Because the standards by which buildings
can be certified "green" are so new in comparison to the data available
for analyzing traditional construction, the current challenge of
valuers and underwriters is to gather sufficient market data to prove
(or disprove) any of the aforementioned potential benefits. There is
ample anecdotal information to do so, but the valuation and lending
communities are reluctant to rely on such data.
However, there
are a few potential benefits that have been recognized by the
investment community. The potential of reduced risk - one of the most
significant and critical considerations in the investment assessment
and valuation of any property - was acknowledged by Fireman's Fund
Insurance recently when they guaranteed a premium reduction of 5
percent for any commercial property achieving either a LEED or Green
Globes certification. Similarly, the mandate to meet LEED requirements
by a growing number of municipalities is viewed as support for the
premise that these properties will be less susceptible to obsolescence
created via planning, zoning, or code changes.
Thus, it appears
at this point in time that the physical costs associated with green
development are much more easily quantified than the potential
benefits. However, there is sufficient data on the identified and
potential benefits to indicate that green development should at least
be strongly considered when assessing the possibilities of acquiring,
developing, or re-developing a facility.
Market Acceptance
The
more compelling consideration may be the "cost" of market acceptance if
an owner/developer does not at least consider this form of development.
In a time of contentious corporate governance issues and an
international focus on corporate responsibility, to dismiss a
healthier, more efficient building methodology outright could be much
more expensive strategically. With pension funds having the stature of
CalPERS and CalSTRS and institutional investment advisors like Kennedy
Associates embracing green development as a responsible alternative for
their investors, the decision to ignore this growing trend could have
greater impacts on the bottom line than the actual physical expense.
This
probability is discussed in-depth in the book The Ecology of Commerce
by Paul Hawken, an entrepreneur, journalist, and environmentalist whose
works have appeared in The Wall Street Journal, Harvard Business
Review, and The Washington Post. In this widely acclaimed work, Hawken
suggests 20th century industry should internalize some of the
environmental costs its production methodologies have created, and if
it refuses, it should be taxed accordingly. It is further explored in
Ray Anderson's book, Mid-Course Correction. Anderson is the founder,
chairman, and CEO of Interface, one of the most successful providers of
interior furnishings on a global basis with annual revenues of over $1
billion. He is also an environmentalist committed to being an agent of
change for the business and industrial communities worldwide. The
following quote from his book epitomizes the growing attitude toward
both corporate and environmental responsibility:
"There is not
an industrial company on earth, and - I feel pretty safe in saying -
not a company or institution of any kind.that is sustainable, in the
sense of meeting its current needs without, in some measure, depriving
future generations of the means of meeting their needs. When earth runs
out of finite, exhaustible resources and ecosystems collapse, our
descendants will be left holding the empty bag. Someday, people like me
may be put in jail. But maybe, just maybe, the changes that accompany
the new industrial revolution can keep my kind out of jail. I hope so,
most assuredly."
So perhaps the appropriate question to ask
yourself, your board, and your shareholders when deciding whether or
not to consider green development and what its value might be to you or
your organization is not if you can afford to - but if you can afford
not to.
Theddi Wright Chappell
is managing director of Advisory Services at Pacific Security Capital
and CEO of Sustainable Values, Inc. She holds the CRE, MAI, FRICS, and
AAPI designations and is a LEED Accredited Professional. Chappell has
extensive experience in both national and international investment
analysis, valuation, and consulting services. Her practice focuses on
objectively assessing both the business case for, and cost benefit
analyses of, sustainable development and redevelopment and how to
optimize investment returns for corporations, investors, developers,
and owners.
