By Carrie Kreydick and John-Paul Wolfe
Developers have been incorporating ecologically-friendly and economically-responsible upgrades into residential and commercial buildings for years. Technology has changed rapidly and energy efficiency is nothing new. Unless you’ve been on the moon for a while, you’ve probably been hearing the terms green building, carbon footprint, eco-friendly and LEED certification. And if you haven’t, you better brush up. There’s some green to be made by going green, in both the commercial and residential sectors.
There are plenty of reasons to consider adding environmentally-friendly components to your real estate projects, such as expedited permits and tax incentives, and if you drive a hybrid, your conscience. Most residential buyers want to enjoy the anticipated savings on utilities costs and feel like they aren’t adding to the problem, while developers of large office buildings are acutely aware of the cost of energy and investigate alternate sources to run the required lighting, elevators and air conditioning. Everyone is trying to save money in the long (or short) run, and these days it’s starting with smarter design.
The Leadership in Energy and Environmental Design (LEED) program was introduced by the U.S. Green Building Council (USGBC) in 2000. Only 1,500 buildings have received LEED certification thus far, but more than 11,000 are currently trying to get it. The USGBC is changing the way architects, contractors and developers design and construct buildings. Even structures that don’t pursue certification are incorporating sustainable practices, including increased energy efficiency, daylighting, recycling materials, using non-polluting carpet and paint and low-flow water fixtures and toilets.
LEED promotes a whole-building approach to sustainability by recognizing performance in five key areas: sustainable site development, water savings, energy efficiency, materials selection and indoor environmental quality. Points are awarded for specific practices in each area and are verified by an independent third party. Depending on the number of points earned, a building is awarded a certified, silver, gold or platinum ranking.
LEED certifications are available in the following categories: new construction, existing buildings, commercial interiors, core and shell, schools, health care and homes. Another category, for neighborhood developments, is in the pilot stage. The LEED retail program is due out late this year.
There are different concerns when evaluating a retail project for sustainability, including lighting, customer traffic, water use, refrigeration and commercial kitchen equipment in restaurants. Unique to retail, these components hadn’t been considered in a LEED rating before.
As with other LEED certifications, cost can be a serious concern. While most retail developers can find cost-effective materials and see a quick payback on efficiency investments, undergoing LEED certification adds costs to a project. Smaller retail projects or developers with many locations can find the process pricey and LEED documentation difficult to justify.
The USGBC is working on a volume certification model for national retailers that would allow companies to submit a prototype for review, verify the suitable execution of three projects for every 50 locations included in the program and call all locations certified at the end of the process. This fits in with the chain retailers’ business strategy: consistent branding, or the same product everywhere you go. If you can “green up” your prototype, you can reduce your overall carbon footprint, and make some money in the process.
Research shows a direct correlation between time and money spent by customers in a store, and increased levels of natural light. Wal-Mart has reported higher sales in stores with increased natural daylight. And plenty of other retailers are paying attention, including Chipotle, Target, Whole Foods, Best Buy and Starbucks to name a few.
Image helps customer loyalty as well, with all the choices consumers can make, it couldn’t hurt to set yourself apart. Corporate responsibility resonates with consumers. By achieving LEED for retail certification, businesses distinguish themselves as being environmentally aware, which can help them connect with their customers and develop long-term relationships.
In addition, many LEED projects qualify for a variety of financial incentives from state and local governments, including rebates from utilities, city rebates on investment costs, expedited permitting, state and federal tax credits and even federal grant programs. If you operate in the city, then you know the mayor’s office wants Chicago to be a world leader in environmentally-friendly development.
Retailers are curious as to how these strategies will improve their bottom lines, and they will focus on what their competition is doing, as well. But just as residential buyers would choose energy efficiency and the perception of being green over not, retailers will apply LEED strategies if they think they can make money by doing it.
A growing number of shopping center developers make it easy for their tenants to get LEED certified or pursue greener retail strategies, from energy-efficient design to low-emitting paints and finishes. Demand will help drive the market, and brokers see LEED as an attractive “amenity” for retail leasing. You really can’t go wrong by going green, as long as the benefits outweigh the added costs.
CARRIE KREYDICK IS THE DIRECTOR OF BUSINESS DEVELOPMENT AT NEW WEST COMMERCIAL AND JOHN-PAUL WOLFE IS THE DIRECTOR OF COMMERCIAL BROKERAGE AT NEW WEST COMMERCIAL. KREYDICK CAN BE REACHED AT CKREYDICK@NWRCHICAGO.COM AND WOLFE CAN BE REACHED AT JPWOLFE@NWRCHICAGO.COM.
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