Return On Green: LEED Proves It's Worth In Resale
by John Laumer, Philadelphia on 02.23.06
We've been wondering what happens to a LEED certified building when it goes up for sale. Willl it be lemon (Bitter Lesson) or mango (King of Fruits)? A recent article from Chicago Sun Times of February 20, 2006 provided anecdotal evidence: Mango it is. Here are some excerpts to whet your appetite. "In Chicago office development, "going green" has a double meaning. It's about environmental friendliness, yes, but especially the color of money"... "John Buck Co. was among the first in Chicago to seize upon the trend...It's 51-story 111 S. Wacker building opened last June, and four months later crossed a green milestone. It became the first new office building not designed for a single user to win what's called a LEED gold rating". "...from the landscaping and storm-water collection system on its roof to the recycling system and bicycle storage space in the building's depths...Buck met standards for sourcing construction material nearby, with much of it recycled, and for the design and installation of air-filtration systems and monitors for indoor pollutants".
Now here's a tasty tidbit: "It's getting to the point where if you're not LEED, you won't have the anchor tenants you need to start the building,..."
The Money Quote: "Property records show that the Buck firm and co-investors sold 111 S. Wacker last month to a German investment fund for $386 million. Buck will continue to collect fees for managing the property...That's a nice return on a $270 million project, more than enough to put LEED on more developers' lips".
A banquet of LEED goodies is being set on the table of Chicago's Loop. It's the City State personality in full bloom.
This all sounds great, but is the building actually recieving higher lease rates as a result of the LEED Certification? It seems unlikely that the $116 Million appreciation in value can be solely attributed to the LEED aspects of the project. Don't get me wrong, I'm a huge green building proponent (not just LEED) but what I need in my professional work is to have good solid evidence that is defensible so that I can continue to forward these practices with my own clients. You've wet my whistle, but now I want some detail! Thanks.
==== author's response follows ====
Out of respect for the Sun Times, I left much detail behind. Like so much else in life, success in office development is seldom attributed to a single thing. The building has a great location, terrific view, benefited from a team of good designers and builders, and is in a city where good commercial digs get public attention. Anecdotally, there seem to be two keys to market interest being so high. One is that the human environment inside is so much improved over Bauhaus- and SOM-type bare glass shells that renters have documented a marked improvment in worker productivity. Because the majority of a service business' operating cost is tied up with labor, managers and stockholder are waking up to the bottom line potential. The market shows a willingness to pay a premium for the first in advantage. Second key is that Big Businesses want to flaunt their green ideals with an image boosting symbol. The 70's thing was to move headquarters out to the suburbs and build a two story cluser of socially isolated inefficient glass boxes on 80 acres, closer to the executive's mansions. The drawbacks were overlooked: gridlock, big energy bills, low worker productivity, and so on. If we are lucky, this marks the beginning of a new trend.