The business case of sustainable real estate – Part 2, Green Edge « Saint Consulting

In Part 1 of the business case of sustainable real estate, I wrote that it is hard to dispute it is less risky to take action to reduce green house gases than to do nothing. I would like to now explore the business case for green — market factors and regulatory factors.

The Business Case for Green – Market Factors
The business case of sustainable real estate – Part 2, Green Edge « Saint ConsultingA good place to start is to understand the financial benefits of potential green features and how they could result in value creation. There are two types of factors to evaluate: market factors and regulatory factors.

Let’s start with just one of the market factors: lower operating costs. Given today’s technology, there should not be significant incremental cost involved in developing a high rise office or residential building that is 15% more energy efficient than a “traditional” building which meets minimum ASHRAE requirements. A 15% savings in energy costs can lead to millions of dollars in additional asset value. Here’s how: Assume that energy costs are $3 per s/f. A building which is 15% more energy efficient means saving 45¢ per square foot in energy costs. If the building is 500,000 square feet, total savings would equal $225,000 per year. Going one step further, assuming an 8% cap rate, saving 45¢ per foot in energy costs translates into a $2,812,500 increase in the value of the building. Spread that savings and increased asset value over a portfolio and the value creation proposition is hard to...

There's more good info in this linked article. Read the whole thing: The business case of sustainable real estate – Part 2, Green Edge « Saint Consulting.