Value Beyond Cost Savings - Green Building Finance Consortium

Value Beyond Cost Savings: How to Underwrite Sustainable Propertiesand tenant training, lease review, and service provider due diligence and compensationassessment.While forecasts of energy use can be tricky, reductions in property/casualty insurancecosts, and lower maintenance costs due to reduced need to change light bulbs, vacuum,and some other savings can be reasonable estimated.Building Operations/Capital CostsImproved building operations can result from commissioning and re-commissioning, moredurable and flexible design and materials, and a general reduction in tenant/occupantcomplaints due to satisfaction with the building and working environment. These benefitscan improve the financial performance through reduced frequency of capital expenditures,reduced leasing commission and tenant improvement costs, and general increases in spaceuser demand.Improved space flexibility is particularly critical today as occupant space needs undergorapid changes due to economic difficulties and rapid product development and salescycles. Durability and flexibility are not just sustainable concepts, because for anybuilding to remain economically and functionally relevant today, and in the future, it mustbe able to adapt. Durability and flexibility are a sustainability issue primarily due to theembodied energy in a building envelope and its tenant improvements.Potential benefits to building operations must be carefully considered in light of potentialbuilding operating problems due to product or service provider underperformance,uncooperative tenants, new system learning curves for engineering and maintenance staff,and potential reductions in economies of scale for facilities management staff, who mayhave to learn and service a broader array of systems.Cash Flow/Building Ownership RiskBy far the most important financial benefit of sustainable property investment is thepotential reduction in cash flow/building ownership risk. Reduced cash flow/buildingownership risk is an important contributor to an increase in space user demand, which candirectly improve revenues, and to an increase in investor demand, resulting in highervalues through reduced discount and capitalization rates.Cash flow and ownership risks are most significantly reduced due to the ability of asustainable/energy efficient building to cost-effectively meet the changing needs ofregulators, space users, and investors. It is almost a certainty that local, state and federalregulations regarding sustainability will increase, perhaps dramatically, in the comingyears. A building that cannot, at a reasonable cost, adapt to meet future regulatoryrequirements or capitalize on incentives, will be less valuable. A building that cannotadapt to meet increasing demand for sustainability by space users and investors will alsolose value through economic obsolescence.119