Value Beyond Cost Savings - Green Building Finance Consortium

Value Beyond Cost Savings: How to Underwrite Sustainable Propertiessurveys in Appendix D. 60 These surveys, which became more frequent starting in 2005 and2006, demonstrate an increasing trend of tenant and investor understanding of, and interestin, sustainable property. Generally, space users indicate an interest in sustainability, and insome cases a willingness to pay, but also reinforce the importance of cost savings andrelated financial concerns. While space user demand has continued during the economiccrisis, select surveys report an even greater focus on cost savings or value, with a priorityon organizational survival, rather than sustainability.Space user demand is not consistent across types of space users. Government organizations,larger corporations, space users with an affiliation or relationship with the sustainableindustry, high technology organizations, and certain other tenant groups tend to show thestrongest interest and demand for sustainable properties. Larger, more sophisticatedproperties and owners are more focused on sustainability generally, but enhanced demandin the multi-family and smaller building segments appears to be growing, though it is hardto pin down based on surveys done to date.Surveys of investors, which tend to be mixed with other respondents, or part of largersurveys, are beginning to show a stronger interest in sustainable properties. Investors areresponding to increased regulator and space user demand, indicating, at least for the largerinstitutional or private investors, aggressive programs of evaluating the energy efficiencyand/or sustainability of their properties, and trying to figure out strategies for measuring,monitoring and improving their portfolios.Evidence based on our discussions with scores of institutional investors, and as confirmedby select surveys, suggests that many investors are developing acquisition screens andcriteria to assist in evaluating the potential economic or functional obsolescence, and thecost to cure such obsolescence in new properties that they buy. These trends are quiteimportant, because they suggest concrete investor response to increased regulator and spaceuser demand.Corporate Sustainability Surveys and ResearchCorporations and other owner-occupants are significant players in the commercial realestate markets. Corporations own approximately half of the commercial real estate market.Additionally, they lease a substantial portion of space owned by others. 61 Corporatesustainability surveys and research incorporate a broad array of work evaluating the60 This chronological list of survey research includes space user and investor surveys, surveys of other real estateindustry professionals, and surveys of corporations regarding their general preferences for sustainability. Many of thesesurveys are available on the Consortium’s website under index code 15.73 in the Research Library or Industry Linkssections.61 This estimate is very approximate, based on a 20-year history of capital markets research by Scott Muldavin, andreview of the “Non-residential Buildings Energy Consumption Survey” (CBECS) of the Energy InformationAdministration. According to the EIA and CBECS research as of 1999, there were 4.7 million commercial buildings inthe United States, of which 89% were privately owned and 60% of those were owner occupied. A detailed breakout andanalysis of the commercial building industry is provided in “Who Plays and Who Decides, The Structure and Operationof the Commercial Building Market, US Dept. of Energy, Innovologie, LLC, John Reed et al., March 2004.87