Ghost in green building

Jan. 8, 2010
By Elisa Wood January 8, 2010 In midtown Manhattan, home of the nation’s priciest office space, the equivalent of 16 office towers, each 40 stories high, now stand empty. This statistic, from the Wall Street Journal, underscores the vast damage inflicted on commercial real estate by the economic downturn. http://online.wsj.com/article/SB10001424052748703521904574614833750873314.html?mod=WSJ_Real+Estate_LeftTopNews Given the ailing market, this […]

By Elisa Wood

January 8, 2010

In midtown Manhattan, home of the nation’s priciest office space, the equivalent of 16 office towers, each 40 stories high, now stand empty. This statistic, from the Wall Street Journal, underscores the vast damage inflicted on commercial real estate by the economic downturn. http://online.wsj.com/article/SB10001424052748703521904574614833750873314.html?mod=WSJ_Real+Estate_LeftTopNews

Given the ailing market, this hardly seems the time to invest in expensive green upgrades. But a recent report suggests just the opposite.

Issued by sustainability organization Ceres and investment services company Mercer, “Energy Efficiency in Real Estate Portfolios: Opportunities for Investors,” points out several reasons why both property owners and investors may want to consider improving buildings now.

  • Several studies indicate that efficient buildings command a premium in both rent and sales prices, and a shortage of green buildings exists to meet demand.
  • New programs and support are available through private and public sources to finance efficiency retrofits. The federal stimulus package alone earmarks $11.3 billion for energy efficiency.
  • Efficiency upgrades can decrease operating expenses.
  • Inefficiency could mean financial penalty if the US moves forward on pricing carbon dioxide emissions.

We are experiencing an unquestionable increase in the greening of buildings – a good thing since buildings account for 39% of energy use in the United States. But property owners would probably pursue more efficiency if not for the misconception that efficiency upgrades are expensive. Owners often believe energy efficiency upgrades will cost as much as 17% more than they do, according to the report. These “ghost expenditures” are scaring building owners away from making upgrades, the report says.

“Evidence suggests that in many cases, the most effective changes have low upfront costs and result in significant operational cost savings, rental premiums, shorter vacancies and reduced obsolescence, as well as slower depreciation, and therefore higher capital values,” the report says.

Some investors aren’t afraid of the ghosts. Financial services giant TIAA-CREF is well on its way to reducing energy use 10% for its real estate holdings, a goal it hopes to achieve before the year is out. Begun in 2008, the effort already is saving the company $4 million a year in reduced energy costs.

Likewise, the California Public Employees’ Retirement System (CalPERS), the world’s largest pension fund, is on target to meet a 20% cut in energy use for its real estate by the end of this year.

“As fiduciaries, focusing on energy efficiency in our real estate portfolios just makes sense,” said Anne Stausboll,  CalPERS CEO, “CalPERS invests in millions of square feet of real estate so cutting back on energy use and lowering operating costs can only boost the value of the properties in our portfolio, while also contributing to climate change mitigation.”

The report provides advice about how to proceed with green investments for both property owners and those who invest in real estate trusts and other securities.  It can be found at www.ceres.org/realestatereport.

Visit Elisa Wood at http://www.realenergywriters.com/ and pick up her free Energy Efficiency Markets podcast and newsletter.

About the Author

Elisa Wood | Editor-in-Chief

Elisa Wood is an award-winning writer and editor who specializes in the energy industry. She is chief editor and co-founder of Microgrid Knowledge and serves as co-host of the publication’s popular conference series. She also co-founded RealEnergyWriters.com, where she continues to lead a team of energy writers who produce content for energy companies and advocacy organizations.

She has been writing about energy for more than two decades and is published widely. Her work can be found in prominent energy business journals as well as mainstream publications. She has been quoted by NPR, the Wall Street Journal and other notable media outlets.

“For an especially readable voice in the industry, the most consistent interpreter across these years has been the energy journalist Elisa Wood, whose Microgrid Knowledge (and conference) has aggregated more stories better than any other feed of its time,” wrote Malcolm McCullough, in the book, Downtime on the Microgrid, published by MIT Press in 2020.

Twitter: @ElisaWood

LinkedIn: Elisa Wood

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