Burnham-Moores Center for Real Estate University of San Diego
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Transcript of Burnham-Moores Center for Real Estate University of San Diego
Burnham-MooresCenter for Real Estate
University of San DiegoThe Economics of Green
October 30, 2007
Dr. Norm Miller, Jay Spivey (CoStar Research Director and Andy Florance, CEO, CoStar)
Evolution of a Cynic
• 2002 on a panel at Realcomm in Chicago my view was basically this… as long as landlords used triple net leases there would be little owner driven incentive to invest in any form of energy or building efficiency. …most benefits of high performance and healthy buildings do not accrue to landlords
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Certified Silver Gold Platinum
Extra Costs in Percentage to Build GreenSource: USGBC
External estimates average closer to 3%
down from prior year when 15% was
the norm
EXTRA COSTS VARY BY MARKET
Platinum Gold SilverUCSB Ave. 7.8 % 2.7 % 1.0 %
San Francisco 7.8 % 2.7 % 1.0 %Merced 10.3 % 5.3 % 3.7 %Denver 7.6 % 2.8 % 1.2 %Boston 8.8 % 4.2 % 2.6 %
Houston 9.1 % 6.3 % 1.7 %
Source: U.S. Green Building Council, USGBC.org
Real barriers to going green
• The Who Moved My Cheese Mentality– If it ain’t broke don’t fix it…..– Culture– Education– Coordination– First time mental blocks (inexperience)– Cynicism over benefits– Perverse incentives, i.e. admin fees charged on pass
through and common expenses by management.– Lease structures that don’t align incentives
Actual proportion of green LEED certified buildings
• Only a fraction of existing stock but…• 30% of all new Class A buildings • 100% of all new Class A in NY City• 100% of all new Class A in Boston (50,000
sq ft or larger)• Quickly LEED is becoming the de facto
standard
So let’s look at the numbers from the first nationwide study using CoStar data…
Costs and Benefits
30% premium
Summary• Green is not “easy” but it is getting easier.
– The big hurdle is mental!• Non-green buildings are going to become becoming
obsolete much faster today.• The benefits of green are not only the quantifiable but also
qualitative (happier workers, more retail sales but also simply doing good by saving resources)
• We need more transparency, better standards, more shared best practices and more enlightened government.