GreenMetrx - Q2 2010 Newsletter

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
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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
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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.
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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
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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. 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
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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.
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