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Green Features Attracting Tenants to New Buildings
Tenant expectations that new buildings will be green and energy-efficient are driving significant changes in both the commercial and multifamily building markets, according to experts who spoke at a recent conference hosted by the Urban Land Institute (ULI).
“One of the big factors driving green building is the concern regarding what it takes to retain tenants,” said Kenneth Hubbard, executive vice president of Hines, an international real estate and investment firm based in New York. “I was talking to a managing partner of a major law firm and he said, ‘I have to be in a green building.’ Why? ‘It’s a major part of recruiting new associates.’”
Hubbard served as conference chair of a one-day ULI conference on “Investing and Developing Green: How to Make Money and Cut Costs” on June 23 in Washington, D.C. Discussion topics included green regulations, cap and trade, energy-efficient finance and measuring returns from green investment.
“We have some industrial properties in the Inland Empire that are unencumbered by leases,” said William Anderson, a principal at Prudential Real Estate Investors in Parsippany, N.J. “In those buildings that have the most green features — T-5 lighting, extra insulation and other features — I think those will be the first to lease as the market improves.”
Several speakers suggested that the increasing emphasis on green is leading more firms to focus on the quality of building management.
“Organizations that weren’t particularly adept at management are being asked to manage building performance more effectively,” said Stuart Brodsky, sustainability leader in global asset management for GE Capital Real Estate in Norwalk, Conn. “We’re seeing them achieve better results as they improve their management practices. That means more efficient buildings and improved revenues,” he said.
“One issue for us in terms of quantifying properties is risk assessment,” said Andrew Nelson, vice president of RREEF Real Estate in San Francisco. “We are as much about managing our risk as we are about maximizing revenue,” he said.
“When we buy a property we’re looking seven years out,” Nelson added. “So we’re not building for today’s market — we’re building for a future market. I expect the market to look greener and more energy-efficient seven years from now.”
A panel discussion of cap and trade policy proposals featured Danielle Baussan, majority counsel for the House Select Committee on Energy and Global Warming. Baussan gave a succinct preview of the legislation that passed the House of Representatives just two days later. The measure, the American Clean Energy and Security Act of 2009 (H.R. 2454), passed the House with a vote of 219 to 212. The measure is not expected to advance in the Senate at this time.
Baussan noted that four provisions within the legislation would have the greatest effect on developers, should the measure be signed into law in its current form: energy efficiency requirements for building codes on new construction; retrofitting incentives; rebate provisions for new manufactured housing; and a building performance labeling provision, only applicable to new construction.
While much of the ULI conference focused on commercial properties, there was recognition that many of the same concerns apply to mixed-use and multifamily development.
For more information, e-mail Blake Smith at NAHB, or call him at 800-368-5242 x8583.
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