Value Beyond Cost Savings - Green Building Finance Consortium

Value Beyond Cost Savings: How to Underwrite Sustainable PropertiesOne challenge to the analysis and articulation of the value of sustainable propertyinvestment to the enterprise is in transitioning from a general discussion of these benefitsto a discussion about the potential magnitude of these benefits for a specific property. Theinfluence of potential enterprise value benefits on the decision of space users will varybased on the types of space users, their business strategies, the demographics of theiremployees, and the nature of the customers that they serve, among other factors.Once an understanding of the key drivers of potential space users is established, the nextstep is to assess the likelihood of whether the subject property will generate the types ofsustainable outcomes and building performance important to expected occupants.Government Tenants with Sustainable Real Estate Mandates or PoliciesLocal, state and federal governments are increasingly requiring that their employees workin sustainable properties. Sustainable property requirements for new construction havebeen prominent in many governments for some time, and requirements for governmentleases are increasingly being implemented as leases turn within government organizations.With over 18% of all commercial space in the United States government owned, andsignificantly more in many other countries (approximately 13% of which is office space),this is a significant market that will have broader influence on leasing policies throughoutthe country. 90The potential impact for a specific property will be a function of evaluating the level ofgovernment leasing in the subject property’s submarket, trends relative to governmentleasing, government lease rollover expectations, and the specific sustainability thresholdsrequired by different levels of government compared to the subject property. Evaluation ofthis potential benefit must take into consideration not only sustainability issues, but alsothe suitability of the subject property relative to other minimum requirements ofgovernment tenants related to security and other issues.Vendors/Suppliers Encouraged/Required by Big Customers to Consider SustainabilitySome large companies like General Electric and Wal-Mart are beginning to putsustainability requirements on their vendors and others in their supply chain to be moresustainable. These initiatives have grown over time, and while relatively small today, arelikely to increase.Evidence of this phenomenon can be ascertained for a property in a particular marketplaceby studying the profile of tenants in the marketplace. Again, this is just another of themany issues influencing space user demand, but is likely to grow. For example, nearly1,500 global businesses signed on to the United Nation’s Global Compact in 2008,90 “Who plays and who decides; the structure and operation of the commercial building market,” March 2004,Innovologie, LLC for DOE.174