Book 4 - Appraisal Institute of Canada

or moving duct-work are eliminated,and electrical and data services canbe accommodated within the space.The energy advantage of an underfloorsystem is that, when supply airis introduced at the floor level andreturned at the ceiling, natural convectionreduces the energy requiredto distribute the supply air, thusreducing the size of the HVAC unitsand associated energy consumption.xiii Use of a raised floor systemand largely open floor plan alsoreduces the ‘churn’ or constructionand renovation costs resulting fromthe need to re-configure space overtime. Additional energy efficiencyis achieved with optimization of theventilation systems to reduce electricalload, while keeping the buildingpressurized. A related design featurein the CRD building is the provision ofoperable windows to provide naturalventilation when outside conditionspermit. The main intangible benefit ofthese features is the ability to bettercustomize heating and cooling foreach work unit and building zone.The CRD building incorporates anumber of additional sustainabilitymeasures related to water conservation,use of natural materials, andrecycling. For example, water conservationfeatures include low-flowshower heads and toilets, motionsensor faucets, waterless urinals, anda rainwater storage/reuse system toaugment non-potable water supplyrequirements. An analysis of thesefeatures is beyond the scope of thisarticle.Energy savingswith green?To answer the first research question,there was a need to establish typicalbuilding energy costs for similarclass B (BOMA standard) officebuildings in downtown Victoria. Localproperty managers, brokers andthe BC Assessment Authority xiv staffconfirm that the typical range in O&Mexpense 5 for class B office buildingsin Victoria is $6-$7 per ft 2 . Theenergy component (hydro and gas) ofO&M expense for conventional buildingsis estimated by local experts tofall within a range of $1.75-$2.00 perft 2 . This expense range is supportedby the federal government energyestimate of $1.85 per ft 2 , notedearlier.The latest available 6 CRD buildingoperating expense statements (fiscalyear 2006) reveal an energy expenseof $1.26 per ft 2 versus benchmarkenergy expense of $1.75-$2.00 perft 2 of rentable area, representing adifference of $.49-$.74 per ft 2 . Hasthe cited literature demonstrated thepremise that green buildings achievesignificant energy savings in relationto conventional buildings of similarutility? Not conclusively, for a numberof reasons:• Only one year of performance datawas available for the CRD building,7 but, according to local propertymanagers, a three-five yearoperating history is required tounderstand building performance,especially for green building investments.• Extreme climatic variation in anyyear of data (e.g., colder thannormal winter or warmer thantypical summer) will skew energyconsumption numbers.• The energy consumed by officebuildings will be greatly impactedby hours of use, e.g., some privatesector buildings may require moredaily hours of lighting, heating andcooling than institutional buildingssuch as the CRD HQ.• Consistent information required toreliably benchmark performancefor conventional and green buildingsis scarce.• There are many different buildingHVAC systems with consumptionrates for gas and hydro, creatingan issue for performance benchmarking.However, since the energy performanceoutcomes are representativeof the 30% in cited literature, it isassumed that the outcome justifiesan attempt at hypothetical valueanalysis.Do energysavings = green value?The first problem to address was theappropriate method for valuationof the energy savings. Gary Wolff(2006) identified four methods toanalyze the financial benefits of greenbuildings: simple pay back, levelizedcost, relative net present value, andinternal rate of return. xv In the interestof simplicity, there is one methodwhich is well understood by the valuationand investment community, i.e.,net present value (NPV).The biggest difficulty faced inusing NPV was the availability ofreliable information on the constructioncost of the CRD building, versuscosts for a similar building with conventionaldesign (e.g., cost of greenconstruction). To overcome this limitation,the National Research Councilfindings were adopted. These indicatethat the capital costs for constructinga green building are comparable tothat of conventional buildings of thesame type. xvi Additional assumptionswere made for the investment horizon,yield rate, and stability of energyoperating costs over time.Assumptions were made that aconservative energy cost savings of$.45/ft 2 can be achieved with greendesign and construction, and thetotal annual savings for the CRDbuilding would be about $33,500. A10-year investment horizon and 6%yield rate (e.g., real estate investmenttrust yields) were also assumed. Capitalizingthe annual expense savingsover the investment horizon returns apresent value of about $246,500. 844C a n a d i a nAppraiserVolume 51 • book 4 • 2007EvaluateurC a n a d i e n