Green Office Buildings Save Money, Make Money

A recently published report titled, Doing Well, Doing Good: An Analysis of the Financial Performance of Green Office Buildings in the USA by the Royal Institution of Chartered Surveyors (RICS) concluded that green buildings with Energy Star ratings generate premium rents. However, the report did not find that LEED-rated buildings generated premium rents. The report suggest that tenants and investors will pay for for an energy-efficient building, but not for one that is "advertised as sustainable in a broader sense."

The building sector accounts for about 40 percent of raw materials and energy consumption, and  for at least 30 percent of world greenhouse gas emissions. Constructed buildings use energy, and energy is 30 percent of office building expenses, "the single largest and most manageable operating expense in the provision of office space."

Green buildings result in an aggregate premium of three percent per square foot compared to identical (average) buildings. Effective rents, rents adjusted for building occupancy levels, result in rent premiums of over six percent. This implies, according to the report, that greening an existing building increases its value by "some $5.5 million."

Increasing energy efficiency by 10 percent is associated with a 0.2% increase in effective rent. This is in addition to the six percent rent premium. A $1 savings in energy costs from increased thermal efficiency results in about $18 worth of "increased valuation."

The report cites four economic benefits from investing in green buildings:

1.  Saves money spent on energy, water and waste disposal, insures against future energy price increases

2.  Improving indoor environmental quality may result in higher employee productivity

3.  A green corporate building might create a positive corporate image

4. Green buildings may have longer economic lives due to less depreciation and lower volatility in market value