SAVE MORE BY BUILDING GREEN BUILDINGS

High efficiency and performance can result in higher property values and potentially lower lenders’ credit risk. Lower operating costs associated with more efficient systems can lead to higher building net income.

The value of a l00,000-square-foot office building increases by over $1 million through implementation of green building measures. These measures, associated with energy, water, waste, and labor, result in annual operating savings of $101,400. The increased building value is calculated by using a fairly conservative building market capitalization rate—a formula used by building appraisers, brokers, and lenders to calculate a building’s value—of 10 percent on the savings. A building’s value is derived by dividing its net operating income, or savings, by the market capitalization rate.

In addition to increasing a building’s net operating income or value, green building measures may allow building owners to charge higher rents or achieve higher rates of building occupancy, if tenants view green properties as more desirable. Voluntary building rating programs have been developed for commercial buildings. As these programs are introduced into the marketplace and gain the acceptance of building owners and tenants, they could impact the value of properties. Prospective tenants will be able to rate buildings based on such measurable features as natural daylight, better indoor air quality, and lower energy, water, and waste costs. If enough buildings are rated for environmental performance, those that perform better will start to realize market advantages.

INCREASED VALUATION 

Valuation of a Typical 100,000 sq. ft. Office Building

Energy Retrofit Savings (50%) $90,000 2
Water Savings (30%) $4,400 3. Waste + Labor Savings (e.g., chute system) $7,000 4
Total Annual Operating Savings $101,400 5
Market Capitalization Rate 10% 6
Increase in Building Value (divide 4 by 5) $1,014,000

Source: Information based on discussion with CB Commercial , a commercial real estate brokerage firm.

MT.AIRY PUBLIC LIBRARY  

Mt. Airy, North Carolina, has incorporated extensive day lighting into the passive solar design of its 13,000-square-foot public library, built in 1982. This design strategy helps to meet the town commissioners’ goal of a 70 percent reduction in annual electricity consumption. The day lighting strategy admits glare-free, diffuse light to all corners of the library without damaging the books with direct illumination. It is combined with efficient lighting systems, where needed, and other features that conserve energy used for heating and cooling.
Lighting energy use, usually a large portion of a library’s total energy consumption, is now only one-eighth of the entire building’s total energy usage. Not surprisingly, utility bills have been very low.
The building’s attractive design has drawn positive reactions from employees and visitors, and made the facility a town centerpiece. Visitation rates at the library are more than twice what was originally anticipated, and operating hours have been extended to accommodate users of this multipurpose cultural center.