The Value of Green

Posted: June 2009

It’s important to keep in mind that while green building is gaining acceptance, it’s still a relatively young movement. At present, green buildings account for only about 10 to 15 percent of the overall new construction market. This means that evidence like the profits from the sale of the two Chicago buildings is even more critical to illustrating the business case for green.

“The main justification for green is value,” says Gary Christensen, owner of Christensen Corp., developer of the LEED Platinum-certified Banner Bank Building in Boise, Idaho. “Profit is the difference between the cost of the building and the building’s worth. Capitalization on the savings in operating costs makes the building worth more. Green does increase profit.”

Skeptics aren’t so sure. They point out how difficult it is to know exactly how much green elements influence the value of a building. Proponents for green have an answer, and again, the two Chicago buildings provide evidence. “The skeptics say the profits were because they were better buildings,” says Craig Sheehy, director of property management at Thomas Properties Group. “Green building advocates say ‘exactly.’”

Kats agrees: “Green has become a shorthand way to indicate a quality building. A LEED-certified building is a higher quality building because you’re going through additional steps. There is a lot more whole-building modeling, energy modeling and systems integration. The building is more likely to be built as designed and operated as intended.”

Another financial incentive that could offset a potentially higher first cost is that green buildings may command higher rents in some markets. “We’re starting to see premiums for green in buyers’ markets where there’s a lot of choice,” says Kats. “Green really outperforms non-green in these markets.” But it hasn’t happened everywhere. In Boise, Christensen says he gets the same rent for space in his new LEED-Platinum building as buildings that are 18 to 20 years old. That’s okay for now, though, because he says his operating costs are $3 per square foot less than those older buildings. So he’s still making a profit.