Do Sustainable Real Estate Practices Cost More? Part I
By Mike Tobin
There is a myth that sustainable real estate practices are more expensive, and it needs to be put to rest. The myth is causing more harm than good in the market and it is time to shed light on the truth.
So, are sustainable real estate practices more expensive? In order to answer this, one is forced to first determine what we are measuring up against. When you hear someone say, “A sustainable building costs 10% more,” please ask them what they are comparing that to. Some of the typical responses are:
a) A typical building of similar size and function.
This does not hold water as there is no common definition of a typical building. There are millions of buildings in the United States alone that have been constructed and operated over the course of centuries. The Davis Langdon company, among others, has performed multiple studies to properly define a typical set of buildings to make an accurate and statistically relevant comparison for LEED certified buildings. Their study (and others) have found that there is no statistical evidence to support that LEED certified projects cost more than similar buildings not certified.
b) A code compliant building of similar size and function.
This also does not hold water as every building constructed must be code compliant. Even if they meant to compare it to a building built to code minimum, it is safe to say that there are very few buildings built today to the exact code minimums. It would be ridiculous for someone to compare their building to something that they would never build in the first place.
c) The cost alone of coordination and documentation to LEED or other programs pushes the price to a 10% premium.
This is an extreme exaggeration. The fact is that the cost to certify a building to many of the sustainable building programs is minimal. There are three facets to this cost exaggeration though that needs explanation: Program Fees, Professional Fees, and Prerequisite Costs.
The Program Fees are the fees associated with the registering and submitting a project to the sustainable building program. These are typically much less than 1% of project costs.
Example #1: $2M renovation of a 30,000 SF office. Cost to register and submit the project to the LEED program equals $3,150. That is 0.16% of the project cost.
Example #2: $20M build-to-suit of a 100,000 SF office building. Cost to register and submit the project to the LEED program equals $5,400. That is 0.027% of the project cost.
Stay tuned for Part II on Friday where I will discuss Professional Fees and Prerequisite Costs.
Tags: LEED, sustainable
This entry was posted on Wednesday, September 1st, 2010 at 9:23 am and is filed under Sustainability. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.