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Meteoric Green Movement Takes New Trajectory Existing Buildings a Launch Pad for Initiatives
November, 2008
By William Roth
Change is the only constant in today's business and real estate environment. In the past year oil has peaked at more than $140 a barrel and then dropped to just above $60, global stock market indices have shed 30% to 40% of their value, and the Canadian dollar has slid from near par to the $0.80 US range.
The green building movement has also evolved rapidly and significantly over the past year. It has shifted beyond newly constructed buildings to focus on the operations and maintenance of existing facilities. Tenants have been taking a more active role in greening their operations by partnering with their landlords via green leases. Another emerging trend is assessing the sustainable benefits of a building as part of the acquisition due diligence process.
GREENING EXISTING BUILDINGS
While LEED (Leadership in Energy and Environmental Design) for new construction, or LEED-NC, has become the standard for new buildings, it is a design tool that does not address existing buildings or how they are operated once they become occupied. Owners and managers have now begun to integrate sustainable principles into the day-to-day operations and maintenance of their existing facilities.
Currently there are two separate benchmarking standards available to owners for addressing the operations of their existing buildings:
* The Building Owners and Managers Association (BOMA) Go Green and Go Green Plus programs - recently re-branded as BOMA BESt; and
* The United States Green Building Council (USGBC) LEED for Existing Buildings (LEED-EB).
Both programs are evolving for the Canadian market
BOMA BESt provides owners and managers with four levels of certification. Level 1 represents the former Go Green certification. Levels 2, 3 and 4 represent increasing scores on the Go Green Plus assessment tool from 70%, 80% and 90% respectively. All buildings previously registered with both Go Green and Go Green Plus are moving to the BOMA BESt program. For more information, see the web site at www.bomabest.com.
In the absence of a Canadian version of LEED-EB, some Canadian owners have registered their buildings with the USGBC LEED-EB program. However, the CaGBC is scheduled to launch its own version of LEED-EB early in 2009, which is expected to be very similar to its US counterpart.
The CaGBC is also working on the LEED Canada initiative, which is meant to create an easily accessible assessment tool that brings together all of the LEED programs into a single streamlined tool that can be used throughout the life cycle of an asset and for entire portfolios. More details about LEED-EB and the LEED Canada initiative can be found at www.cagbc.org.
There has been some speculation about how the two LEED-EB programs might coexist in the market. Both focus on the same principles, but there are numerous differences between the two programs, each with its own benefits. Adopters' experiences will no doubt shape the future evolution of the Canadian green building sector.
GREEN LEASES
In recent months, the Real Property Association of Canada (REALpac) and BOMA International have released guidelines and sponsored information sessions on green leasing. REALpac's model lease and supporting green lease resource centre can be found at www.realpac.ca.
Continuous improvement and an integrated approach to designing, constructing and operating buildings while minimizing the impacts to the natural environment form the basis for green building principles. A green lease represents a partnership between the landlord and tenant focusing on maximizing the advantages of leveraging sustainability. Both parties can outline specific and measurable environmental targets related to both the base building and the tenant fit-up and occupancy.
A green lease makes sense for both environmentally committed landlords and tenants. Many owners invest significant time and money into designing and/or operating their buildings in a sustainable manner, but there are limitations to what they can control once they lease a space to a tenant. If a tenant doesn't share the same commitment to sustainability, or doesn't understand how to use the space to take advantage of the benefits, many of the sustainable outcomes cannot be achieved.
In turn, tenants can use a green lease to outline the initiatives that they will implement to make their occupancy of the space as aligned as possible with the benefits the building offers. In addition, it creates a contractual document that outlines the specifics of the green programs and benefits of the building they are occupying.
GREEN DUE DILIGENCE
Given the rapid emergence and evolution of green principles in the commercial real estate sector, future new paths are expected but challenging to predict. One discernable trend among industry leaders is to incorporate green assessments in their due diligence assessments.
With cap rates rising, a reduction in available capital and a shortage of good quality product on the market, some acquisition teams are looking for additional ways to evaluate an acquisition. This addresses questions such as: What are the opportunities for energy and water savings associated with the building? Can we add 'green value' to this property? How much will it cost? What simply cannot be done with this asset?
A realistic scope of work is necessary so that green due diligence can be conducted in conjunction with normal due diligence processes, but, as yet, there is no industry standard. Organizations are using a range of methods from a simple questionnaire added to a typical PCA to the completion of a LEED-EB checklist or BOMA BESt questionnaire.
Consider questions such as: How much money do you want to spend? How long is the due diligence period? What specific questions do you want to answer? What kind of information does the vendor have? Will they make it available prior to closing?
INDUSTRY BUY-IN EVIDENT
What began not so long ago as a small movement in the design community has now become one of the driving forces behind the commercial real estate sector. Perhaps the best examples of emergence of the green building movement were the 1,200 attendees at the CaGBC's aptly named Shifting into the Mainstream Conference held last June in Toronto, and the more than 25,000 people expected at this year's version of the USGBC's Green Build in Boston.
If the past is any indication of the future, the landscape of green buildings will continue to evolve rapidly.
William Roth, P. Geo., is Director, Real Estate and Insurance, Central Canada, with Jacques Whitford Limited. For more information, see the web site at www.jacqueswhitford.com.
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