The business case for leed certification


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Business Case for LEED Certification
draft for PEER review

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  • The argument I've always made speaks to the value of the certification process. Similar to the case for mechanical systems commissioning, the LEED requirements, process and 3rd party validation add value that ensures better performance.
  • One of our sponsors, Bryan Koop at Boston Properties, relates a story to communicate the value of LEED. "When I'm driving home, coming around the corner to my house, and I see my kids and some neighbors playing ball in the driveway, I know instantly if they are playing a game of basketball or just messing around. There is a big difference in performance and execution when you are trying to score. LEED ensures that people are at the top of their game and without a real effort to be certified, those efforts toward green the building just aren't verifiable." I think we all know how things can get fudged if you don't have someone signing on the testimony, regardless of best intentions.
  • Project teams that go through the LEED process, and are held accountable for certification, are tied to a different level of rigor in their work, such that outcomes are more predictable and reliable.
  • Yes, PERFORMANCE COUNTS, and LEED Certified buildings perform better than non-LEED buildings. Commissioning is part of the guarantee.
  • The USGBC helps you celebrate and promote your success, providing increased visibility and credibility for your business. Many designers, builders, building owners and operators use LEED as a business growth platform. Shouldn’t you?
  • Many states counties and municipalities have regulated green building incentives in place, many of which arespecifically for buildings that achieve LEED certification.
  • Commercial buildings abatements are capped at 75% of improved value.
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  • Employees are most businesses biggest asset, and employee churn can be a huge cost, both tangible and intangible. These days, for top young talent, sustainability is a key decision factor in where they will work, and green buildings are a very visible signal to them.
  • See the tiny dot off to the far right? LEED certification costs are a small fraction of the real costs of occupying a building. Savings in energy, water, materials, rent, churn, talent acquisition, and productivity in the workplace will very quickly pay these costs back.
  • 3RD-PARTY VERIFIED LEED certification helps lock in these benefits.
  • The truth is probably somewhere in between, and will depend on the type of project, its location, the experience of the design team, and the choices that are made. Administrative costs for LEED certification are generally not large.
  • The business case for leed certification

    1. 1. We’ve all run into these types Why should I go through the trouble and cost for LEED certification? When I already design/build/operate green, and can build all the same attributes in myself?
    2. 2. What’s in the LEED brand for me? Bank of America Tower New York City
    3. 3. The Business Case for Green is Understood… Financial/economic return Risk mitigation Marketing/public relations Productivity/health gains Recruitment/retention Prevent “value erosion” Northfield Stapleton, Denver Sustainability concerns LEED But what is the business case for LEED Certification?
    4. 4. What is LEED Certification? Consensus standards developed by the U.S. Green Building Council Voluntary, performance-based green building rating system Building labeling scheme, with a widely recognized brand Third party verified
    5. 5. Why LEED Certification? • THIRD PARTY VERIFICATION It's like the difference between self-publishing and having a paper peer-reviewed and edited by other experts. The added rigor of INDEPENDENT EXPERT REVIEW ensures that the outcomes are not only what they are expected to be, but are also high-quality. ≠
    6. 6. Why LEED Certification? • Validation is a key concept - it ain't real if it's just you saying it's "compliant" or "certifiable." ≠
    7. 7. Why LEED Certification? • COMMISSIONING A fundamental requirement of LEED, Commissioning is the process of physically testing the building systems and controls to assure that they perform according to design. Non-LEED buildings often skip this step, and then under-perform in areas of energy efficiency, indoor thermal controls, and other areas.
    8. 8. LEED Energy Performance 26% LEED Certified buildings compared to non-LEED buildings 32% LEED Silver buildings compared to non-LEED buildings 44% LEED Gold and Platinum buildings compared to nonLEED buildings Source: New Buildings Institute, “Energy Performance of LEED for New Construction Buildings”, March 2008
    9. 9. Why LEED Certification? • PUBLIC RECOGNITION LEED is the most widely recognized green building rating system in the world. People who certify with LEED smartly use the media, builders and residents to promote their sustainable building program, their business and their careers.
    10. 10. Why LEED Certification? • LEADERSHIP Using LEED as a basis for your building project shows that you care about the environment and the people that occupy your buildings, places you in the top tier of practitioners in your field, and can get you a seat at the table discussing new initiatives in your area.
    11. 11. Not convinced LEED certification is a good idea? LOOK AT THE FINANCIAL INCENTIVES! Market Performance
    12. 12. LEED Incentives • Structural Incentives – Expedited permitting for LEED bldgs – Density bonuses (higher FAR allowed) • Financial Incentives – – – – – – Permit fee reductions or waivers Grants and subsidies Low-interest loan funds Technical and/or marketing assistance Tax credits Tax abatement
    13. 13. (insert map of U.S. showing incentives programs locations)
    14. 14. LEED Tax Abatement Benefits • Owners pay no taxes on improvement value of property for up to fifteen years. • Tax abatement remains with property and transfers to a new property owner.
    15. 15. Cincinnati has the most aggressive green building property tax abatement scheme in the country – up to 100% for 15 years – based on LEED Certification! Why did Cincinnati pick LEED? Because of who runs it: US Green Building Council – Non-Governmental Agency – Non-Profit – Consensus Based Decisions – Great Brand Recognition – Voluntary Program – Tiered Program
    16. 16. Why Did Cincinnati Pick LEED? Because of the Well Documented Outcomes from LEED Certified Buildings: – – – – – – – Reduction of Operating Costs Energy Savings Water Savings Improved Occupant Health and Comfort Increased Occupant Productivity Reduction of Potential Liability Enhanced Building Marketability
    17. 17. Cincinnati Tax Abatement example • Assume typical 50,000 SF commercial bldg with $120/SF cost of improvements -> • $6.0M construction cost • 0.021 tax rate • 15-yr / 75% abatement = • $6.0M x 0.021 x 0.75 x 15 yrs = $1,417,500
    18. 18. Still not convinced LEED certification is a good idea? SHOW ME THE MONEY! Market Performance
    19. 19. Why Did Great American Pick LEED? • Higher occupancy rates • Higher resale value
    20. 20. LEED Market Value 34% Or $10/SF higher rental rates for LEED class A buildings 4.2% Lower vacancy rates for LEED office buildings 2.5% Lower vacancy rates for LEED buildings – all types Source: RREEF, “The Greening of US Investment Real Estate”, November 2007
    21. 21. LEED Market Value 37% Or $11.33/SF higher rental rates for LEED buildings 64% Or $171/SF higher sales price for LEED buildings (Peer Building Selection Approach) 9% Or $24/SF higher sales price for LEED buildings (Hedonic Model Approach) Source:. CoStar Study, March 2008
    22. 22. LEED Rent Premium Gross Rents Office, 5 stories plus, 200,000 to 1 Million, Multi-tenant Source: CoStar 38 36 35.45 35 34 32 31.36 30.99 31.97 31.43 31.25 30 29.07 28.99 Energy Star LEED 28 Overall 26 24 22 20 Q42007 Q42008 Q42009
    23. 23. Human Performance
    24. 24. 44% of C-level executives believe green buildings help attract and retain employees Source:. McGraw Hill Construction, 2007 Corporate Real Estate Smart Market Report
    25. 25. Office Cost Distribution
    26. 26. Productivity Value
    27. 27. Genzyme Center-Employee Retention • Biotech company • 900 employees • LEED Platinum, 2004 – 360,000 ft2 corporate HQ • Turnover reduced 5%/year – Value: $2 to $5 million Per Year (or $5.60 to $14 per ft2) – Contrast with green cost premium
    28. 28. LEED Buildings Make Money Sense
    29. 29. Expected Business Benefits from Sustainability Adoption 73% 71% 62% 61% 39% Customer retention and attraction Drop in operating costs Greater productivity Employee retention and recruitment More tax incentives Data Source:. McGraw Hill, 2009 Greening of Corporate America
    30. 30. The Conclusion on LEED Certification You may be able to design/build/operate a green building that meets or even exceeds LEED criteria, but if you don’t pursue certification, you would miss out on a host of LEED benefits: 1. 3rd party verification holds the entire project team accountable 2. LEED Commissioning proves the quality of the installation and assures high performance 3. Public recognition of your project builds your brand 4. LEED certification demonstrates Leadership 5. Tax abatements and credits, accelerated permits, reduced permit fees, density bonuses, fee waivers, grants, loan funds and other financial incentives in place in many cities/states for LEED-certified buildings 6. LEED buildings experience lower vacancies and higher rents 7. Occupier benefits in talent attraction and retention, and work productivity, are tremendous The benefits far outweigh the potential costs – don’t miss out
    32. 32. Two LEED Cost Studies 1 to 6% LEED premium Data Source: “Costs and Benefits of LEED-NC in Colorado”, Governor’s Office of Energy, March 2007 “there is no significant difference in average cost for green buildings as compared to non-green buildings.” Data Source: : “Cost of Green Revisited”, Davis Langdon, July 2007