what is being required in new legislation.

The best way to learn about green issues is to read and listen. In addtion:

  • Seek out colleagues that have worked on green real estate issues and listen to their experiences. They will be willing to share.
  • Attend a presentation or exhibit on green issues at a local museum or university.
  • Join a local group or committee such as the local USGBC chapter.

There are many Web sites, including the USGBC’s, which are great sources of general green information. Use the Google toolbar to find an area of personal interest. Of particular interest to brokers are green legal blogs. Blogs such as Green Building Law (www.greenbuildinglawblog.com), Green Building Law Update (www.greenbuildinglawupdate.com), Green Buildings NYC (www.greenbuildingsnyc.com) and Green Real Estate Law Journal (www.greenrealesatelaw.com) are writing about the contractual and legal issues that impact green commercial real estate.

Another more rigorous way to learn about green issues is to prepare for and take a LEED exam. If you have the time, taking this test is one way of differentiating yourself from your competitors. The new LEED AP exam structure may offer more opportunities with its various tracks for varying levels of professional participation. Visit www.gbci.org for more information.

Until you take the test, here are Frank’s Four Favorite LEED Facts to tide you over.

  1. Know the difference between LEED registered and LEED certified. A site that is LEED registered has signified its intent to seek LEED certification, upon completion of construction for a new building or after necessary improvements in performance for an existing building. A site that is LEED-certified has gone through the LEED certification process and has met the necessary performance requirements.
  2. Know the difference between LEED certified and LEED accredited. Buildings are certified; people are accredited.
  3. Know the different LEED rating systems and how they could impact a lease. In the commercial real estate world one is likely to be working with mostly four LEED rating systems: LEED for New Construction or LEED for Core & Shell, which are base building construction-based; LEED for Existing Buildings: Operations & Maintenance, which involves operations and maintenance starting two years after construction; or LEED for Commercial Interiors, which is exclusively tenant build-out. Each LEED rating system may engender different lease attachments. A building within the LEED for Core & Shell rating system may have a set of “Green Tenant Design & Construction Guidelines” as part of its compliance with LEED Sustainable Sites Credit 9 and not require a tenant who leases space within the building to certify under LEED for Commercial Interiors. A building in the LEED for Existing Buildings: O&M rating system may have requirements for sustainable construction purchasing, construction waste recycling and indoor air quality procedures during construction. I was involved in a case where a tenant was signing a lease in a building that was seeking LEED for New Construction certification. One of the lease attachments was a document discussing the LEED for New Construction rating system and the requirements our tenant build-out was to meet, including commissioning and low-VOC materials.
  4. NEVER say LEEDS. As part of one internal training presentation, I had a slide that had this easy way to remember how to spell LEED: “LEEDS is where The Who recorded their 1970 live album; LEED is the U.S. Green Building Council’s Leadership in Energy and Environmental Design green building certification program.” Repeat several times and you won’t forget.

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