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GreenMetrx - Q2 2010 Newsletter

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  1. 1. Downtown Toronto’s LEED® Certified Buildings In This Issue: According to the Canadian Green Building Council (CaGBC), a total of five Affecting Change Profile....... 2 commercial office buildings in Toronto’s downtown core have achieved LEED® certification. These buildings include Oxford Properties’ MetroCentre-King Street Green Building Market Tower, Northam Realty Advisors’ Bell Trinity Square, Cadillac Fairview’s Simcoe Place, Brookfield Properties’ Bay-Adelaide Centre, and Cadillac Fairview’s office Penetration.............................. 3 tower at 77 King Street West. Furthermore, a number of other commercial office buildings in the downtown core have been built to LEED® certifications. Building Commissioning.......... 3 The five LEED® certified commercial office towers in Toronto’s downtown core Starbucks’ LEED® comprise a total floor space of approximately 4,154,376 sq. ft. As of June 1st, Registered Store..................... 3 2010, the five structures had 529,569 sq. ft. of space available for lease, representing an availability rate of 12.75%. 77 King St. W. Obtains LEED® Certification................. 4 For Q1 2010, downtown Toronto’s class “AAA” buildings had 2,180,813 sq. ft. of space available for lease while class “A” buildings had 2,483,138 sq. ft. of space available for lease. Availability rates for downtown Toronto “AAA” and “A” office A Tipping Point in space were 17.1% and 10.4%, respectively.1 Commercial Real Estate..........5 A map of downtown Toronto’s LEED® Adoption of Responsible certified commercial towers is provided LEED® Certified Buildings Property Investing (RPI).......... 5 below. A number of Toronto’s LEED® registered buildings are also included. Floor Space 4,154,376 sq. ft. Available Space 529,569 sq. ft. Availability Rate 12.75% Average $26.05 psf Additional Rent LEED® Certified Additional Rent Building (psf) MetroCentre- $26.54 King Street Tower Bell Trinity $19.64 Square Simcoe Place $23.80 Bay-Adelaide $27.93 Centre TD Centre - 77 $31.65 King Street West 1
  2. 2. measurable, but at the same time, add up to more than the Affecting Change Profile sum of their parts, working synergistically to create a truly green project. When working on the sustainability strategy For those of us out there trying to bring about change in the on a project Sandra creates an Affecting Change building industry, there is nobody more dedicated to the Sustainability Matrix™ that goes beyond LEED©, yet keeps cause than Sandra Lester, founder and CEO of Affecting the target LEED© level as a side benefit to the overall Change Inc., a green building consulting and sustainable strategy. design firm based in Toronto. Another approach that Sandra uses in the design phase Affecting Change is coming fresh off the starting block with includes consideration of post-peak-oil and other a number of projects still on the drawing board. They scenarios. “What would be the results to operational costs, include a range of green building projects, from an and how would your bottom line be affected?” Due ecoresort on the remote shores of Fogo Island, just off diligence consideration of these factors is essential in Newfoundland, to a high-tech hospital campus in planning for new developments and retrofits. Sandra is downtown Toronto. hopeful that a ceiling on energy usage in buildings, much like the 2030 Challenge, is developed by building type, and Trained as an architect and now a LEED©-accredited put into legislation in Ontario in the near future. professional, Sandra has been in the sustainability industry since 1992, trying to make a difference in a field that has Intuitively we know that when companies elect to build been slow to react to the threats of climate change and green they strengthen their brand, and whether green decreasing resources. building is legislated or not, all of our actions and inactions are becoming more transparent in the new paradigm that is When asked about the industry, Sandra explains that while emerging. businesses are making progress, they need to think more systemically. She goes on to This is when Sandra remindful explain that most current that it’s easy in this industry to get technologies and practices have Instead of making buildings less focused on energy and water been around for over twenty years harmful, we should question our e f f i c i e n c y . H e r f r i e n d , and that green building is not a intentions in building: the ‘why?’ sustainability writer and teacher, new thing. But business is still s t u c k i n t h e e c o - e ff i c i e n c y ‘where?’ ‘how?’ and ‘when?’. We John Ehrenfeld, would call it, ‘doing less harm’. paradigm that negates anything need to build what we ought to with a payback longer than five instead of what we want, with full Instead, Sandra tries to focus on years, and they need to shift to a consciousness of the impact of our true sustainability. Instead of new paradigm of assessing doings. making buildings less harmful, we energy efficiency measures should question our intentions in through the lenses of Life Cycle building: the ‘why?’ ‘where?’ Assessment and Return on Investment (ROI). ‘how?’ and ‘when?’. We need to build what we ought to instead of what we want, with full consciousness of the In the early nineties Sandra worked with notable cutting- impact of our doings. edge sustainability engineering and environmental consulting gurus, Greg Allen (HOK Architects) and Mario However, if that isn’t the case, Sandra is still determined to Kani (Sustainable Edge Ltd.). Seventeen years later their promote some of the easiest green building approaches low-energy building projects are still exemplary. To her which include passive solar. When it comes to building delight, Sandra is working with both of them again on retrofits, Sandra says, “windows are usually a good place several projects. The experience of coming full circle in this to start.” The advent of low e-coatings coatings on windows way has taught Sandra that it is our mindset and our means that any building can have effective passive solar economic framework that determines building design, and potential with relatively small window areas. Sandra she is determined to find the leverage points in the way recommends a very modest window-to-wall ratio. South or that we do things. north facing high-tech windows are great substitution for a traditionally weak area in the building envelope that leads Sandra explains that at the very beginning of every project, to better thermal comfort and usually a very positive return the project design problem is defined and the sustainability on investment. Sandra explains other useful strategies goal is determined. These goals get written into the which include right-sizing your building and building Request for Proposal (RFP) that is issued to the designer. systems to ensure there are not unnecessary capital The traditional ‘RFP’ process doesn’t encourage designers expenses from the get go. Passive design along with to question the space requirements and sustainability goals efficient heating and ventilation strategies, can work and most require designers to bid in blind competition systemically to reduce mechanical systems, ductwork, against each other in an ‘apples to apples’ comparison. If plenum heights, shaft spaces, exterior envelope areas, the sustainability goals were missed in the RFP then they etc., resulting in LOWER capital costs. usually go unaddressed. Savvy architects and interior designers include green options on their proposals, but The measurable results of building green include lower they are usually ‘extras’. operating costs, improved employee retention, less sick days, and improved employee satisfaction. It’s even proven On several projects Sandra is excited to be working with that green buildings achieve higher rental rates and are in building owners, entrepreneurs and developers to write more demand than conventional commercial real estate. sustainability goals that will get written into the RFP’s for projects. These sustainability goals are exacting and 2
  3. 3. Understanding the ways that green buildings can work for you is a valuable tool for your business and one that you Building Commissioning: A can invest in now and will put you ahead of the curve on your competition later. Golden Opportunity to Reduce Building Energy Costs There appears to be a lack of communication regarding the financial benefits of building commissioning. In particular, Green Building Market there is a lack of communication regarding the energy and cost savings generated by the commissioning process. Penetration: Room for Growth A 2009 report by the Lawrence Berkeley National Green buildings continue to gain importance throughout Laboratory assembled diverse case studies and developed Canada’s commercial building industry. One way of gaining performance benchmarks in an attempt to address these a better understanding is an examination of the market issues. The results of the report show that commissioning penetration of buildings meeting certain sustainable is arguably the single-most cost-effective strategy for certifications and standards, such as LEED®. reducing energy, costs, and greenhouse-gas emissions in buildings today. As of 2009, Canada had more than 440,000 commercial and institutional establishments (offices, schools, hospitals, As the study reports, energy savings from commissioning etc.) representing floor space of more than 671 million results in a payback time of 1.1 years for existing buildings square meters (7.22 Billion square feet) and consuming and 4.5 years for new buildings. more than 1.036 billion GJ of energy. Other key findings include: As of March 31, 2010, the Canadian Green Building • Median commissioning costs: $0.30 and $1.16 per Council reported that there were 249 LEED® certified square foot for existing buildings and new buildings throughout Canada. Those buildings translate to construction, respectively (and 0.4% of total 2,414,927 square meters (25,994,058 square feet) of green construction costs for new buildings) space. • Median whole-building energy savings: 16% and 13% That figure represents a market penetration of LEED® • Median benefit-cost ratios: 4.5 and 1.1 certified floor space of just 0.0036%. Encouragingly, the • Cash-on-cash returns: 91% and 23% market penetration of LEED® certified space has steadily increased since the first LEED® certified building in 2002. The commissioning process ensures that building owners maximize the efficiency of building systems when The size and scope of Canada’s commercial real estate constructing or retrofitting buildings. It also provides risk- industry, and the relatively small amount of commercial management and ‘insurance’ for commercial buildings, green space to date, means that the sector continues to detecting and correcting problems that could eventually have a significant environmental impact. surface as far more costly maintenance or safety issues. The report is the world’s largest database of commissioning However, one initiative that may help reduce the industry’s case studies for new and existing buildings. In the study, environmental impact is REALpac’s “20 by ‘15” target. The information and data was gathered and analyzed on 643 target is to have Canadian office buildings consume only buildings throughout the US, representing approximately 20 equivalent kilowatt hours of total energy use per square 99 million square feet of floor space. foot of rentable area per year (20 ekWh/ ft2/year) by the year 2015. According to REALpac’s website, “The target is To view the report, click here. intended as an essential first step in demonstrating substantial, sector-wide emissions reductions and operating cost savings”. As a matter of perspective, using NRCAN’s calculation of Starbucks Opens First LEED® 1.54 GJ/m2 energy intensity average for commercial and institutional buildings converts to 39.73 kWh/ft2/year. Registered Store in Canada Furthermore, NRCAN reported that the average energy intensity for commercial offices was 36.65 kWh/ft2/year as In May 2010, Starbucks held the grand opening of the of 2007. company’s first LEED® registered store in Canada. The store, located at the corner of Bathurst and St. Clair, is one REALpac’s objective appears to be a fairly lofty one, as of twelve Starbucks stores worldwide that will be pursuing NRCAN’s calculations are almost 50% higher than the “20 LEED® certification. by ’15” target. However, the objective is achievable. If nothing more, it can be used as motivation towards The LEED® registration pilot project is part of Starbucks’ improved energy efficiency. Shared Planet initiative. According to the company’s website, Starbucks’ Shared Planet initiative aims to design, Despite the increasing market penetration of LEED® build, and operate stores in ways that reduce the certified buildings, the “20 by ’15” initiative shows that there company’s impact on the planet. is still room for Canada’s commercial real estate industry to significantly reduce its environmental impact. 3
  4. 4. As part of the program, the retailer’s objectives include In May 2010, Cadillac Fairview Corporation Limited reducing and recycling waste, energy conservation, water announced the launch of its 77 King Street West conservation, and tackling climate change. revitalization project in an effort to enhance one of its flagship office and retail properties in Toronto. Regarding the newly opened store, Starbucks incorporated the following design and construction elements: Originally built in 1969, the 46-storey tower is part of the company’s $110 million investment in the TD Centre • Tables and chairs made from reclaimed materials complex. Each of the building envelopes is famous for its such as bowling lanes from a Scarborough bronze-coloured curtain wall within a matte-black painted bowling alley; steel frame, featuring floor to ceiling windows that offers • Siding, cladding and wainscoting made from a tenants incomparable views, and access to natural light. locally-sourced fallen barn; The TD Centre was downtown Toronto’s first major office • LED and low-voltage lighting; development and to this day, remains the largest office • Variable flush toilets and metered water fixtures; complex in Canada. The Centre is home to many of the • Paints and solvents that are low VOC; and, country’s premier businesses and foreign multinationals, in • Reduced construction materials due to exposed addition to being the global head quarters of TD Bank surfaces, polished and densified concrete floors. Financial Group. If the pilot project proves to be successful, the company’s The first stages of this multi-year revitalization project will stated objective is to achieve LEED® certification for all enhance the property and improve tenant comfort while new company-owned stores worldwide by late 2010. maintaining the integrity and style of the original building. According to Starbucks’ website, the company has been A major aspect of the project is the replacement of all 5,676 actively involved in working with other retailers and the windows, beginning with the removal of single glass U.S. Green Building Council (USGBC) to create a system window panes, and replacing them with thermal double to certify retail stores and store prototypes since 2001. panes and a new innovative roller shade system. For the news release, click here. In May 2010, Brookfield Properties’ Bay Adelaide Centre gained LEED ® Core and Shell Gold certification. Completed in June 2009, the class ‘AAA’ office building is located at 333 Bay Street. The Centre is a 51-storey office 77 King Street West obtains tower with a total rentable area of 1,160,000 sq. ft. LEED® Certification Prior to the Bay Adelaide Centre, Cadillac Fairview’s Simcoe Place was awarded LEED® EB Gold certification In June 2010, downtown Toronto welcomed the addition of in the Operations and Maintenance category in April 2010. its latest LEED® certified office tower. The downtown core’s The class ‘A’ office building is located at 200 Front Street most recent LEED® certified building is Cadillac Fairview’s West. The 30-storey tower has a total rentable area of 46-storey office tower located at 77 King Street West. 758,528 sq. ft. One of six buildings comprising the Toronto-Dominion Centre, the class ‘A’ building has a total rentable area of 976,163 sq. ft. The office tower recently achieved LEED® Existing Building (EB) Gold certification in the Operations and Maintenance (O&M) category. DOWNTOWN TORONTO LEED® CERTIFIED OFFICE SPACE 4,154,376 5,000,000 4,375,000 3,750,000 Square Feet 3,125,000 2,500,000 1,259,685 1,259,685 1,875,000 316,055 1,250,000 529,569 0 625,000 0 0 0 0 0 0 0 2008 2009 Q1 !10 Q2 !10 Q3 !10 Q4 !10 LEED® Certified Space Available for Lease (sq. ft.) LEED® Certified Total Inventory (sq. ft.) * Started recording available space for lease as of Q2 2010 4
  5. 5. Commercial owners and investors need to recognize and A Tipping Point in the take steps to adapt to the changing commercial landscape, Commercial Real Estate Sector making a commitment to sustainable building strategies to ensure their long-term survival. As one report suggests, “the evidence cannot be ignored, and that investors and An October 2009 report by the United Nations Environment trustees need to consider the SI [sustainable investment] Progamme Finance Initiative (UNEP FI) Property Working criteria of their real estate investments in their decision- Group suggests that there will be an eventual ‘tipping making”. point’ in the commercial real estate sector in which green buildings become the standard against which all other One reason for allocating additional capital into SI real commercial buildings are judged. estate and RPI initiatives is a long-term investment strategy focused on future-proofing commercial real estate Adapted from a 2009 research report by RREEF, portfolios. As the RREEF report suggests, “investors in the argument suggests that major North American cities many markets will find that sustainability is a necessary are close to a point in which the premium for green and appropriate defensive strategy for preserving buildings shifts to a discount for older, less efficient, occupancy, particularly for owners of older office buildings conventional buildings. and shopping centers most at risk of losing tenants to newer, greener buildings coming into the market”. The key metric is the point in which sustainable buildings constitute a large enough part of total building inventory For a copy of the report, “Sustainable Investment in Real that tenants are able to choose between different green Estate… Your Fiduciary Duty”, click here. buildings. At that point, green buildings will become the new market standard and older, inefficient, conventional For a copy of the RREEF research report, click here. assets will be forced to discount rates in order to compete with newer, innovative, energy efficient buildings. There are a number of reasons to believe that green buildings will become the standard in the next decade or Increasing Adoption of UN so. The RREEF report lists four broad reasons for the continual short- and long-term growth of green buildings: Principles for Responsible the low market penetration to date, the increase in proficiency regarding development and implementation, the Investment existing number of projects already in the pipeline, and the Environmental and social issues are becoming increasingly ’strong business case’ for sustainable buildings. important considerations in the purchasing decisions of consumers. Consumers are making a more conscious What does this mean for commercial real estate owners choice to purchase organic foods, drink fair-trade coffee, and investors? Owners and investors need to be drive hybrid vehicles, and move into LEED® certified concerned with the short- and long-term financial homes. implications that a shifting commercial real estate landscape has on portfolio valuations. More specifically, Socially Responsible Investing (SRI) is also growing in owners and investors need to be concerned with declining significance, as environmental and social issues become market values of older, inefficient, conventional real estate increasingly important considerations in investment assets. As the supply of sustainable buildings catches up to decision-making. In particular, SRI factors are being relative demand, enabling tenants to choose between increasingly incorporated into investment strategies as green buildings, owners and investors of conventional companies look to adopt and implement ‘triple bottom line’ buildings will be faced with the prospect of discounted and environmental, social and governance (ESG) rental rates and declining asset values. investment principles. As discussed earlier, the development and implementation For example, the Social Investment Forum reports that SRI of green buildings is still a work in progress in Canada. now encompasses an estimated $2.71 trillion out of $25.1 However, the same holds true in the United States. As of trillion in the U.S. investment marketplace. 2009, there were a total of 22,000 LEED® certified and registered buildings throughout the United States. With One factor that has contributed to the growth in SRI is the a total inventory of five million commercial office United Nations’ Principles of Responsible Investment (UN buildings, the number of LEED® certified and registered PRI) initiative. The initiative, which asks institutional buildings in the U.S. represents a market penetration rate investors and investment managers to sign up to six of only 0.004%. responsible investment principles, helps investors consider ESG issues when making investment decisions. Despite the relatively minor impact to date, the shift towards sustainable buildings seems destined for growth. Currently, the UN PRI has 738 signatories representing As is the case with Canada, the rate of growth regarding asset owners, investment managers and professional the registration and certification of LEED® buildings in the service partners with over $20 trillion of assets. U.S. has increased significantly since LEED® first began pilot projects back in 2000. As individuals, corporations and There appears to be a growing view among investment governments make greater efforts to reduce their professionals that environmental, social and corporate environmental and social impact, commercial real estate governance (ESG) principles can affect the financial owners and investors will be forced to do the same. 5
  6. 6. performance of investment portfolios. The UN argues that • Fonds Desjardins The Principles for Responsible Investment provide • Growthworks Capital investors with an opportunity to consider these issues and • Meritas Financial Inc. fulfill their fiduciary duties. • Natcan Investment Management • Northwest & Ethical Investments LP Using the Principles, ESG factors are integrated into • Presima business operations with the objective of assisting • Sarona Asset Management companies better manage their economic risks. According • TD Asset Management Inc. to the UN PRI website, application of the Principles should • Vancity Investment Management lead to better long-term financial returns and a closer alignment of objectives amongst institutional investors and One of the first Canadian signatories, the Canada Pension society at large. Plan Investment Board, has $127.6 billion under management. Although, only 5.5% is invested in real In the case of Canada, only 30 of the 738 signatories are estate assets through joint ventures and real estate funds. Canadian firms. The breakdown of Canada’s signatories The CPP Investment Board’s approximately $7.0 billion are as follows: eight asset owners, fifteen investment real estate portfolio contains mostly office and retail managers, and seven professional service partners. commercial properties. Provided below is a list of those asset owners and investment managers: Another Canadian signatory is Bentall LP. The company is a real estate advisory and service organization that has Asset Owner Signatories (8) implemented a number of initiatives relating directly or indirectly to responsible property management. Bentall • British Columbia Municipal Pension Plan manages more than 600 properties throughout Canada • Caisse de dépôt et placement du Québec and the US. The properties are drawn together under • Canada Pension Plan Investment Board Bentall’s ForeverGreen banner. • Comité syndical national de retraite Bâtirente • Public Service Alliance of Canada (PSAC) Despite the relatively small number of Canadian Pension Fund signatories, it is encouraging to see at least a few • Régime de Retraite de l’Université de Montréal Canadian firms adopt the UN’s Principles. • Régime de retraite de l’Université du Québec • Société d’assurance-vie inc. (SSQ) Investment Manager Signatories (15) • AlphaFixe Capital Inc. • BC Investment Management Corporation • Bentall LP • Blue Marble Capital Management Limited • Cordiant • Fiera Capital Inc 1 Colliers International, “GTA Office Market Statistics - Q1 2010”, (March, 2010). About GreenMetrx GreenMetrx’s mission is to contribute to the evolution and growth of the commercial real estate industry through the facilitation, promotion, and acceleration of sustainable building strategies. The company’s objective is to provide commercial real estate developers, owners, managers, investors, and tenants with the resources and tools to make effective and informed decisions regarding the adoption and implementation of sustainable building practices and policies. For more information, visit our website at www.greenmetrx.com. Or, follow Greenmetrx at www.twitter.com/greenmetrx. Sponsors 6