The Price of Building Green

Even owners of spec buildings can reap some advantages

By Linda Hardesty

Does it cost more to “build green” than to use standard construction practices?

That depends upon who’s doing the estimating and who’s paying the tab.

Building professionals in the United States estimate that it costs a 16% premium to build a sustainable building, according to a recent study by the World Business Council for Sustainable Development in Washington, D.C.

Conversely, a study published in July by London’s Davis Langdon LLP the Europe and Middle East arm of Davis Langdon & Seah International, a global construction and property firm concludes that LEED-certified buildings don’t cost any more to build than non-LEED buildings.

Aside from the discrepancy about first costs, there’s the issue of cost savings over the life cycle of a green building. The energy savings, marketing benefits and value from increased worker productivity can be huge over time. However, speculative developers may not reap much of these benefits.

“That’s why you don’t see too many private LEED buildings,” says Ben Weeks, executive principal with Aardex LLC. He says that many of the LEED-certified buildings in Colorado are public structures.

Photo by Ed LaCasse

Aardex, a company that handles the development, design, construction and property services of buildings, just completed its own corporate headquarters in Golden. The 186,000-sq-ft Signature Centre recently received LEED-platinum certification.

“We have identified about $350,000 (less than 1% of total project cost) we believe was the premium for reaching the LEED-platinum level,” Weeks says. “But we built the building at, or less than [the cost of], many conventional buildings of similar size. We’re in the neighborhood of $200 per sq ft for a Class A building.”          

On the cost-savings side, Aardex’s mechanical system is expected to operate 30 to 40% more efficiently than a traditional system. The company has also reduced its lighting load from the typical 2-2.5 watts per sq ft to less than .75 of a watt per sq ft, resulting in substantial electricity savings.

And the 40 waterless urinals in the building will save 1.6 million gal. of water per year.

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Promoting Sustainability While green building may make smart financial sense for a builder like Aardex that will enjoy years of cost savings, the numbers don’t add up so well for speculative developers.

Nevertheless, some pioneers such as Denver’s Forest City Stapleton Inc. are building sustainable buildings on a speculative basis.

Greg Markling, principal with MOA Architecture of Denver worked with Forest City on its Stapleton Medical Office Building project. The 48,000-sq-ft building was part of the U.S. Green Building Council’s core-and-shell pilot program.

“For Forest City, it was an advancement of their philosophy,” Markling says. “The balance they were trying to achieve was to attain LEED silver and still be competitive from a leasing and marketability standpoint. They proved that was possible.”

In fact, Forest City is constructing a second, larger office building on spec at the Stapleton Redevelopment. Charlie Nicola, senior vice president with Forest City, estimates the cost premium to build green is about 2%. “Yes, the costs get cranked into our pro forma and diminish our rate of return,” Nicola says. “We’re going to have to make some concessions. We can’t increase lease rates to recover it.”

He adds that while the tenants of the buildings will enjoy the savings from better energy efficiency and improved worker productivity, Forest City can use those things to promote its buildings. “It helps attract tenants now that they’re getting savvy about these things,” Nicola says. “There’s a marketing piece in this for us. Also, we’re doing it because it’s the right thing to do.”

Green Citizens The situation is different for public buildings constructed with taxpayer money.

The Denver Health Pavilion for Women and Children received LEED-silver certification in July. Robert Owens with Boulder Associates architects was the principal-in-charge of the project. “The cost of LEED is related to how good a citizen you are going to be in the first place,” Owens says. “Denver Health already had a high commitment.”

The 212,000-sq-ft project cost roughly $58 million. Of that, $220,000 of construction costs can be attributed to green building. Architect and commissioning fees in connection with LEED certification cost another $85,000, making the premium to build green less than 1% of the total project cost.

Stephanie Thomas, chief operating officer with Denver Health, says the high-efficiency HVAC system is projected to save $105,000 per year, and by xeriscaping, the hospital expects it will save 250,000 gal. of irrigation water a year.

“I think we owed it to the community to be responsible for the public money they entrusted to us,” Thomas says. “This is a building for the future where we won’t be consuming as much as we would have.”

Thomas adds that aside from the hard numbers, “We expect that this building will improve retention because the employees love working here. It will also improve our ability to recruit.”

Other financial benefits to green building are more difficult to quantify, like improved worker productivity and better worker health. Considering that employee salaries usually cost far more per sq ft than building expenses, increases in productivity through better lighting or individual temperature controls can really pay off.

Several years ago, executives at Aardex noticed that when one of their federal government clients in Albuquerque moved from an old building to a new building with lots of natural light and outside views, the agency saw a 76% increase in the number of cases closed per year.         

“You can’t afford not to have a good building,” Weeks says.

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