1. Leasing & Operating Green An Overview of Issues in Leasing and Managing Green Commercial Real Estate Space Michael Kerwin Christopher Stevenson William Amann Ginny Carita Brian Banaszynski Jesse Nash The material provided herein is for informational purposes only and is not intended as legal advice or counsel.
7. RideWise is the Transportation Affiliate of the Somerset County Business Partnership; the Source for Sustainable Travel Solutions that Improve Mobility, Reduce Traffic Congestion & Decrease Carbon Emissions RideWise
22. William Amann, P.E., LEED AP Chairman: USGBC, NJ Chapter Chairman: Somerset County Energy Council President: M&E Engineers, Inc. Green Leasing – Technical & Performance Issues
26. CONTINUALLY STRIVING TO MAKE THE GOOD PRACTICE OF TODAY, THE STANDARD PRACTICE OF TOMORROW THE U.S. BUILDING MARKET 70 % REGULATIONS lawbreakers DEGREE OF GREEN MARKET SHIFT typical building practices market leaders innovators & risk takers 20 % 5 % 5 %
27.
28.
29.
30.
31.
32.
33. RESULTS OF THE CALIFORNIA STUDY AVERAGE BOTTOM LINE SAVINGS 30 % 30-50 % 50-97 % energy savings water use savings waste cost savings
35. KEY VALUE DRIVERS for GREEN OPERATIONS COMMERCIAL REAL ESTATE Occupancy Rate Operating Cost Tenant Retention Tenant Satisfaction Asset Value Shareholder Value CORPORATE Operating Cost Employee Relations Shareholder Value GOVERNMENT Environmental Stewardship Operating Cost Employee Satisfaction Stakeholder Relations
36. 3 green improvements pay for themselves in years annual return on investment is 25-40% RESULTS OF THE CALIFORNIA STUDY AVERAGE BOTTOM LINE SAVINGS The Getty Center The J. Paul Getty Trust Los Angeles, CA Museum/Office LEED-EB Certified Version 2.0
37. Technical Performance LEED EB Gold Certification Johnson & Johnson HQ New Brunswick, NJ An energy audit in 2002 yielded an initial ENERGY STAR score of 52. Major upgrades to Lighting, Controls & HVAC, reduced the buildings overall energy consumption by 25%, improved ENERGY STAR score to 85. Obtained LEED Gold Certification in 2009.
38. What about multi-tenant commercial office leases? What are the main goals of the Landlord/Operator, the Architect/Engineer, and the Tenant?
39. Main goal of the Landlord/Operator is to maximize profits by maximizing rents as the market allows, minimizing costs, and attracting and retaining tenants to minimize vacancies.
40. Main goal of the Architect and/or Engineer is to not get sued. Over-sizing systems and using VAV reheat is safe. Maximizing energy efficiency is risky.
41. Most important factors for the Tenant are the comfort and quality of indoor air, the acoustics, and the quality of the building management , according to ULI Study.
42. Who pays for improvements? Who controls expenses? Who benefits from savings?
43. Who pays for improvements? Improvements are often based on a $/Sq. Ft. fit-up allowance determined prior to lease signing, and has no real connection to performance or life-cycle cost.
44. Who controls expenses? With a triple-net lease, operating costs are passed through to tenant. Tenant has only marginal control over operations, and generally has little expertise.
45. Who benefits from savings? The Tenant can obtain better productivity, reduced absenteeism, less employee turnover. But this can very rarely be quantified and directly associated to IEQ.
46. Gross Lease Financial risk/reward for operating costs returned to or shared with Landlord. Intelligent building controls allows Landlord to monitor and limit occupant manipulation of controls.
47. Green Leasing LEED is a collection of best practices for building design, construction and operation. Market supply for Green Buildings depends upon the demand.
48.
49. US Green Building Council – New Jersey Chapter Mission: “ To be NJ's foremost coalition in the public and private sectors promoting the planning, design, construction, and operation/maintenance of buildings that are environmentally responsible, cost effective, productive, and healthy places to live, learn and work” USGBC-NJ 14 Maple Ave Suite 201 Morristown NJ 07960 Chapter Coordinator: Marianne Leone [email_address] www.usgbcnj.org
50. Ginny Carita Vice President, Property Management LEASING AND OPERATING GREEN A Property Manager’s Perspective
51.
52.
53. Without Visibility Green is more expensive! Green is too complicated! Green is too much work! This May Be Your Reality…
65. Brian Banaszynski Vice President - Leasing LEASING AND OPERATING GREEN A Leasing Professional’s Perspective
66.
67.
68.
69.
70.
71. Green Lease Process Lease Portfolio Portfolio Characterization Establish Green Criteria New Leases Existing Leases & Renewals Negotiate: Green Criteria for Tenant & Common Space. Core & Shell. Operations. Green Leases Measure And Monitor Site Selection
72.
73.
74.
75.
76.
77.
78. Green Leasing Scorecard A scorecard that includes a building’s green attributes will allow for more informed decisions around a company’s green leasing decisions.
79. Sample Tenant Green Indicator Score Card QUESTIONS Yes (1)/No (0) Does the building have any LEED certifications? Are there any tenants in the building who have achieved LEED certification for space in this building? Have you calculated the ENERGY STAR score of the building? If the ENERGY STAR score has been calculated, does the building have a score of at least 60? Are there mass transit options near the building? Have the building's mechanical/electrical/plumbing systems been commissioned within the last three years? Does the building have any special energy efficiency features such as night cooling, passive stacks, chilled beams, geothermal or renewable energy sources? Have renewable energy certificates (RECs) been purchased to offset energy use in the building? Does the roof minimize heat island effect by using highly reflective materials and/or vegetation (have a "green roof")?
80. Sample Tenant Green Indicator Score Card QUESTIONS Yes (1)/No (0) Are tenants' spaces separately sub-metered for utilities? Does the building have an indoor air quality management program in place? Is the building non-smoking and is smoking prohibited next to the outside air intake louvers? Does the building use low-flow plumbing fixtures (<1.6pf for toilets and <2.5 gpm for lavoratories and sinks)? Does the building or site utilize high efficiency irrigation technologies? Is at least 50% of parking underground or is the parking surface permeable? Will tenant be permitted to build out its own space and select its own architect and general contractor? Does the building provide a tenant recycling program for paper, cardboard, cans and bottles? Are waste and recycling volumes and/or weights tracked for this building? Are green cleaning practices used in the building and made available to tenants? Are integrated pest management practices used at the building? TOTAL
101. Covanta Energy Score Card 1 1 1 1 1 1 1 1 1 1 1 1 12 C A S E S T U D Y QUESTIONS Yes (1) No (0) Does the building have any LEED certifications? 0 Are there any tenants in the building who have achieved LEED certification for space in this building? 0 Have you calculated the ENERGY STAR score of the building? 0 If the ENERGY STAR score has been calculated, does the building have a score of at least 60? 0 Are there mass transit options near the building? 1 Have the building's mechanical/electrical/plumbing systems been commissioned within the last three years? 0 Does the building have any special energy efficiency features such as night cooling, passive stacks, chilled beams, geothermal or renewable energy sources? 1 Have renewable energy certificates (RECs) been purchased to offset energy use in the building? 0 Does the roof minimize heat island effect by using highly reflective materials and/or vegetation (have a "green roof")? 0 Are tenants' spaces separately sub-metered for utilities? 1 Does the building have an indoor air quality management program in place? 1 Is the building non-smoking and is smoking prohibited next to the outside air intake louvers? 1 Does the building use low-flow plumbing fixtures (<1.6pf for toilets and <2.5 gpm for lavoratories and sinks)? 1 Does the building or site utilize high efficiency irrigation technologies? 1 Is at least 50% of parking underground or is the parking surface permeable? 0 Will tenant be permitted to build out its own space and select its own architect and general contractor? 1 Does the building provide a tenant recycling program for paper, cardboard, cans and bottles? 1 Are waste and recycling volumes and/or weights tracked for this building? 1 Are green cleaning practices used in the building and made available to tenants? 1 Are integrated pest management practices used at the building? 1 TOTAL 12
105. Green Standards and Leasing Generally An appropriately drafted lease is a major component of any “Green” project – Impacts all major LEED qualification areas:
106.
107.
108. Green Standards and Leasing Generally Green leasing generates a much higher level of Landlord/Tenant interaction and need for mutual accountability.
109.
110. Where Does the Green Go? Operating Expenses - The Split Incentive Problem generally
New, 250,000 Sq Ft building, built by Mack-Cali, LEED Certified – Silver under the LEED Commercial Interiors Rating System. It was not rated under New Construction. A Green building is a building that is environmentally responsible, profitable, and a healthy place to live or work.
LEED is a collection of best practices, aimed at the top 25% of the market in terms of high-performance buildings.
This is the theory, and for owner-occupied buildings has been proven to be true. But what about for leased properties?
Importance of EA Buildings in the U.S. consume large quantities of energy Energy consumption cases many environmental problems Reducing energy consumption mitigates environmental costs and is economically sensible Goals: High energy efficiency and system performance Encourage renewable and alternative energy sources Support ozone protection protocols Examples: Building commissioning, assess building-wide energy performance (via EnergyStar), enhanced metering
Importance of MR Each year in the United States, we throw away about 21 tons of garbage for every person living in the country. This amounts to about 115 pounds per person per day. It’s important to re-use when possible, find materials with recycled and rapidly renewable content, and seek local materials when possible Goals: Reduce the amount of materials used Use materials with less environmental impact Reduce and manage waste Examples: reduced mercury lighting products, material purchases that conform to sustainability criteria, certified wood procurement policy, recycling
Importance of IEQ Americans spend 90% or more of their time indoors IEQ affects occupant health Improving IEQ has human resources and economic benefits Goals: Prerequisite: environmental tobacco smoke control, asbestos removal or encapsulation, PCB removal, minimum outside air Maintain good indoor air quality Eliminate, reduce, manage the sources of indoor pollutants Ensure thermal comfort and system controllability Provide for occupant connection to the outdoor environment Examples: IAQ management plan (during renovations and occupancy), documenting absenteeism, entryway systems, isolation of janitorial closets, low environmental impact cleaning solutions, pest control, and equipment
The average savings were substantial: 30% increase in designed energy savings, 30-50% decrease in water consumption, and 50-97% savings in waste costs
Creating healthier buildings is better for employees, less costly to operate, and less taxing on natural resources – making green building benefits go straight to the bottom line Actually to the triple bottom line of people, planet, profits
Green buildings and operations can drive economic and productivity benefits. For Commercial Real Estate, there are increases in occupancy rate, tenant retention, tenant satisfaction, asset value and shareholder value while driving down operating costs. Corporate owned buildings experience reduced operating costs, improved employee relations, and increased shareholder value Government drivers are environmental stewardship and public relations benefits, reduced operating costs, improved employee satisfaction and stakeholder relations
Generally, the green improvements paid for themselves within 3 years having annual return on investments of 25-40%
Generally, the green improvements paid for themselves within 3 years having annual return on investments of 25-40%
Q&A
USGBC New Jersey Chapter – benefits of membership.
