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The Empire State Strikes Back

kyle — Tue, 29 Mar 2011 20:44:20 +0000

Q&A: Dana Schneider, VP, Sustainability Services Market Lead, Jones Lang LaSalle

By Brian Libby, for NEEA’s BetterBricks Initiative


Dana Schneider Jones Lang LaSalle

In 2009, owners of one of New York City’s great architectural landmarks, the Empire State Building embarked on a renovation to reduce the skyscraper’s energy use by more than one-third by 2013. Part of an overall $500 million building makeover, the energy efficiency strategies, ranging from window replacements and insulation to electrical upgrades and tenant education, are bringing annual savings of more than $4 million, with just a three-year payback on the investment.

Originally built in 1931, the Empire State is no ordinary office building, of course, but a symbol of American achievement and strength—and now efficiency. At 102 stories with 2.6 million square feet of space, some 6,500 windows and 73 elevators, it has the scale to reap significant energy efficiency savings and to substantially reduce its more than 105,000 metric tons of carbon dioxide emissions a year. Besides many tenants now having LEED-rated interior offices, the Empire State Building is also expected to fall in the top 10 percent of ENERGY STAR office buildings when its renovation is completed, the project designers said.

More than that, though, this Art Deco icon at 34th Street and Fifth Avenue, because of its unique status as perhaps America’s most famous skyscraper, has the opportunity to serve as a model for other office buildings around the world seeking to transform.

They’re showing the rest of the city that existing buildings, no matter how tall they are, no matter how old they are, can take steps to significantly reduce their energy consumption,” New York mayor Michael Bloomberg told The New York Times.

Recently BetterBricks’ Brian Libby spoke with Dana Schneider of Jones Lang LaSalle, VP of Sustainability Services, a global real estate services firm overseeing the Empire State Building’s green retrofit.

BetterBricks: You grew up in New York. Do you remember the first time you saw the Empire State Building?

Schneider: I was a little kid the first time. My family has lived in New York for generations. I was there several times as a little kid, but the first time I really remember it is when I was in 5th grade. It was so huge! It was a whole city block. I remember going to the top and thinking, ‘O my gosh!’ You can see forever. Looking down the ground almost looked fake. It put things in perspective.

The Empire State Building carries extra symbolism, doesn’t it?

Yes. In 1931 it became the tallest building in the world, and it was built during the Great Depression. Now it’s one of the world’s most energy efficient buildings, with the retrofitting work also done during tough economic times. It was a beacon of hope when it was built, and I think that’s what it is now.

Could you explain the role you played in the Empire State Building Retrofit Project and the role of Jones Lang LaSalle?

I was the program manager for all the updates that go on. I lead our work on the energy retrofit there.

You have written that in ESB “Under the plan, actions taken by tenants are expected to reduce the building’s energy use by more than 6 percent, about one-sixth of the total reduction target of 38 percent.” What tools did you develop to involve tenants?

We’ve done a lot of things. We’ve developed a set of really detailed design guidelines for building out their spaces, and how they can achieve LEED certification and built a prebuilt LEED platinum space for them to see our recommendations in action. We also have a tenant energy management program. This is actually a new technology that enables tenants to see their usage in real time and get recommendations to reduce their use. And I personally work with tenants coming into the building to make sure they integrate our recommendations. We also wrote into new leases a whole set of performance requirements such as a five year or less payback.

We understand that tenant involvement was voluntary? What percentage of tenants are participating now and how are the numbers looking re this 6%? Is ESB achieving its goals with regards to the tenant piece?

The tenant initiatives are really focused on new tenants. When we started our work, there was an existing program for tenants. They’re moving to get more prestigious tenants. New spaces will be built out this way. It’s in the lease language. We can’t make anybody do anything, especially in this market. But we present it as a massive added value. We are providing industry leading expertise to build out these spaces at a high level: It’s like, why not? It will save money to have a better-performing space. It’s the carrot rather than the stick. And it’s a huge selling point for the building.

How have you handled long term tenant disruptions during the retrofit process?

The work that would affect tenants in their spaces is already finished. We scheduled it around them. We did work overnight and were in constant communication. We did it on overtime so we would minimize disruption. Extremely extensive work like replacing ducts was only done in empty spaces.

Were lease renegotiations part of the strategy? If so, what new language, requirements, and sustainability language was inserted into the new leases?

There’s a huge part of the strategy in the lease with respect to payback period. I’m literally at the table supporting these people. The building is moving towards sub-metering all the tenant spaces. So it incentivizes them. We’re trying to move to larger full-floor and half-floor tenants. At its peak there were 598 tenants. There are a little under 200 tenants now.

It’s the whole idea of a class-A asset. It’s major tenants instead of little mom and pops. A lot of that drives us. We have more opportunity to optimize spaces for performance. Those tenants tend to be stakeholders who have more interest in these issues. Whereas with a lot of smaller tenants, it might not be something they’re concerned with. Larger spaces are easier to work with, but we didn’t establish that as a goal.

You wrote back in 2009 that “with nearly 40 percent of the building’s space due to turn over within four years, the success level of the tenant engagement program will soon be evident.” What does it look like now? How engaged are the tenants and how is the retrofit impacting the lease up of the building?

They’re very, very engaged. We’re targeting new tenants, and those who have come on have been part of the process. Skanska’s office is LEED platinum, another is LEED silver. Another tenant is signing on to a half a million square feet and it will be LEED silver.

How does this project tie into the overall marketing strategy of the Empire State Building? In what ways are you counting on the energy efficiency “story” to help add value to the property?

It’s a huge part of the marketing, the repositioning of the assets, the performance of the building and all of the environmental initiatives. It’s a class A asset now. In addion to all the upgraded infrastructure, the whole lobby has been restored to its art deco grandeur. It’s a totally different building than it was. It’s very difficult to pull out the value of an environmentally responsible retrofit or even in a new building because there are so many other aspects that add value. But it absolutely does have to do with the increased tenant retention.

How is Jones Lang LaSalle spreading this experience and tools to the rest of your portfolio? Where are you on that?

We’ve had international training sessions for our own experts. We’ve spoken at every major industry conference to make sure people understand what we did and what the benefits are—AIA and USGBC’s Green Build. We want to get the word out. We’ve done numerous publications and case studies, we have a website, www.esbsustainability.com where all of our processes are detailed for everyone to see. We’re trying to engage select corporate clients as well. We’re replicating this in about 30 buildings nationally.

What other barriers are you seeing out there now? What needs to change to help accelerate this level of renovation to the existing building stock? What new tools do we need to make this easier?

We’re working really hard at a state, city and federal levels to encourage policies that encourage retrofit. I think the greater greener building code requires a lot from building owners to make sure their buildings are operating officially: mandatory benchmarking, audits, commissioning. All of it requires better energy efficiency in buildings. And we worked with the city of New York to make sure it reflects how buildings get built. And we’re working to ensure that the incentives work too, for retrofit and for new construction. It’s a matter of getting those tools out there. The more successful cases we have, the more we can move the needle. If the only place we succeed is the with the Empire State Building than we’ve failed. It’s about convincing other people this is an intelligent business decision.

NEEA’s BetterBricks plans to launch region-wide deep renovation initiative later this year. Any words of wisdom for the Pacific Northwest?

Use our model because it works! We spent over a year developing it. We did all kinds of peer reviews. This kind of approach is extremely effective. Take an integrated approach: the envelope, but also tenant behavior. I’m a huge fan of energy modeling. It gives far more robust information. And be open-minded. Let the numbers speak for themselves. Looking at things objectively and outside the box is important: considering measures not typically thrown out there during an energy audits. And work together. We work very closely with the building managers and engineers in every project we work on.

BOMA Seattle | King County Challenge Office Buildings to "Crackdown" on Energy Use

kyle — Thu, 13 Jan 2011 01:53:36 +0000

Contact Information
Jack Davis/BetterBricks
503/827.8416 ext. 235, jdavis@neea.org

Kyle Stuart/Coates Kokes
503/241.1124, kyle@coateskokes.com

Seattle, Wash. – The Building Owners and Managers Association (BOMA) Seattle King County announced the launch of the 2nd “Kilowatt Crackdown,” a competition challenging all Puget Sound-area office buildings to improve building energy consumption. This unique contest will allow property managers and building owners to demonstrate their leadership in energy efficient building operations, identify the most energy efficient buildings in the market, and which properties are making the greatest gains in performance. Participants will assess their building’s energy performance; calculate their ENERGY STAR® rating and work to improve that score over a two year period.

Registration is available from January 25th – April 30th online at: http://kilowattcrackdown.betterbricks.com

“This is a tough market right now, so it’s natural for building owners and property managers to focus on operational savings through lower energy bills,” said Rod Kauffman, president of BOMA Seattle King County. “The power in this event is that it’s about forward thinking – putting your building in the best competitive position for when the market recovers.”

Several new categories this year offer additional ways to recognize achievements in energy efficiency. In addition to the highest performing and most improved building categories, separate categories for smaller buildings (40,000 to 100,000 sq. ft.), the Climate Leader Award, and the Most Valuable Tenant Award will be given out to deserving leaders that have taken energy management to the next level.

Kilowatt Crackdown sponsors -- including Seattle City Light, Puget Sound Energy, Tacoma Power, Snohomish PUD, BetterBricks and Seattle City of Seattle -- have all stepped forward to make technical and educational assistance available to participants, as well as media coverage and recognition.

For more information about the event, or to register, visit http://kilowattcrackdown.betterbricks.com

Established in 1912, BOMA Seattle King County is a professional trade association that is the voice of the office building and commercial real estate industry. BOMA Seattle King County has several hundred members from 250 firms who either own or manage commercial real estate or provide goods and services to the industry. BOMA Seattle King County works to actively represent the best interests of the commercial real estate owner, the real estate professional and its allied members through effective leadership in advocacy, the collection and dissemination of information and professional development and accreditation. BOMA Seattle King County is a local association federated with BOMA International.

BetterBricks is the commercial initiative of the Northwest Energy Efficiency Alliance, which is supported by local electric utilities. Through the Northwest Energy Efficiency Alliance, BetterBricks advocates for changes to energy-related business practices in Northwest buildings.

The Greenest Lease Around: NEEA and Unico Collaborate on a Win-Win

kyle — Thu, 13 Jan 2011 01:20:36 +0000

Download a PDF of this article

In October, the Northwest Energy Efficiency Alliance (NEEA) completed the move into our new offices in downtown Portland’s Commonwealth Building, securing a cost-effective, energy-efficient space with an environmental footprint well below the market norm. Earlier in this series, you read about the carbon factor (how the carbon footprint of our employees’ commutes factored into our choice of locations) and the human factor (how a cross-functional team collaborated to identify and create an office that meets our needs). Now, learn how we introduced innovative green concepts in another traditionally tricky area – the commercial lease.

Wins All Around
Because all parties ultimately felt the lease package made financial sense, it would be a misnomer to say that some items were “wins” for the tenant and others for the landlord. So, here are some of the green provisions that ultimately made it into the lease, which really were wins all around.

Category	Lease Provision	Implication
DESIGN & CONSTRUCTION
Tenant Improvement (TI) Practices	The lease specifies that NEEA agrees to perform all TI work in accordance with sustainability practices, engage a third-party sustainability consultant to assist with our TI, and pursue and maintain LEED for Commercial Interiors certification for our space. The landlord, Unico Properties, is obligated to cooperate with these efforts, including such specific activities as modifying their construction waste processes. (We didn’t let ourselves off the hook there: we’re required to recycle or reuse construction waste and report this activity to the landlord.)	NEEA and Unico both proactively committed to these activities, a rare sight in today’s market. Because of this and other sustainability commitments, our brokers are confident we have the greenest lease in the city. Though these provisions might impose additional costs on NEEA and Unico, our executives supported them with the understanding that they’re part of our mission and core values, and Unico was confident that the built-out space would be more re-leasable in the future if it were built green now.
Tenant improvement costs	Unico agreed to a “turnkey” TI, where they essentially incur all the costs of building out the space and oversee the process, then hand us the key to the space. If the project exceeded the agreed-upon budget, those extra costs would be assumed by Unico.	NEEA’s TI posed some challenges for the process. For example, the construction budget assumed building-standard lighting, but NEEA’s selected lighting package was more costly; the indoor bicycle storage area is an unusual allowance, but one we felt was critical to our corporate culture. These items required us to negotiate and redefine what exactly “turnkey” means – what specifications and standards should be used to price the project, what is considered an “additional” cost beyond the building standard, and who should pay for it?
OPERATIONS
Benchmarking	Unico is required to benchmark energy and water use in ENERGY STAR’s national benchmarking tool, Portfolio Manager, and disclose performance data to NEEA quarterly.	Though benchmarking is a common practice among environmentally-conscious real estate owners like Unico, the lease kicked their efforts into high gear. Benchmarking creates transparency into the building’s utility consumption and costs.
the ENERGY STAR label	The lease requires Unico to strive to attain an ENERGY STAR label for the building (applicable to buildings earning a 75 or higher in the 1-100 energy performance rating system within Portfolio Manager).	The lease holds Unico accountable for making every effort to meet a well-defined, accepted industry standard for energy performance – removing some of the ambiguity about what constitutes “energy efficiency.”
Separate metering	NEEA’s electricity consumption must be separately metered. This makes it possible to structure our lease as a net lease, in which our utility costs are our own responsibility – and are under our control.	In theory, a net lease with separate metering ensures that a tenant is financially motivated to operate their space efficiently and invest in energy-efficient technologies. On a practical level, the accounting is tricky unless all other tenants in the building are sub-metered as well. Other tenants at the Commonwealth Building have expressed an interest in separate metering in pursuit of LEED-CI certification; the property management team is currently assessing the best way to implement this, while determining how to track and allocate energy costs in the meantime when only some tenants are directly metered.
Ongoing green initiatives at the building	The lease stipulates that Unico will form a Tenant Sustainability Committee to act as a voice for all tenants in decisions about building operations. NEEA is obligated to comply with the Sustainability Committee’s current and/or future programs intended to promote sustainability at the building (including recycling, energy and water conservation efforts, and indoor air quality), and we’re prohibited from operating our space in a manner that would negatively impact our ENERGY STAR rating or LEED certification.	Some landlords might feel that they’d lose some control over building operations by having a committee provide input on decisions, but Unico was open to the idea. The committee will give other tenants the chance to easily join NEEA in sustainable practices and procedures – whether or not they previously considered them. Future leases at the Commonwealth Building will incorporate similar provisions for tenant compliance with building sustainability initiatives. Certain building-wide services mandated in NEEA’s lease (such as green cleaning) will inevitably impact other tenants in one way or another, so why not involve them more directly?
Itemizing energy costs	In many leases, utility costs are charged as a total “utility” line item that includes multiple building services. However, Unico is required to disclose specific, itemized energy costs, separate from other utility items such as janitorial, water, and trash removal.	This gives NEEA insight into the true impact of efficiency measures on the total cost of occupancy. If utility costs were lumped together, changes in the costs of one service (such as janitorial) could be confused with changes in another (such as energy). In this example, decreasing janitorial costs could mask increasing energy costs, and the tenant may not realize that efficiency goals are not being met.
Hours of operation	The hours of operation specified in the lease are 7:00am to 6:00pm, Monday through Friday. For HVAC services to be provided on Saturdays, we’re required to give the landlord advance notice – in contrast with the many commercial buildings that regularly condition empty space on weekends.	Most landlords believe that if Saturdays are included in lease hours, the building must always be conditioned during that time – even if it’s sitting empty. In our lease, we reversed these customary assumptions about Saturday HVAC service, setting an example for other landlords and tenants looking for mutually-agreeable, financially-sound efficiency strategies.
Operating expenses	Most leases define the operating expenses that the landlord is allowed to pass through to the tenant. In NEEA’s lease, this definition is expanded to include the costs of energy-efficiency improvements – meaning Unico is incentivized to improve efficiency because they can recover these improvement investments fairly quickly.	The next challenge? Convincing the other 90% of the building tenants to agree to this model, so that it can be used effectively for common-area projects.
GENERAL LEASE PROVISIONS
Lease term	Because longer leases are inherently more sustainable (and earn a LEED credit), NEEA committed to a 10-year lease.	Some tenants don’t have the flexibility or stability to commit to a long lease, but all parties tend to benefit from them. The landlord gets a steady income, NEEA locks in our green lease terms and our rental rate, and fewer office moves mean less waste and natural resource consumption.
Educating the market	The lease gives NEEA the right to share some of its provisions with third parties in connection with its work...	…the reason that you’re able to read this article today!

In our lease negotiations, we often aimed pretty high. One of our bolder ideas that didn’t make it into the lease: a financial penalty for the landlord if the building were to fall below a specified energy performance threshold. We also originally wanted the landlord to post the ENERGY STAR rating in the building’s lobby each month, but settled for the requirement that Unico must disclose this data directly to NEEA quarterly.

“People are fixated on the lease itself, but there’s a whole package of documents that all link together. If you don’t have your ducks in a row, something might slip through the cracks in one of those other documents. It’s not a green lease, it’s a green lease document set.” –Jack Davis, NEEA's BetterBricks Initiative

Before diving into the leasing process, our brokers (Gordon King and Mike Holzgang of Colliers International) coached us on setting reasonable expectations as well as consistently and continually communicating our needs to the landlord so both parties always knew what was coming next. Our brokers also played the critical role of organizing all of NEEA’s diverse, dynamic requirements and understanding their implications for not only our lease, but also the various associated design documents: materials that stipulate ongoing operating conditions, the tenant improvement plan, and contractor rules and regulations. Some of the most substantive components of the “lease” actually appear in these other documents, including requirements that contractors use practices and products compliant with our LEED goals. It’s important to put leases in context: you’re not just negotiating a lease – you’re determining the plan for your occupancy of the building over the next ten years.

A Two-Way Street
From day one, our lease was intended to be a partnership with the landlord (including the Commonwealth Building’s General Manager, Brian Pearce). Our brokers only introduced us to landlords they deemed to be willing to enter into such a partnership. To make the cut, not only did the owner need to have space available in our target location priced within our budget, they also had to share our sustainability vision to some degree – and come to the process with an open mind. A number of buildings in Portland would have met most of our criteria for location, available space, and rent; and a number of landlords would have happily partnered with us on a groundbreaking green lease. At the Commonwealth Building, we found the intersection of both.

“If you decide sustainability practices are important to you, you should make your landlord commit to them. There are enough landlords out there who will.”
–Brian Pearce, Unico

Economics certainly flavored the discussions. It is a tenant’s market throughout most of the real estate industry, with landlords making concessions to attract or retain tenant companies. NEEA’s lease was also important to Unico and the Commonwealth Building for building-specific economic reasons. Though this backdrop may have tipped the scale in NEEA’s favor on some items, Unico was already pursuing sustainability initiatives and green leases in their portfolio, making them better-positioned to respond to our requirements than other landlords might have been.

So why push for these items to be included in the lease at all, if the landlord is also environmentally-conscious? Wouldn’t it be sufficient to have a separate policy document in which the tenant and owner put their mutual sustainability goals in writing? The advantage is that if the building sells, the next owner will be required to stick to their predecessor’s commitments if they are written into the lease.

Brian is confident that Unico will be able to continue to do business with NEEA and Colliers International on a long-term basis because of their willingness to partner and innovate in this lease. Unico is also embracing the Commonwealth Building’s new role as a hub for green businesses, hosting publicity and networking events and promoting tenants’ green leases in the local media. In the real estate industry, such relationships and reputations are critical to success.

“It’s a ‘win’ to get these elements in the actual lease documents. On the tenant’s behalf, this will hedge against future sales of the building: if the building sells, ‘I’ll try my best’ clauses don’t really cut it.” –Gordon King, Colliers International

Moving the Market
Embodying the emerging culture shift among some eco-minded owners, Unico accepted the costs of our green build-out and the burden of some of our green lease provisions, with the knowledge that this would put them at the forefront of a market transformation to redefine “normal” landlord costs and services. Unico is now expanding the use of its green lease addendum for new and extended leases, partly inspired by the NEEA transaction.

Our brokers from Colliers International are also recommending green leasing to their other clients, using the NEEA lease as a model. They’ve found that perhaps seven out of ten tenants have some level of interest in discussing the pros and cons of a green lease. If the green lease provisions are considered early and often, and all team members informed and educated about the process from the start, those that take action will find themselves with mutually-beneficial results that are good for the environment and the bottom line. In NEEA’s new home, we look forward to seeing how our green lease plays out in practice.

Additional Resources
To learn more about NEEA’s move into new space, visit http://neeasuitesearch.wordpress.com/. Stay tuned for upcoming articles on the space planning process and our LEED CI certification.

For more on green leases, read the briefing 10 Goals for Green Leasing. See also the briefing Leasing & Energy: Allocations.

It Takes a Village: Teamwork Facilitates NEEA's Move to New Office Space

kyle — Thu, 13 Jan 2011 01:07:55 +0000

From brokers to landlords, from interior designers to employees, it takes a village to move a company. In NEEA’s search for a new home, that village consisted of a cross-functional, collaborative team made up of people from both within and outside of our organization.

Having the right team in place was critical to reaching an end result that met all the assorted requirements of our move: creating a productive space for a growing organization, representing the NEEA brand, demonstrating our value to our funders, and – not least – walking our talk by creating a showcase energy-efficient, green office. Each partner brought something different to the table, but each came to the table with the understanding that decisions would be considered through the lens of sustainability. Even with the most significant decisions of all (the location, space plan, and lease structure among them), energy was always at least part of the discussion. Just as sustainability influenced each decision, the corollary is also true: each decision will impact the future environmental footprint of our location in one way or another.

With so many goals – some competing and some complementary – the process was bound to include some tradeoffs. But with a cross-functional team in place to consider all the angles, we were able to find synergies and capture value in areas where a more “siloed” team wouldn’t have. For example, at the same time as our new space was being identified and designed, NEEA’s strategic planning team was creating a vision for our growth as an organization, which would necessitate creating a more collaborative workspace. With that viewpoint represented at the table, we were able to translate the vision for growth into an actual space design that will meet our growing workforce’s needs.

Here are the team members that collaborated to make NEEA’s new offices a reality:

The Inner Circle
The core internal team consisted of Lloyd Johnson, a consultant working nearly full time on the move; Susan Hermenet and Suelynn Callahan, NEEA’s business operations managers; and Jack Davis, the BetterBricks office real estate program manager. These individuals drew upon and coordinated the expertise and guidance of other NEEA stakeholders, and together they represented the needs of the “tenant.”

NEEA employees: Though Jack was engaged to represent the incorporation of innovative energy and sustainability goals into our lease, he also ultimately served as one of the staff representatives on the core team, giving a voice to the broader needs and interests of NEEA employees. When employees expressed concerns about lack of privacy in an open workspace, for example, Jack and the team addressed the issue by incorporating “phone booth” offices – quiet locations to take private calls – into the design.
Executive team: Though this team drove the program requirements, NEEA’s executive directors played a role in decision-making upon being presented with various options for buildings, lease components, and space designs. Their support was crucial in incorporating innovative elements into the lease, especially since some (such as our advanced, highly efficient lighting system) came with added expenses. Bearing in mind NEEA’s mission to test out new energy-efficient technologies that aren’t yet the industry standard, our executives supported the lighting design despite the costs it added beyond our TI allowance.
The marketing department: Becca Yates, one of NEEA’s marketing and communications specialists, was recruited to help us create a space that appropriately reflected and embodied NEEA’s brand, from concept to color palette.

Building the Network
With the internal team established and initial goals in place, NEEA recruited outside partners to help solidify the program requirements and intended outcomes of the move. Besides building on the groundwork our internal team had already laid, they also contributed their unique experiences and ideas to the process.

The interior designer and space planner: The team held a charette to enable the staff to identify their ideal office environment. Not surprisingly, there were tensions between the desire for privacy and the need to create a collaborative work environment with plenty of open space and natural light. The lucky man selected to sort that all out was our interior designer and space planner, Paul Gibbons of WGS Design. His job was to help us develop the fundamentals of our “program” – what we wanted to accomplish with our space – and orchestrate the give-and-take that would get us there, calling upon the other team members’ expertise for various components.
The brokers: The broker selection process included interview questions about sustainability aptitude, so naturally the brokers ultimately chosen to manage our search and leasing process (Mike Holzgang and Gordon King of Colliers Portland) were very enthusiastic about its green aspects. In the environmentally-conscious Pacific Northwest real estate market, they recognized that assisting with a successful green lease was a good business move. Based on experiences with another client that had similar sustainability goals, they were able to help us understand whether certain landlords would or wouldn’t be receptive to the introduction of innovative lease concepts, and whether the open workspace idea would work as well in reality as in theory. One of the most important things our brokers brought to the table was the extended team they assembled – including Paul.
Building ownership and management: Eventually, Unico Properties, the landlord and property management staff of the selected building, became part of the extended team. Their willingness to engage with NEEA to help us reach our energy and sustainability goals was a significant factor in our choice of buildings. For example, they allowed us to install a bicycle storage room on our floor (an unusual component of tenant improvement but one we felt was vital to our low-carbon culture) and to use lighting technologies that deviated from the building standard. They also funded the sub-meters that will allow us to closely monitor our space’s own utility consumption, ensuring that the actual data reflects the investments made to create a highly energy-efficient space.

Other external team members included LEED consultants and the Energy Trust of Oregon, which provided rebates. We also pulled in product suppliers and furniture designers, all of which were considered in the context of their sustainability expertise; at least one, Herman Miller, was selected because of it.

If I Had to Do It All Over Again…
The cross-functional team was highly successful, but we didn’t get everything right the first time! Here are some of our lessons-learned, including what we did right and what we might have done differently:

Pick a point person. Communication challenges could be a shortfall of having a broad, multi-disciplinary team. It’s not always possible to involve every single team member in every meeting or decision, and everyone has other tasks on their plate. To make sure nothing gets lost in translation or slips off the radar, it’s helpful to have one point person (in our case, Lloyd) to be the eyes and ears into every piece of the process.
Foster inclusiveness. Make sure that the external team members know that their advice is welcome and valued – they shouldn’t feel that they have to hold back.
Lay the groundwork early on. We knew from the start we wanted a model energy-efficient office. If we had instead decided to pursue aggressive energy goals a few months into the process, it would have taken much more time and effort.
Take a birds-eye view of your organization. Step back from the task at hand and consider who else in your organization should be involved, looking down the road at future phases of the project. It’s never too early to invite someone to participate, even if their participation is only tangentially required at that phase. Also look across your company at other significant initiatives underway. Is there anything going on that the move’s timing or strategy should tie into? In our case, the move coincided with a rebranding initiative – an excellent opportunity to tie together our new space and our brand identity.
Get an executive on your side. Invite an executive-level decision-maker to be closely involved. You’ll have an “in” with the rest of your company’s senior management. He or she can help you set realistic boundaries for what management will and won’t approve (or help you frame the options in advantageously to increase the chances of approval).
Don’t forget about your staff. New offices are a big adjustment for some employees. In our case, many will have less personal storage and less privacy with our open workspace design; some didn’t think that the resulting energy savings and natural light were worth the tradeoff. We had to continually remind employees of the mission-driven reason for the space plan and other aspects of our building selection and leasing process – and to continually listen to their input and feedback.

The Bottom Line
At each step of the search and leasing process, energy efficiency and sustainability were significant pieces of the discussion. With a collaborative, cross-functional team in place to weave these considerations into the decision-making process, we pulled them together into a cohesive whole – and created our new home.

Engaging Tenants and Brokers in Your Sustainability Initiatives

admin — Mon, 18 Oct 2010 17:17:51 +0000

By Alison Drucker for NEEA's BetterBricks

You know you're already doing everything within your control to operate a high-performance green building - retrofitting lighting, tuning up your HVAC systems, offering recycling bins - but you may feel your hands are tied when it comes to your tenants. It's their space, their equipment, and their decisions; if they choose not to throw their soda cans in the right container or to shut down their computers at night, so be it.

Two outstanding buildings in Seattle are pushing the boundaries of sustainability by showing that educating tenants about sustainability pays off. At the same time, they're extending their outreach to brokers, starting the sustainability conversation with tenants before they even sign a lease.

Tenants and Teslas
Wright Runstad's director of property management, Jeff Myrter, is what you might call a sustainability champion. For several years, he and his team at 1201 Third Avenue have organized Earth Day events for their nearly 3,000 tenants, initially focusing on energy conservation and recycling. The building has a 2010 ENERGY STAR label with a top-notch energy performance rating, and is currently awaiting LEED EB certification.

This year, they ventured into a relatively new frontier: electric cars. "Given that we have been able to not only stabilize building energy consumption over the years, but also reduce it," said Jeff, "we were looking for the next challenge." Jeff's assistant property manager, Celjeta Xaxa, convinced the local Tesla showroom to display a model in the building lobby. Tenants came to view it throughout Earth Day, learning about the future of electric cars and their environmental benefits.

The feedback from tenants was extremely positive, whether or not an electric car purchase is in their future. Ric Thorning, office services manager for building tenant Perkins Coie LLP, said that his associates were excited to learn about the new technology and appreciated the team's efforts to reach out to them. Lisa Wabik, the facilities manager with another large tenant, Davis Wright Tremaine, echoed this feedback; a few of her associates even followed up to ask when electric vehicle recharging stations would be installed. The event certainly accomplished its primary goal, which was to start a dialogue with tenants and get ahead of the potential market shift toward electric cars. As a result, the Wright Runstad team is now evaluating options for adding recharging stations to the parking garage.

"Collaborating with tenants and showing the concrete measures we're taking to reduce their costs gets them more invested into the property and can improve tenant retention over the long term." - Craig Goldsmith, Coast Real Estate Services.

While cool new technologies are exciting, it's the more routine interaction with tenants that truly gets results. Through tenant meetings and memos, the Wright Runstad team regularly shares energy-saving tips and provides updated statistics on the building's recycling program. With a campaign called "Turn It Off, Save Some Juice," led by director of engineering Jeff Kasowski, they recruit tenants' involvement to reduce plug loads (the energy used by office equipment, appliances, and other energy consumers, excluding lighting and HVAC). And by partnering with Perkins Coie to pilot a commercial composting program, they were able to prove the concept feasible, and subsequently rolled it out to other tenants.

Getting Through to Brokers
Just as challenging as engaging tenants, educating brokers about a building's sustainability efforts and convincing them to use that information as a market differentiator has been a hurdle for many real estate owners and managers. With the Tesla event, Wright Runstad was able to get the message to the brokerage community, too, with a broker open house in the building's new marketing center the evening before the tenant event. In addition to viewing the electric car, brokers perused a series of information boards about the building, including one highlighting Wright Runstad's past and current projects to reduce the building's environmental footprint.

"For brokers, it boils down to the ENERGY STAR score and LEED certification," said Jeff. "ENERGY STAR and LEED are right up there with all the other statistics about the building, like how many floors you have and how much parking is available. Brokers now seem to be savvy about connecting tenants that are already interested in sustainability with the right buildings."

But a broader market transformation toward high-performance buildings will require convincing those brokers who aren't quite there yet. Wright Runstad's philosophy is to offer up this information during building tours even if they're not asked about it. It is also built into the standard marketing material for 1201 Third Avenue.

Usually, the financial argument is the one that hits home. "If you're talking to a numbers-oriented audience and they tune out when you talk about carbon footprints, start talking about the escalation of energy costs that will be billed back to tenants," said Jeff. "There is a business reason and an ecological reason. You can deliver the message either way but you still get to the same end result."

Convincing tenants to drive electric cars doesn't have as clear a financial argument; in fact, adding charging stations could increase Wright Runstad's costs. So why go through the trouble? They felt the Tesla event was worthwhile to simply enhance tenant and broker relationships and to establish a reputation for environmental stewardship.

Those relationships may be the reason a tenant decides to stick around. Perkins Coie recently extended its lease for another 22 years, and Ric Thorning reported he had never worked with a better property management team. How's that for a satisfied tenant?

A New Normal
At the Bellegrove Building, a medical office complex in Bellevue, another building team leveraged Earth Day to start a dialogue with tenants about sustainability and energy efficiency. After participating in a scoping study with NEEA's BetterBricks program and implementing changes to their lighting and HVAC systems, owner Henbart LLC convened a tenant meeting to present information about their sustainability commitment. Along with the Coast Real Estate Services management team, they described the improvements that had been made and how the building's performance compared to its peers. Then, with some "fun facts" like how much energy tenants' workstations are using, the team generated discussion about the tenants' roles in making the building more efficient. Fourteen of 16 tenants were represented at the event, many of whom offered up concrete suggestions for additional energy efficiency opportunities.

Our tenants are our customers - building relationships with them is very important to us. To the extent that we can build these relationships by sharing knowledge toward the goal of sustainable, efficient buildings, we always endeavor to." - Mark Craig, Henbart

In a third-party managed medical office building where tenants are directly metered and fully responsible for their energy costs, it's unprecedented for a building owner to take the initiative to bring tenants together in a conversation about reducing utility consumption. But, coming from a property management background, Henbart president Mark Craig sees his role as an owner in a different light. "Our tenants are our customers - building relationships with them is very important to us," said Mark. "To the extent that we can build these relationships by sharing knowledge toward the goal of sustainable, efficient buildings, we always endeavor to."

When tenants pay their own utility bills, the economic message is all the more meaningful in engaging them in sustainability initiatives. "Some of the suggestions we provided might require a little more effort from the tenants," said Robert Shipley, Bellegrove's chief engineer. "But we tied them all back to saving money. It is just as important to show tenants that this is an economically smart way of doing business as it is to increase their environmental consciousness."

Tenants were receptive to the team's ideas for how they could take action to reduce their businesses' environmental footprints and operating costs. Since the event, the team has noticed a difference in behavior, with more tenants turning off lights and computers and utilizing the building's recycling program. Besides that, the event created a greater sense of community at Bellegrove: "We received very positive feedback not only on the material we presented, but also on the fact that tenants had the opportunity to meet each other and get to know their neighbors better," said Mark.

The Earth Day event was originally conceived as a way to kick off a Tenant Advisory Committee, which will meet regularly to discuss a number of topics, sustainability and energy efficiency among them. Through tenant representatives on the committee, the team will present new ideas for ways tenants can modify their operations, while receiving feedback on the best ways to communicate with the broader tenant group. With a tenant base consisting mostly of busy company principals, they know it won't be easy to secure regular participation from everyone. But, said Robert, "The goal is for the meetings to be fun and engaging so that those who cannot make it to one meeting are enticed to come to the next."

With these successes under their belts, Coast and Henbart are preparing to hold similar joint events at other properties, and plan to back up the presentation with property-specific facts. At a multi-tenant office building, they're currently going through the steps of benchmarking energy performance in ENERGY STAR's Portfolio Manager, then identifying and planning improvements. "The tenant informational meeting will follow these other steps," said Coast's vice president and property manager Craig Goldsmith, "because it's important to go into it having things to show."

Henbart and Coast both find that these activities are key to sustaining positive relationships with tenants. "Collaborating with tenants and showing them the concrete measures we're taking to reduce their costs gets them more invested into the property," said Craig, "and can improve tenant retention over the long term."

At the same time, by always looking for opportunities to improve a property's sustainability and efficiency, Coast adds value to its property management services. Just like any other aspect of operations, Robert said, "reassessing the status quo is a good way of doing business."

To have a real impact, this practice needs to be continual. "The goal is keeping energy and sustainability in the forefront of tenants' minds over time," said Robert. "If this was a one-time event, we would see a good initial response, but it would slowly taper off. With a continual process, we can change the overall culture to a 'new normal.'"

Kennedy Associates: Setting the Bar for Tenant Improvements

admin — Mon, 14 Jun 2010 16:43:46 +0000

Download Kennedy's Tenant Improvement Manual

Office space is constantly being built out to suit the needs of a changing tenancy. After the dust settles from a series of tenant improvement (TI) projects, will a building owner still be left with the same high-performance green building he or she started with? How does an organization protect an asset's value, and ensure consistent, long-term performance levels across its entire operating portfolio?

To tackle this dilemma, Kennedy Associates, a Seattle-based commercial real estate investment advisor, partnered with NEEA's BetterBricks initiative to develop a Sustainable Tenant Improvement (TI) Manual. By establishing minimum green requirements for all TI's - and providing extra suggestions for tenants that want to go above and beyond - the manual enables Kennedy's asset management team to both maintain and improve sustainability over time.

With over $2 billion worth of LEED-certified assets and one of the first portfolios in the country to proceed through the USGBC's volume certification program, Kennedy is well aware of the market's demand for LEED certification. As such, the TI Manual aligns with two rating systems - LEED for Commercial Interiors (LEED CI) and LEED for Existing Buildings: Operations & Maintenance (LEED EB: O&M). The first can help facilitate certification of the tenant space for those tenants that wish to pursue it; the second ensures that new or renewed leases in EB: O&M certified buildings are adhering to the buildings' documented efficiency standards. "For both LEED certified and non-certified buildings," said Christian Gunter, Kennedy's VP for Responsible Property Investing, "the TI Manual establishes a core set of practical, cost-effective strategies related to energy, water, materials, and indoor environmental quality, while providing key technical assistance resources."

Kennedy has established itself has a leader in Responsible Property Investing (RPI), which considers the environmental and social aspects of property development and operations in addition to typical financial considerations. With the TI manual, Kennedy promotes RPI by proactively engaging its tenants. Because a basic level of sustainability is inherently going to be part of their TI, it gives tenants the opportunity to occupy sustainable space and demonstrate market leadership without the burden of additional costs. "We can say to prospective tenants, 'You know that when you lease space in one of our client's properties, you're not only getting a green building that is healthier and more productive for your employees, but ultimately becoming a partner in making green a reality,'" said Christian.

"The manual is a quality control tool for asset managers, property managers, tenants, and legal counsel," said Jack Davis, Market Manager for NEEA's BetterBricks office building initiative. "It sets the bar high for the portfolio, aligns with other Kennedy policies, and delivers on Kennedy's promise of a superior product." Kennedy's green lease model already requires that tenants implement certain sustainability measures, including pursuing LEED CI in certain cases; now, with the TI Manual, Kennedy asset managers have a clear, consistent way to explain these requirements to new and existing tenants and their lawyers as they work through the lease terms. The manual also gives team members involved in the TI process a better understanding of what's expected of them - and where they may need to develop additional expertise.

To support both the successful development and implementation of the TI manual, Kennedy formed a Sustainable TI Committee composed of Kennedy asset managers and sought insight from other experts in sustainable TI's. As they pilot the manual, they'll collect data along the way about what works and what doesn't, and incorporate those lessons-learned at other properties in the portfolio. Meanwhile, the team will look at developing supplemental resources like construction contract language, product specifications, and case studies - which are already in high demand.

To advance the practice of sustainable TI's throughout the real estate community, the Kennedy Sustainable TI Manual is being made available to the public via the BetterBricks website.

Download Kennedy's Sustainable TI Manual.

An Interview with Ada Healey

admin — Wed, 12 May 2010 11:47:53 +0000

Former BetterBricks Developer Winner Ada Healey from Vulcan Talks About What's Next

Since joining Vulcan in 2002 as its vice president for real estate, Ada Healey has helped the company, formed by Microsoft co-founder Paul Allen, become the principal developer in Seattle's burgeoning South Lake Union neighborhood, adding some 10 million square feet of mixed-use office and retail space to the edge of downtown. Healey manages Vulcan's entire real estate development portfolio, which primarily includes property in the Northwest. She also manage a variety of projects and relationships with real estate brokers, developers and other business partners to maximize the portfolio's value and leverage development projects in various markets.

Healey won a BetterBricks Award in 2006, a time when the real estate market was booming, for Vulcan's commitment to high performance buildings. In the ensuing three years, the marketplace has become very different, but Healey's values about promoting sustainability and green construction are stronger than ever.

BetterBricks: What do you know now that you wish you had known three or four years ago when you won the BetterBricks award about developing high performance buildings?

Healey: I think what we probably should have done a better job on was measurement tools, refining the cost premium for being LEED certified and tracking that in a more vigilant manner across projects. And also convincing our tenants about measuring the validity of successes: productivity, absenteeism, retention, or some of the other measurement tools.

What challenges have you seen in making sure your buildings' perform as designed and keep performing over time? Are your tenants willing parties in this? What steps have you taken to ensure energy performance is maintained?

Ultimately, it's a partnership between landlord and tenant. Certain tenants are extremely focused on energy consumption and the bottom line across the entire spectrum of their operations from energy consumption to water to recycling. Other tenants, it's just not a priority. For example, daytime janitorial: some tenants are all about having them start earlier when the lights are still on. And other tenants do not want that disruption. The challenge is every tenant has a different view and we can't always pick and choose whom we'll lease to.

On the residential side, often times you need to secure tenants' permission to measure (energy), and for whatever reason some don't want to do that. Also there tends to be more turnover on the residential side. Maybe an occupant is there for 12 or 18 months and a new occupant comes in with a different use pattern. It's harder when people turn over to come up with a unit-by-unit baseline.

In terms of how we're trying to deal with that, we have and continue to try to share with our commercial tenants the value proposition about energy consumption. We have data we can take to our less enthusiastic occupants. On our residential leasing focus, we try to get tenants to approve us having access.

Have you seen changes in how important sustainability and being in a high performance building are to your tenants? Have you seen the demand shift?

I do think there's definitely a higher degree of knowledge around it. In many cases it's a criteria that you have to beat to be considered. It's a competitive advantage for Vulcan real estate, that our product meets those standards. I do believe it's a differentiator. I think over time, and even more so with the new administration and its focus on energy efficiency, I think it will continue to gain acceptance. As companies have reflected on what sustainability really means, it has a positive impact on their bottom line. In trying economic times, saving money and passing that on to the customer is a wining competitive strategy. I think of companies like Walmart. They're obviously very focused on the bottom line.

I do see the knowledge base of the average tenant significantly higher than it was four or five years ago. The brokerage community has also become more knowledgeable. More corporations have created that demand and brought the brokerage community up to speed.

You have a lot of biotech and tech-industry tenants. Do you think Vulcan's focus on sustainable developments has helped you market to these types of prospective tenants?

I absolutely think so. It was a competitive advantage when no one was doing it. Now you have to because everyone's doing it. Certainly in Seattle, the marketplace has spoken. That's the level of product you have to deliver or you'll be at a competitive disadvantage.

Have you changed how you structure your green leases?

We haven't gone from a triple-net lease, which is the market here in Seattle, to a gross or a modified gross structure. We'd have to look at it. The structure we use today is very accepted in the market. It passes on to the tenant any cost increases, but also the benefits of any cost savings. Which of course is one of the challenges of investing in existing buildings: the landlord doesn't share in the profit or the payback. So that's one of our to-dos, is to look at whether it makes sense to transition to a green lease. That also has implications with our financial partners. In the long-term it may be of interest.

Have you changed how you hire brokers, property managers?

I think we initially didn't have the luxury of hiring firms based on their commitment to sustainability. There just weren't that many who had that level of commitment. Today I think most brokers or property managers we engage are up to speed and certainly are even leaders in sustainable development and operations. I wouldn't say we wouldn't hire anybody who doesn't have those credentials because we can teach them, but our preference wouldn't be to have to be the educator.

Looking forward from your perspective how do you think we are going to meet the 2030 Challenge goals? What needs to change for us to get there?

I think one significant piece of the puzzle that needs to be figured out soon is we need a common nationwide standard for how you measure carbon. I don't know if the industry and the government and other players have come together that way. That really needs to happen. Without a common standard, it's hard to measure progress across the country. It probably is similar although not identical to what the EPA has done on ENERGY STAR. And I can imagine that tool being political because certain industries will look better or worse.

Secondly, once we have that standard measurement tool, government at all levels needs to figure out how to motivate people with a carrot and a stick alike. They both are needed. There needs to be incentives for people achieving those goals, incentives as well as penalties. And as a cost effective way of determining whether you're meeting the goals, a number of developers are abandoning the cost of LEED certification and saying 'built to LEED standards'. This tells me that the name has some value but the cost is more significant in this challenging economic environment.

What's ahead for you and Vulcan?

We're trying to benchmark our portfolio for energy, water consumption and waste management. Once we get that, it will be easier for us to measure how our policies and investments are producing results.

In terms of specific projects, we're building a new headquarters for amazon.com. We're seeking LEED gold certification. We're really on hold in terms of new development activity until the capitol market improves. Part of the benchmarking really gets back to securing LEED-EB designation and what value that brings. So we're looking at investing in new energy-efficient technologies. We're doing a little experimenting.

How do you see the market performing in the 2010?

In terms of the next twelve months, I think the market's going to continue to be challenging. I don't see things improving dramatically. In this market we still have a lot of supply and not enough demand. I think that'll make occupancy rates high and rental rates low. I think holding our ground would be a victory of sorts. If you look at the residential market, we're going to have a lot of supply delivered with apartments. On the condo side, I think most of the supply has been delivered. In the commercial class-A office market, the lion's share has been delivered. Perhaps the technical end of the recession has passed, and there are certainly some industries that are growing. I think many businesses have continued to right size. It's unclear when they will start to grow again.

What factors make a green building market?

admin — Tue, 23 Mar 2010 09:35:14 +0000

Annual index marries real estate economics with green design metrics.

Why does one market tend to have more LEED Certified buildings than another? What is the impact of vacancy rates, utility incentives, or public policies on the feasibility and economics of "going green?" In the 2011 study, Cushman & Wakefield and NEEA's BetterBricks initiative have published the 2011 Green Building Opportunity Index - a comprehensive ranking of the top 30 U.S. markets for green buildings. The annual Green Building Opportunity Index remains the first office market assessment tool to provide weighted comparisons of top U.S. markets on the basis of both real estate fundamentals nand green development considerations.

See how your home town ranks by reading the 2011 Green Building Opportunity Index

Download the 2011 Green Building Opportunity Index
Download the 2011 New York Midtown Profile
Download the 2011 Seattle Profile

What industry professionals are saying:

"Once again, the Green Building Opportunity Index is providing critical market analysis for smart and responsible real estate investing. What's more, the finding continue to prove teh important role of smart public policy in facilitating a green building marketplace." - Roger Platt, Senior Vice President of Global Policy & Lay at the U.S. Green Building Council

Review the 2010 Green Building Index

Download the 2010 Green Building Opportunity Index
Download the 2010 New York Midtown Profile

Winners of the 2009 Kilowatt Crackdown

admin — Fri, 15 May 2009 09:41:36 +0000

2009 Kilowatt Crackdown Fact Sheet

Unico Appoints Sustainability Director

admin — Tue, 03 Mar 2009 11:55:06 +0000

by Alison Drucker
JDM Associates for BetterBricks

Margot Crosman

After pursuing a sustainability vision for several years, Seattle-based real estate investment and operating company Unico Properties LLC recently formalized that vision by promoting a forward-thinking property general manager to the position of Director of Sustainability. In this new role, Margot Crosman will lead sustainability efforts for more than 10 million square feet of office, retail and multifamily properties in the western United States, as well as Unico's related investment, development and corporate initiatives.

Unico's sustainability vision has been in place since 2005. With an understanding that conserving natural resources is in the best interest of Unico and its communities, the company made a commitment to developing and operating environmentally responsible, healthy buildings, and to running its business in a responsible manner.

Since then, to a great extent, environmental stewardship has been deeply integrated into the fabric of Unico's approach to real estate development and operations. Margot had already been serving informally in a leadership role for green initiatives. So why did Unico expend the resources to create a new position if they were already going strong?

It was a matter of maintaining their market competitiveness and being more effective in their ongoing green initiatives by establishing a formal leadership team. When Margot attended a BOMA conference last year, she ran into a number of her peers who were playing similar roles in their firms as she was within Unico, but with a greater degree of empowerment and corporate recognition, and perhaps most importantly, a budget. She realized Unico needed a point person to carry the vision forward.

"We had to formalize something that was already going on," Margot said. It became imperative to identify a clear leader with the authority to drive Unico's sustainable agenda across their different property teams and business units. A more official structure would establish clearer responsibility and accountability and enable Unico to take advantage of economies of scale. They would now be able to streamline practices and share knowledge across the portfolio, using "prototype" projects to develop ideas for best practices.

Margot herself was the obvious choice to fill the role. Her long-term commitment to environmental stewardship is rooted in part in its ability to bridge the gap between traditionally oppositional groups - landlords and tenants; environmentalists and more conservative property owners - who can all find common ground in the need to save energy and conserve resources. "This is an opportunity to bring all the parties together," Margot said. "If we're working together positively on something, we'll have a better community within the buildings."

Margot and Brett Phillips, Unico's Sustainability Project Manager, now serve essentially as internal consultants for Unico, collaborating with building operations, marketing, development, investment, and corporate staff. Weekly meetings with property teams help Margot and Brett ensure that the energy and sustainability projects in each property's annual business plan are being implemented and that actions are being taken toward properties' LEED for Existing Buildings (EB) certification. For each project that involves a capital investment, the sustainability team carefully weighs the costs with the projected annual energy and cost savings.

Streamlining the energy performance benchmarking process was one of the first hurdles tackled by the new sustainability department. Said Brett, "Our entire office portfolio was registered with ENERGY STAR Portfolio Manager; all the chief engineers knew it was their responsibility to update and track energy performance. But it was inconsistent - some were updating scores monthly, some every six months; some were looking to increase their ENERGY STAR score, some were just going through the motions. Following a portfolio-wide benchmarking effort, properties are now operating in a consistent and understandable way with regard to Portfolio Manager."

Cobb Building

Property managers and engineers are particularly critical to these efforts - and are fully on board. "Our engineers love this stuff," said Brett. "It's an engineer's dream to make a list of all the things you'd like to do to your building to improve energy efficiency." Property managers and engineers utilize real-time metering in combination with ENERGY STAR Portfolio Manager to monitor energy consumption and costs at the building level. Margot and Brett also have access to this data centrally and share it with anyone else who may need it - including ownership partners, who receive ENERGY STAR ratings as a part of their monthly reports.

Having a sustainability department in place provides a structure that allows property managers and engineers to communicate with each other, sharing goals, experiences, lessons learned, and information about new concepts and technologies. Organizational knowledge is distributed via the weekly LEED meetings, weekly engineering meetings, quarterly chief engineer meetings, and informal emails and phone calls among property managers.

Service providers, vendors, and contractors form another core group that have a hand in the success of sustainability initiatives. Sustainable purchasing policies have been developed, covering everything from ENERGY STAR-qualified office equipment to ongoing consumables to recycled content building materials, and properties are being pulled into the program in stages. Sustainability criteria are communicated to architects working on tenant improvements or remodels; to contractors performing mechanical upgrades and retrofits; and in some markets, even to trash haulers.

Many of the initiatives underway involve building upgrades and operational changes in support of potential LEED certification. "In 2009, our primary goal is to accomplish LEED-EB certification for as many properties as possible. The incentives for energy reduction targets are built into achieving the 69 EPA energy performance rating required for LEED-EB," said Margot.

Key Center

Other specific goals have been set for each department, such as helping the investment department better understand how sustainability can add value or introducing cost-effective sustainable practices in the multifamily portfolio. Across the office portfolio, Unico has endorsed the BOMA 7-Point Challenge, which calls on organizations to reduce energy usage by 30% as compared to an average portfolio. So far, Unico has reduced energy usage by 28% compared to the national average.

Among their initial successes, Unico counts 10 ENERGY STAR-labeled buildings and two that are currently LEED-certified. By the end of 2009, Unico expects to have 12 buildings with a LEED certification under either the LEED for New Construction (NC) or LEED-EB rating systems. 100 Pine in San Francisco, where Margot continues to manage, has the distinction of being the first multi-tenant building in California to earn LEED-EB certification.

Unico has also developed creative programs and services for tenants, such as green dry cleaning services, water filtration systems to cut down on bottled water consumption, and education on green practices to implement at work and at home. Bike parking is now available in every Unico office property. Office leases are being updated to encourage tenants to follow green guidelines. Tenant responses to these initiatives have been overwhelmingly positive.

To further engage tenants, Unico recently began using green lease language (adapted from the BOMA Green Lease Guide) with each new tenant. Basic requirements include purchasing only ENERGY STAR qualified office equipment, complying with LEED requirements for waste diversion, and conserving energy day-to-day by taking simple actions like turning off unneeded lights. "Green sustainability fairs" in office building lobbies aim to keep tenants inspired to participate in sustainability efforts once they've moved in, and lobby signage periodically updates tenants on new initiatives such as lighting or mechanical upgrades.

This continual inspiration and motivation is a consistent theme in the new sustainability department's approach. "A lot of managers tend to get lost in the paperwork and lose sight of the inspiration behind embracing sustainability. It's important to have someone outside the immediate property team to keep the spirit alive and keep looking for new ideas," said Margot.

Along those lines, Unico's sustainability department staff leverages industry resources to keep abreast of new innovations, learn from their peers, and move projects forward. Both Brett and Margot are pursuing LEED accreditation through the USGBC, and Unico is working to have as many staff members as possible become LEED-accredited. For every energy efficiency project being pursued, property teams work with the local utilities to leverage rebates and incentives; for example, the Seattle portfolio collectively received over one million dollars in rebates from Seattle City Light for 2007 energy efficiency projects.

The biggest challenge Margot expects to face in her new role is the fact that there are only 24 hours in the day. Also currently serving as President of BOMA San Francisco, she has a lot of demands on her time - though the two positions complement each other. Holding a corporate-level role at Unico gives Margot greater credibility in her BOMA leadership.

When asked what advice she would give to other companies looking into creating a similar job, Margot said, "Get going! There is a lot of energy and direction in the marketplace around green issues right now. I'm very hopeful that this will be a positive growth area in a suffering economy."

Brett added, "There are obvious environmental reasons to reduce your carbon footprint and reduce strain on natural resources, but from a business standpoint, reducing energy use is equal to working toward having a high performance building. It's a huge advantage to put together a sustainability department to be able to harness all the things going on in the market."

100 PineBuilding

Margot stresses the importance of maintaining a bit of healthy skepticism. "It's important to keep your feet on the ground and be aware of unintended consequences. Sometimes something that seems like a good idea is not always a good idea in the long run - there's a grain of salt to all of this," she said. For example, the 100 Pine team was committed to replacing all the restroom fixtures to incorporate low-flush toilets. But the San Francisco Bay Area didn't offer a viable option to recycle all the old ones, so the environmental benefits were not as clear-cut.

Yet Margot remains inspired by the broader sustainability vision: "The West Coast is so attuned to nature and the great outdoors. That's a value that's worth agreeing upon and promoting."

*The national EPA energy performance rating provides a metric of a building or portfolio's energy efficiency as compared to other properties around the U.S. On the 1-100 scale, an average building earns a rating of 50; a rating of 69 means that a property is among the top 31% most energy efficient in the nation, or in the 69th percentile. The LEED green building certification program for existing buildings requires a minimum energy performance rating of 69.

Briefings & Templates

admin — Wed, 19 Nov 2008 11:33:15 +0000

Quick overviews detailing the interactions between energy and commercial real estate, these briefs and templates will help you to digest the essential facts and take action.

Organized according to the High Performance Portfolio Framework, look below to find the information you require:

Note: If the document is not hyperlinked, that means that it is coming soon. Please check back as we add more resources.

Assess

Commit

Sample Energy Management Policy(Template)
Sample Presentation to Senior Management (Template)
Energy Efficiency: Myths & Misperceptions

Plan

Implement

Capitalize

Ashforth Leads the Way

admin — Wed, 19 Nov 2008 11:19:24 +0000

A well-established, family-owned firm with roots going back to 1896, the Ashforth Company might be expected to do business traditionally. They break the mold, however, when it comes to environmental sustainability. In 1999, before "green buildings" were the hot topic in real estate, the company's West Coast arm, Ashforth Pacific, made a decision to be more sensitive to its properties' environmental impact. They have since earned a reputation as a leader in the field. As an example of their subsequent successes, 2006 energy consumption in their Lloyd District portfolio was nearly two million kWh lower than 1998 levels.

A full-service firm, the Ashforth Company owns and manages over 8.5 million square feet of real estate nationwide, with Ashforth Pacific holdings in Portland, Seattle, and San Francisco. The focus on sustainability arose in part from the company's awareness of commercial real estate's environmental footprint. They believe that businesses must help solve environmental problems, and high performance buildings are commercial real estate's greatest potential contribution. Of course, the opportunity for Ashforth Pacific to better control costs and enhance asset values for their properties is also a key motivation.

A Strategic Approach

Ashforth Pacific takes a cost-conscious approach to improving its properties' energy and environmental performance, focusing on low- and no-cost measures first. "There are always opportunities to enhance efficiency without spending any money. I call it 'enlightened management,'" says Wade Lange, Vice President of Property Management for Ashforth Pacific. This strategy recognizes that small improvements to day-to-day operations substantially impact efficiency.

Ashforth leaders also recognize that when approached strategically, high performance buildings are good for business. Each decision is evaluated from environmental and business perspectives. Says Lange, "At each step, we ask, 'is it a sustainable decision, and is it a good business decision?' If we can't say yes to both of those questions, we reevaluate."

Utility rebates and tax incentives improve the business case for many sound projects that reduce operating costs and enhance tenant comfort, but might not otherwise pass the financial test. Since 1999, the company estimates that it's received rebate checks to the tune of over half a million dollars from local utility programs such as the Energy Trust of Oregon.

However, other projects are put on hold until business conditions can support them. For example, the company has considered applying LEED standards to all tenant improvements. But the tenant makes the ultimate decision whether to comply with that directive or to just find a different office. At the moment, attracting and retaining tenants is the more important business priority, so the project is on hold until tenants are consistently willing to comply with sustainable principles.

That shift may be underway, as environmental impact is becoming more of a priority for tenants and other market players. "We'll know we've reached a tipping point when brokers come to us and say, 'We want Liberty Center, because you run a great building and it's sustainable and energy efficient.' That hasn't taken hold with the brokerage community, but it's getting there," says Hank Ashforth, Chief Executive Officer of Ashforth Pacific.

A Conscientious Culture

When the company's environmental program kicked off in 1999, full-time sustainability coordinators helped get them on the right path, training employees to manage a sustainable business. Now, these principles are well integrated into regular decision-making. To Ashforth Pacific employees, it's just the way that business is done.

During their day-to-day responsibilities, employees from all functional areas determine what each of their disciplines can contribute to efficiency and sustainability. They follow the guidance laid out in the early stages of the program, but also continually revise and improve their tactics.

For example, an early team established a "green" procurement policy for office supplies, such as energy-efficient office equipment. After they laid the foundations for environmentally-responsible purchasing, the team was no longer necessary, but employees still periodically revisit these policies to determine whether updates are required. In fact, more recently, Ashforth Pacific became members of the Responsible Purchasing Network, which evaluates products' sustainability. By taking a company-wide approach to procurement and other business practices, Ashforth Pacific can ensure that decisions and activities are consistent with overall goals.

Integrating "green" into decision-making in this way has enabled Ashforth Pacific to take advantage of opportunities to create value. A recent acquisition in San Francisco was all the more appealing because it was developed nearly to LEED standards, but developers never pursued the certification. Ashforth saw this as an opportunity to increase the potential value of the asset, and plans to pursue LEED certification for the property in the future.

Continual knowledge-sharing ensures that employees retain their commitment and constantly learn from each other. The engineering staff meets regularly to discuss building systems and procedures, share best practices, and help each other improve.

Engineers and property managers make daily decisions that affect energy consumption and other metrics, so building their capacities is a key component of the sustainability program. They regularly attend BOMA Energy Efficiency Program educational sessions. Along with all other incoming Ashforth employees, they also participate in the Natural Step sustainability training program.

Award-Winning Energy Performance

Ashforth Pacific recognizes that energy efficiency is the largest opportunity for green buildings, in terms of potential cost savings and environmental impact. Two Ashforth Pacific properties, One Pacific Square and Liberty Center, recently won top awards in the 2007 BOMA Portland Office Energy Showdown for their superior energy efficiency. The contest required entrants to benchmark their buildings using EPA ENERGY STAR's national energy performance rating system.

The three Ashforth Pacific properties that are now rated in the ENERGY STAR system all earned energy performance ratings in the top 25% of office buildings nationwide. Ashforth Pacific is undertaking an initiative to benchmark the rest of its properties, and engineers closely track energy use on a daily basis.

In One Pacific Square and Liberty Center, Ashforth Pacific focused on two major areas of energy consumption - lighting and cooling. To improve lighting efficiency, they capitalized on low-cost operational changes. It was simple, says Lange: "We'd try to find ways to make systems work more efficiently, so we weren't lighting a space that didn't need to be lit." For cooling systems, building operators closely monitored conditions and identified simple ways to improve, such as taking more outside air into the building in the morning to use less energy during start-up.

Efficient operations in these buildings didn't end with the announcement of the BOMA Showdown results. Rather, it's become standard fare. Engineers now carry cell phones that receive automated text messages when system conditions deviate from set parameters, so that they can be on top of changes before energy performance begins to fall.

Though they're proud of these successes and reputation, Ashforth leaders recognize that high performance buildings are an ongoing effort. "You can never rest on your laurels and turn your attention elsewhere," says Lange. "This is a constantly changing, progressing initiative. We're always striving to improve management and efficiency and take the next steps." Hank Ashforth agrees: "We don't see LEED certification or the ENERGY STAR label as a goal or an end point. Rather, they're mile markers along the way."

A significant next step is to expand Ashforth Pacific's environmental initiatives to the rest of the Ashforth Company. "Based on our success with this program since 1999," says Hank Ashforth, "we're now looking at sustainability on a national basis."

Challenging the Market to Move Forward

Ashforth Pacific sees its role as an industry leader entailing much more than owning and operating efficient buildings. The company is also challenging its contractors, tenants, and other stakeholders to commit to sustainability, and is helping drive a broader shift in the market. In its Portland properties, Ashforth Pacific had its janitorial contractor conduct a one-month trial of "team cleaning," in which one floor of a building is cleaned at a time so that all lights can be turned off as the team moves to the next floor. So far, the energy savings look promising.

For a lighting retrofit project in its Lloyd District properties, Ashforth Pacific received an Oregon tax credit that it passed on to the Lloyd District Transportation Management Association (TMA). The credit gave Lloyd TMA a pool of funds to improve environmentally-friendly transportation options - which, in turn, benefits Ashforth Pacific's properties in the area. Ashforth leaders hope that such mutually-beneficial partnerships will help other organizations buy into the sustainable mindset they've created among their own employees.

Promoting sustainability to tenants is another challenge altogether. In multi-tenant office buildings, tenants' behaviors and choices greatly affect energy and environmental performance. Though Ashforth Pacific can't mandate certain behaviors, they can influence and educate tenants on making smart choices.

Ashforth Pacific involves tenants in environmental efforts by providing easy opportunities to make the right choices, such as providing recycling bins. Further, by simply showing tenants the measures Ashforth is taking in their buildings, they hope to encourage tenants to manage their own businesses in a more sustainable manner. For example, tenants see janitors shutting blinds each evening to prevent the morning sun from increasing start-up cooling costs; eventually, these conscientious behaviors may become automatic for tenants.

Ashforth leaders have already begun to see increased tenant interest in the cost-effectiveness and employee health and productivity benefits of high performance buildings. Says Lange, "We can't point to a tenant and say, 'they're here because we offer a sustainable building,' but that's where the market is going." With a growing industry focus on high performance buildings - and the increasing presence of "green" leaders like Ashforth Pacific - that point may not be very far in the future.

Gerding Edlen Development Company

admin — Wed, 19 Nov 2008 11:28:54 +0000

by Rich Riegel

Dennis Wilde is a real estate developer with a passion for sustainability. Wilde, a senior project manager at the Portland-based Gerding/Edlen Development Company, was one of six professionals recognized as leaders in sustainable, high performance building with a BetterBricks Awards last year.

BetterBricks is an initiative of the Northwest Energy Efficiency Alliance and offers free services that connect building professionals with the information, tools, training and consultation needed to design and construct sustainable, high performance buildings.

Wilde has been active in construction and real estate development since 1967. Prior to joining Gerding/Edlen Development, he was vice president of Baugh Construction, a large regional construction company now owned by Skanska USA. In addition, he has more than 20 years of experience in urban planning and design and Master's degrees in both city planning and architecture from the University of Pennsylvania.

During a 45-minute interview from his office located amid one of the company's major projects-Northwest Portland's Brewery Blocks-Wilde spoke candidly about the environmental and financial benefits of building sustainably.

Environmental Demands, Good Business

"The first and most obvious is this is a move that all of us in this industry have to take. Our environment demands it. Either we figure out how to do it creatively and with our own initiative or it's going to get imposed upon us. I'd rather try to find creative solutions to reduce or minimize the footprint of what we do on the planet," Wilde said.

"The second is that we have discovered that it's simply good business. It doesn't necessarily reduce costs, but we've found that it doesn't cost a significant premium. And that the benefits in terms of operating costs, sales and lease appeal of our product are significantly greater. We've been much more successful since we've embraced this approach. So, given that, why wouldn't you do it," he asked.

Weighing the Costs

According to Wilde, taking the plunge into sustainable building was a leap of faith. "We basically said to ourselves, 'Let's do this,' but we didn't want to incur significant hard construction cost premiums. We were willing to incur some design cost premiums, some soft cost premiums for going through the accreditation process for LEED certification. But we didn't want to incur hard cost premiums. That was our benchmark," he explained. Wilde defines soft costs as design and engineering, the work done prior to hard cost expenditures of "actual sticks and bricks in the ground."

LEED, or Leadership in Energy and Environmental Design, is a certification of the U.S. Green Building Council. The LEED Green Building Rating System is a voluntary, consensus-based national standard for developing high-performance, sustainable buildings. LEED was created to define these buildings by establishing a common standard of measurement. Certification levels include: certified, followed by silver, gold and platinum.

"We have found that through our efforts we've been able to accrue enough in the way of investment tax credits, grants and aid to offset our initial capital investment," Wilde said. He added that it's relatively easy to obtain tax credits in Oregon because of the Business Energy Tax Credit program (BETC) offered by the state. Wilde explained that the BETC program propels the construction team through a LEED-based route. "So if you're going to go for LEED certification for your project, then it's automatic," he said. The developer receives dollars per square foot of building area in tax credits, and a 35 percent investment tax credit.

"It adds up to significant dollars. On our projects . . . our business energy tax credits range from $180,000 to $1 million per project, depending on how well we perform. So you're talking real money," Wilde said.

Continuing to Raise the Bar

When asked if lessons learned from one project are applied to the next, Wilde responded that his company tries to do even more on each project. "You're not making much progress if you're not raising the bar," he said. "This whole area of (constructing) and operating buildings in an environmentally responsible fashion is relatively new to most of us. And so we certainly don't know everything there is to know. We're learning on every project, so unless you're applying those lessons as you go down the road, what have you accomplished?"

Wilde explained that raising the bar applies to everything that improves sustainability and performance from the energy systems that go into the building to the operation of the HVAC and lighting systems. "Now we're seeing ways of getting rid of the air conditioning altogether," he said referring to designs that naturally ventilate and cool buildings using outside air. "Now that would be a real breakthrough."

"On the one project we have under construction now, we challenged our mechanical and electrical engineers up front to give us a building that was 60 percent more efficient than code," Wilde testified. "You're talking major reductions of energy consumption of a building. And we're going to achieve that."

This latest challenge in decreasing energy needs involves what Wilde called, " … a very complex medical office building (for Oregon Health & Science University) with wet and dry labs, ambulatory surgery, wellness fitness center and all kinds of big energy hogs."

Efficiency Can Offer Substantial Savings

"And so to achieve 60 percent energy savings, you're talking several hundred thousand dollars a year just in the gas and electricity that the building owner now is not going to have to pay. That's on top of all the other savings we've been able to find, in terms of energy tax credits and the like, so all of a sudden you're talking about paybacks becoming very attractive to an owner. It's like, 'Ok, yes, I definitely want to do this, because it's in my long term best interest,' " he said.

Wilde was asked if he has been able to convey the added increased asset value in a sustainably-constructed building to tenants in office or residential buildings. "Some get it and some don't," he candidly explained. "What we've done in our office buildings in the Brewery Blocks is created a tenant manual that described all of our environmentally responsible efforts that we have incorporated into the building shell and core for our commercial office tenants. Some of the office tenants embraced the ideas, in terms of the low VOC (volatile organic compound) finishes," Wilde said.

But are residential tenants warming up to the spirit of sustainability? Apparently so. When Gerding/Edlen first started marketing The Henry, one of its condominium projects in the Brewery Blocks, the company talked to its brokerage firm about marketing the environmentally responsible efforts. The firm conducted an informal exit survey with buyers, and 25 percent of the buyers said sustainable design and construction was part of their decision making process, with 6 percent saying it was a primary reason for purchasing. The Henry sold out nine months before it was completed, at record sale prices, according to Wilde.

"So all of a sudden we're saying, 'Holy mackerel, this has a huge marketing potential for us.' So on the Meriwether, our next condo project in the South Waterfront District, we're making that an upfront and central part of our marketing and we're getting very favorable responses," Wilde said.

The Meriwether will be two high-rise condominium towers with 245 units along with retail space, slated to be complete by summer 2006. The developers are Gerding/Edlen Development and Williams & Dame Development. "Again, we're finding a lot of acceptance in the marketplace (for sustainable design and construction), a lot of the buyers are much more educated and much more interested than we as developers and brokers assumed," he said.

Higher Value Sustainable Buildings

Wilde believes that there's an increased asset value in any property that is built sustainably. "If you are building buildings that have a longer life, have better performing systems, have lower operating costs, then pretty soon appraisers and investors are going to figure that out. So they're going to start assigning higher appraisals to buildings that have better performance characteristics," he explained. "The appraisal and financial institutions have been slow in coming around to that, but a number of them are now starting to see that as a significant factor and one that they need to pay attention to."

When asked about being ahead of the curve when Gerding/Edlen used sustainable building techniques on the Sequent Computer Systems headquarters in Beaverton in 1998, Wilde was forthcoming. "This has been a passion for us, a passion for me in particular and fortunately my partners have been willing to indulge in my efforts to make our buildings as environmentally responsible as possible," he said. "They have been truly supportive, because they believe in it also. Both Bob Gerding and Mark Edlen feel very strongly that as a company, part of our responsibility, in addition to generating a profit for us and keeping the doors open, is to give back to the community, to make sure our projects leave a positive legacy for the community, that they are part of building the fabric of the community. That philosophy has been core to Gerding/Edlen from its very inception," Wilde concluded.

October 2004

CB Richard Ellis

admin — Fri, 14 Nov 2008 15:10:05 +0000

Dave Pogue, Senior Managing Director, Asset Services, Western Region
Kurt Sarchet, General Manager, Seattle Municipal Tower

CB Richard Ellis (CBRE) is a leading global provider of real estate services, with more than 700 million square feet under management in the U.S. and 25 million square feet in the Pacific Northwest. In May of 2007, CBRE announced a company goal of becoming carbon neutral by 2010 and engaging its clients in environmental and energy initiatives.

Dave Pogue, Senior Managing Director for CBRE's Asset Services, Western Region, has 33 years of experience in commercial real estate. He has been largely responsible for CBRE's recent increased focus on environmental responsibility, having led the development of the company's environmental and energy team, the Green Knights. Dave is nationally known as a leader in the field. Kurt Sarchet, General Manager of the Seattle Municipal Tower, is a member of the Green Knights and an active proponent of green property management in CBRE's Northwest properties. He has 16 years of experience in commercial real estate management and earned CBRE's Real Estate Manager of the Year award in 2004.

BetterBricks: CBRE recently made a very aggressive announcement regarding carbon neutrality in spaces you occupy. How did this come about?

Dave: Given what we're hearing about climate change and the wide-ranging impact of our expanding global reach, it's appropriate that we begin to do business in a more responsible fashion and reduce the impact we have on the environment. To that end, as a company we have made a commitment to be carbon neutral by 2010. We are currently evaluating our carbon footprint - the greenhouse gases produced as a result of our business activities. We'll do a whole host of things to reduce that footprint - moving into LEED-certified spaces, encouraging our employees to carpool or telecommute, rethinking corporate travel, and much more. To the extent that we can't totally reduce our footprint, we'll buy carbon offsets.

Separate from that, our business allows us to have an impact on lots of other real estate, in addition to the spaces we occupy. We will engage our clients in this discussion and lead them to carbon reductions as well. Enhancing the energy efficiency and energy management services we provide to clients is part of that.

BetterBricks: What was CBRE's motivation to focus on energy?

Dave: Initially, it was purely financial. Approximately 18 months ago, the combination of rising post-Katrina insurance costs and rising utility costs due to high energy prices caused us to seriously address expenses in areas we thought we might be able to control. Some people in CBRE focused on insurance, and I started a group focused on how we could reduce energy costs.
Over the next six to nine months, it grew into something much bigger, when we realized there was this larger movement toward sustainability. In the summer of 2006 we began working with the EPA's ENERGY STAR® program. Now there are more than 400 CBRE-managed buildings that have benchmarked their energy performance with ENERGY STAR.

We also asked our Real Estate Managers to create energy management plans for their buildings. Nearly 300 buildings now have these plans in place. The goal of these efforts is to save 15% on energy in 2008 over 2007 levels. 2007 is the year of planning, training, and benchmarking; in 2008 we'll begin to see results.

BetterBricks: How have CBRE's services evolved to incorporate this commitment?

Dave: We're setting new standards for the way we manage our buildings - a basic set of things we'll do for each of our clients. A client can then make the choice to go further, in which case we'll provide additional services such as retrocommissioning or developing a LEED gap analysis.

To develop these standard services, we have made use of LEED principles, ENERGY STAR resources, and BOMA Energy Efficiency Program resources, which promote low- and no-cost approaches first. We will do everything possible to change behaviors and make improvements that aren't capital-intensive before we ask for any capital dollars from our clients. For example, we have a number of buildings that have been able to reduce or eliminate Saturday hours, even if they are required in the standard lease. If tenants want Saturday hours, they make a special request. It's made a big difference.

BetterBricks: That sounds like quite a change for your tenants. How are they involved in these initiatives?

Kurt: A large part of our efforts is educating tenants and their employees on how they can help with conservation. They can do simple things such as turning off computer monitors at night, purchasing automatic timers for small appliances that will automatically turn off after a period of time, closing window blinds on sunny days to reduce cooling loads, turning off lights, participating in carpools, and delamping fixtures. We also walk through buildings and calibrate thermostats on a quarterly basis, and install motion sensors wherever practical.

Dave: Much of what happens in a building involves changing tenants' behavior. For us to successfully make these changes, tenants must be willing to accept new ideas like daytime cleaning, higher thermostat set points, and robust recycling programs. Some of these changes - which we think are modest - do require acceptance and active participation.

Kurt: To facilitate this with my property, we hold biannual meetings with tenants to bring up energy conservation tips and find out how their suites are doing. We also send out newsletters, and we post articles on our building's Web site that show tenants they're making a difference.

Dave: We've developed a series of these newsletters. It's important to regularly communicate results to tenants in this way, equating their efforts to something meaningful like the number of trees we've saved or the equivalent number of cars taken off the road. We need to tell them why it's important, what they can do to make a difference, and what impact it has.

We also want to get people excited about sustainability so that they might take these things back to their homes and communities. For example, we're working with a national service provider who would help us hold CFL [energy-efficient compact fluorescent lights] sales at our buildings, where tenants could buy the bulbs at our discounted rate and use them in their homes.

BetterBricks: Who leads these energy and environmental efforts at your managed properties around the country?

Dave: The Green Knights, our nationwide energy and environmental team. We always strive for company-wide consistency in policy and practice. We've found that to achieve this, the best approach often is to find someone in a local market who has a personal commitment to whatever the program happens to be. They become that program's "champion." It didn't take me very long to recognize that we needed the same approach for our energy and sustainability programs - a group of committed local advocates who already had a personal commitment to sustainability. So we asked each of our Market Leaders to identify someone who fit those criteria. There are now 33 Green Knights. Most of them are also managers of high-profile office buildings actively engaged in the ENERGY STAR program.

We brought these individuals together in three regional meetings and empowered them to be the eyes and ears in their local markets. We had them learn more about the topics so they could be an informed resource. They help write weekly communications for all of Asset Services, discussing real time, real world experiences. The goal is to have all the Green Knights certified as LEED Accredited Professionals by the end of the year - we want them to become technical experts in the field, to go along with their personal passion.

Kurt: As a Green Knight in the Northwest market, I work with our properties on the ENERGY STAR benchmarking platform, review operations and maintenance plans, earmark where they can make improvements, and facilitate training for the local market. The value in this approach is that we can each talk to other property managers in other parts of the country to find out what initiatives they've put in place and what savings they're seeing.

Dave: If we can drive the effort from the top down and touch all our properties consistently, we can ensure the same message gets out and reuse the same resources for different regions. For example, we have an excellent graphics and communications department that develops materials for use on a national level. The scale of the national program also gives us better purchasing leverage.

BetterBricks: What challenges, issues, or problems have you run into?

Dave: First of all, the fact that we don't own any of this property. We're trying to develop a consistent national program while recognizing that each of our owners have different approaches, agendas, hold periods, and opinions.
With that in mind, we still believe that we have a responsibility to make something positive happen at the property level, so we do a lot of things that don't require active owner participation or capital. No owner is going to be upset about us making energy efficiency a part of the way CBRE manages buildings, but some want to invest more or less capital in the effort than others.

Another challenge is that there are so many people out there right now that think they have the right answer, the right technology. It can be difficult to wade through it all and create a sensible approach.

Also, government regulations are going to come to commercial real estate sooner than we may think or want. We need to become more sensitive to how we do business on our own, or else someone is going to regulate it for us.

BetterBricks: What portfolio-wide financial benefits do you expect to see?

Dave: If we are able to reduce energy use by 15% on the entire managed office portfolio, we will reduce overall costs by nearly $100 million for tenants and owners. At current capitalization rates, that's nearly two billion dollars in value. And there will be a great impact on the environment at the same time.

There's power in big numbers for us because we touch so much square footage. Clients want and expect us to use our size for their benefit. This is a great example of where that is working.

BetterBricks: How are your properties in the Northwest doing?

Kurt: Currently we're tracking the energy performance of several of our office buildings that are 100,000 square feet or more. My tower has been utilizing the EPA's ENERGY STAR program since 2005 and qualifies for the ENERGY STAR label, with an energy performance rating of 84 out of 100. We're in the process of applying for this certification by fourth quarter 2007. We've performed improvements such as retrofitting the parking garage with T-5 fixtures, auto sensors, and daylight sensors, which is expected to have a 6-year payback with 225,000 kWh savings annually.

BetterBricks: What impact do you envision CBRE having on the rest of the industry?

Dave: I hope we have a huge impact. The commercial building industry is a major source of greenhouse gas emissions. We have a responsibility to improve that, and because of our company's global reach, we can.

BetterBricks: What is your sense of the status of this market today, and where do you envision it going?

Dave: There will always be people who are leading and people who are trailing. Some owners take a short-sighted view, especially if they are selling the building and are only interested in keeping a single tenant happy, at whatever cost. And there will always be tenants who want business as usual, resisting even simple things like temperature changes and hours of operation.

But I've been in the business over 30 years, and I've never seen any other trend or movement progress with such speed and such depth as the issue of "green" and sustainability. I sometimes talk about the "crisis du jour" - this business has gone through things from asbestos to Y2K to 9/11, and each of those things was supposed to forever change the business. This will. This will forever change the way people manage their buildings.

Urban Land Institute

admin — Fri, 14 Nov 2008 14:50:05 +0000

Emerging Trends in Real Estate 2008 Highlights: Seattle

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In 2008, Seattle ranked as the second-hottest commercial real market to watch, trailing only to New York City, but ahead of Washington D.C., Los Angeles and San Francisco. As a commercial real estate market, Seattle has been a rising star for the past five years, climbing back from a hole after the tech bust in the early 2000 to once again reach its late 1990's highs. It has now gained status as a preeminent U.S. global gateway city, among the nation's commercial and cultural wellsprings in a rapidly integrating world economy.

Seattle is a standout market for investors, receiving top or near top "buy" ratings for all property sectors: It ranks best in the country for buy ratings in industrial, multi-family, Office property, apartment residential (rental). It ranks second in buy ratings for hotels and retail properties, second only to San Francisco and New York, respectively.

Growth controls and geographic barriers have led to concentrated high-density, mixed-use development, which has drawn residents to new downtown neighborhoods, making Seattle a 24-hour city. However, terrible traffic congestion is strangling commuters. In part, this has helped to create a satellite office market in Bellevue. Expect to see further growth in other urban nodes.

Seattle has "top to bottom" strength because of its location on Asian shipping routes Puget Sound ports attract an abundant share of Pacific Rim import/exports, bolstering the solid warehouse market.

Like other global gateway cities, Seattle is a magnet for corporate headquarters, business elite and the best and the brightest workforce. With so many "corporate heavyweights" headquartered in or near Seattle, it has a highly diversified economy. With office vacancy rates below 10 percent, companies are seeking deals for big blocks of space. Rents are accelerating and prices have risen such that they are at or approaching replacement costs.

Seattle is the nation's best homebuilding market, and housing prices just continue to rise, making it an expensive city in which to live.

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Now in its 29th year, Emerging Trends is the oldest, most highly regarded annual industry outlook for the real estate and land use industry. The report reflects interviews with and surveys of more than 600 of the industry's leading real estate experts, including investors, developers, property company representatives, lenders, brokers and consultants.

High Performance Portfolio Framework

admin — Fri, 14 Nov 2008 15:11:07 +0000

Energy management strategies for a competitive office market.

The executive summary. It's the how-to guide for real estate professionals, detailing the critical concepts and actions necessary to create - and maintain - energy excellence in your portfolio.

Click to download the Framework.

Kennedy Associates: Investing Responsibly Without Compromising Financial Returns

admin — Fri, 14 Nov 2008 14:25:04 +0000

Download a PDF of this article

Kennedy Associates, a Seattle-based real estate investment advisor, has long understood that high performance buildings are not only the right thing to do - they're a business imperative. Responsible Property Investing (RPI) is an apt description of this approach, which Kennedy follows for the development and management of more than $13 billion in real estate assets.

RPI is a holistic approach to real estate investment that considers the environmental and social ramifications of property ownership, development, and management. Achievements in this area, in Kennedy's experience, can also improve financial returns. According to Christian Gunter (Kennedy's Assistant Vice President, Responsible Property Investing), "RPI is the manner in which Kennedy works on behalf of its clients everyday."

RPI and its organization, the Responsible Property Investing Center (RPIC), resulted from collaboration among academics, real estate owners, institutional investors, advisors, developers, lenders, associations, and the Socially Responsible Investing community. When the group met in 2006 and 2007 to discuss the burgeoning concept of RPI, longtime Kennedy executive Ron Roberts was present.

The RPIC developed criteria for responsible investments, which Kennedy classifies into three broad categories - sustainable development/redevelopment, responsible property operations, and economic fairness and worker health. Criteria run the gamut from energy efficiency to affordable housing; from wetlands protection to insisting that contractors pay a living wage. "Our goal is to encourage anyone responsible for real estate stewardship to consider those metrics every day," says Roberts.

Over the next year, the RPIC will research the quantifiable data behind RPI and define specific metrics to measure properties' performance, while building an RPI network. Kennedy is serving as a test case for the approach; as it plays out in their portfolio, they'll evaluate their successes and report back to the RPIC.

Kennedy's clients are supportive. "We're asked to take the lead on behalf of our clients," says Gunter, "especially with areas that create value, such as energy efficiency." Kennedy has also been able to create value for clients and their communities by working exclusively with companies that honor fair labor laws and foster positive work environments. A recent survey estimates that activities on behalf of its largest client created 84,330 jobs and $9.9 billion in local economic activity from 1982 though 2005.

A strong internal commitment and frequent communications ensure that employees keep RPI in mind in everyday decisions. "We want everyone to know that we're putting a lot of energy behind this. It's not only front of mind in every investment we make - it's also on the front page of our Web site, at the bottom of our emails, and in corporate marketing material," says Bob Ratliffe (Executive Vice President, Portfolio Management).

A Framework to Help Better Define and Track

A major group of activities on Kennedy's path to a responsible portfolio centers on how existing assets are managed. Naturally, energy efficiency plays a big role, along with water efficiency, waste management, and indoor air quality. Long before RPI, Kennedy realized that energy use is one of the most costly components of building operations - but a controllable cost.

Kennedy benchmarks all eligible buildings' energy use with Portfolio Manager, from the EPA's ENERGY STAR program. Eligible buildings include 89 office buildings comprising over 11 million square feet. During 2006 and 2007, 28 Kennedy office buildings have earned the ENERGY STAR for superior energy performance. The company has also set out to earn Leadership in Energy and Environmental Design (LEED) certification for 45 of its existing office buildings - a major component of which is the ENERGY STAR rating - under a USGBC pilot program. By benchmarking, Kennedy has been able to show a 41.7 million kBtu reduction for its office portfolio, with consumption 2.1% lower than a year ago.

In 2007, Kennedy expanded benchmarking to its industrial portfolio, of which four buildings have earned the ENERGY STAR. The industrial portfolio presents a challenge due to the triple-net structure of industrial leases. In both the industrial and office portfolios, Kennedy can't control tenants' energy usage outright, but are persisting where they can impact it. Measures have included providing weekend HVAC only upon request, optimizing start up times and sequencing, and installing energy-efficient lighting. In their own office space, Kennedy is pursuing LEED-Commercial Interiors (CI) certification, purchasing ENERGY STAR appliances, improving lighting efficiency by an estimated 35% through retrofits, and reducing water use by an estimated 40% through water efficient fixtures.

Kennedy relies on its third-party property managers and engineers to implement these strategies on site. "These companies are well aware of the 'green wave.' RPI is just a framework to help them better define and track their efforts," Ratliffe says. Kennedy asset managers communicate regularly with building operators about RPI activities, incorporating RPI standards, achievements, and plans into their annual property business plans and budgets.

In addition to existing buildings, responsible new developments and redevelopment projects are key to the program. Kennedy targets LEED Silver certification for all new developments - a goal that their experiences tell them is often achievable at a 1% or lower cost premium over typical projects. Currently, their portfolio includes two LEED-certified projects in the New Construction and Core & Shell categories, with an additional 14 in development and pre-development stages, valued at over $1.3 billion.

LEED is highly compatible with the components of RPI that pertain to new construction. However, RPI's holistic approach takes care not to overlook properties that may never qualify for LEED, but that perform well against RPI criteria and make continual improvements.

They've Started to See How These Factors Affect the Numbers

Acquisition officers are encouraged to pursue due diligence within the context of RPI and consider the lower operating expenses of highly efficient buildings in both acquisitions and dispositions. In client investment briefs, Kennedy includes a discussion of the relevant RPI components of a possible acquisition - the criteria it already meets, and possibilities for improvement. Thanks to frequent internal communications and education, says Gunter, "Acquisition officers know what RPI is, and they've started to see how these factors affect the numbers."

The Northwest boasts several Kennedy assets that exemplify RPI. Block II of Portland's Brewery Blocks, which Kennedy developed with Portland-based Gerding Edlen, achieved LEED Gold certification despite the age of the original building, which dates back to 1908. In fact, structural reuse and historic preservation contributed significantly to both the LEED certification and the building's performance against RPI criteria. Brewery Block rents are up to 20% higher when compared to other Class A office projects in the area.

Portland's Rivergate III is Kennedy's first green industrial project, with strategies such as sustainable tenant improvement guidelines. Seattle's Pacific Place Mall is an example of an extremely successful retail investment taking innovative steps to meet RPI criteria. For example, its restaurants partnered with a local waste hauler to recycle cooking grease, which will be reproduced into biodiesel.

A Fear of Obsolescence

2008 will be a big learning year for Kennedy, as they further develop their methodology, expand its application, and identify and replicate best practices. At the same time, the firm must pay attention to how the market evolves - for example, will responsible buildings be more in demand? Kennedy's executives think so. "It's driven by a fear of obsolescence," Gunter says.

Whatever happens in the market, RPI has to make economic sense to be adopted on a large scale. RPIC activities this year will include research on some of the metrics that don't seem to make economic sense - and an analysis of how they might be fixed. For example, the RPIC might work with vendors to mitigate costs of expensive green building components.

Kennedy's experiences contribute insights to this effort, as they evaluate and compare costs in different markets and situations. Their position as a fiduciary to retirement systems such as the Multi-Employer Property Trust, as well as public and corporate pension plans, also adds a real-world perspective to the RPIC's academic research. Says Gunter, "We're focused on maximizing our clients' returns first and foremost. We'd be out of work if we didn't. But our clients agree, this is the right approach - doing good while doing well."
To learn more about RPI, read research reports, see who else is participating, or get involved, visit www.responsibleproperty.net.

Green Positioning

admin — Wed, 19 Mar 2008 14:23:02 +0000