Value Beyond Cost Savings - Green Building Finance Consortium

Value Beyond Cost Savings: How to Underwrite Sustainable Propertiesfact that Total Energy prices rose at an average annual rate of 14.6% from 1970 to 1982,only 1.1% from 1982 to 2000, and increased at an average annual rate of 5.7% from 2000to 2004.Total energy expenses will depend on the mix of energy use at the subject property and theprice of each source. Electricity and natural gas comprise the lion’s share of energyconsumption for commercial buildings in the U.S., accounting for approximately 80% ofenergy use for buildings over 100,000 sf, 94% for smaller buildings, and averaging 87%for all buildings. The mix of energy consumption is generally consistent over differentbuilding sizes, although larger buildings tend to use less natural gas.4. Sustainable Property Energy/Carbon Reduction FeaturesEnergy efficiency in commercial buildings can be achieved through a variety ofcombinations of features, some of which are physical and some of which are operational.Examples of physical characteristics of an energy efficient building are a properly sized,high efficiency HVAC system or motion sensors. Examples of operational characteristicsare calibrating thermostats or the practice of day cleaning by the janitorial crew.A proliferation of resources is available to developers, investors, tenants, and corporatereal estate professionals to assist them in understanding the general energy/carbonreduction strategies and sustainable features available to them. As the industry hasmatured during the last 2-3 years, the lists of optional features and strategies have becomemore specific to the types of decisions being made—new vs. existing, property type, etc.Another key source of sustainable features ideas and insights are case studies. Most of thecase studies performed to date are sufficient for use in identifying and screening ideas, butare not sufficiently detailed or financially oriented to be used effectively for propertyspecific financial analysis.There are lists and menus to fit most any level of detail and specification. The one list thatis not available is the precise list of strategies and features appropriate for your property.That list will have to be determined through an integrated design/values process where youmeet with the relevant stakeholders to decide what it is you value and how you want topursue those values through sustainable design, construction and property operations.Expanded Chapter III, Section D and Appendix III-A provide comprehensive listings ofsources to assist in identifying potential energy features and strategies to meet differentinvestment needs.5. Sustainable Property Energy Features and Building OutcomesA sustainable features based approach to understanding sustainability is a good first step,and necessary to financial analysis, but it is the eventual measurement of buildingoutcomes/performance that will have the greatest long-term effect on financialperformance. As shown in Exhibit VI-3 below, there are at least eight major “features” to164