The Green Retrofit Revolution

Companies boost their green profile to enhance the work environment—and their pocketbooks

By Kelly Davidson

For many building owners, green retrofitting is a financially feasible option because the projects are usually smaller and offer shorter payback periods.

Motivated by sluggish sales and lower occupancy rates in the real estate market, owners and investors of conventional buildings are using green retrofits to pursue sustainability goals and gain a competitive edge in the ever-greening marketplace.

“Retrofitting represents a huge opportunity for the green-building movement right now,” says Deb Kleinman, executive director of the U.S. Green Building Council’s Colorado Chapter. “In these tougher economic times, an organization may not be able to afford or justify a major green renovation or construction of a new green building. Retrofitting is a feasible option because the projects are typically more affordable, smaller in scale and easier to rationalize, with shorter payback periods.”

Much like conventional retrofits, green retrofits aim to improve the performance and efficiency of buildings through modifications or upgrades to existing equipment and technology. The fundamental difference lies in the materials, methods and technologies employed. The scope and nature can vary from switching out incandescent bulbs for highly efficient LED lamps to improving air quality by replacing a HVAC system.

Eco-Opportunity The latest trend is to hire consultants who identify opportunities and make recommendations for energy savings, efficiency and sustainability. Some owners select projects based on their specific needs. Others go for the full package, doing whatever it takes to achieve LEED certification.

More and more organizations in Colorado are taking the latter route. About 40 existing buildings are currently being reviewed for certification. In some cases, the certification qualifies building owners for tax credits and rebates through local governments or programs, but the primary financial incentive is the reduction of operational expenses.

Facility Engineering Associates of Lakewood is among the firms capitalizing on the increased demand for retrofits. The firm, which specializes in energy audits and site analysis, has had a hand in several projects along the Front Range, including a $50,000 consultation contract for an HVAC retrofit at the Colorado Department of Agriculture Biochemistry Building in Denver.

More recently, FEA assisted Westcore Properties of Centennial with the design and replacement of two gas-electric rooftop units at an office building in Englewood. As part of the $34,000 contract, the firm proposed ways to obtain proper airflow without replacing the entire HVAC system and recommended that certain zones in the building needed to be rebalanced and rezoned.

“Building owners and companies are jumping on the projects with quick paybacks, like lighting and insulation, and putting off more capital-intensive projects, like boiler and chiller replacements,” says Maureen K. Roskoski, FEA’s senior project manager.

Solar Moments The exception with capital-intensive projects is renewable-energy retrofits. With the rising cost of energy, more property owners are choosing to add solar-electric and renewable energy systems to their building and workspaces, Roskoski says.

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“Renewable-energy projects do not typically have a quick payback,” she adds. “It’s surprising that people are looking for long-term payback in a weak economy, but the weak economy is probably why people are planning for rising energy costs.”

Along the Front Range, rooftops of public and private buildings have become a showcase for solar retrofits of various sizes-ranging from 100-kw system on top of the Denver Museum of Nature and Science to the 2-mw, $13-million array at the Denver International Airport.

More recently, the City and County of Denver flipped the switch on 30-kw system at the Richard T. Castro Human Services Center at 1200 Federal Blvd. Across town, Fentress Architects of Denver collaborated with Namaste Solar Electric of Boulder on the 300-kw system on the roof of the Colorado Convention Center.

The majority of such public installations are being funded through power purchase agreements, in which a solar energy company builds a system on said property, and then maintains and operates the system for 15 years or longer. The company assumes the risk and ownership of the system.

In exchange, the property owner agrees to buy the electricity generated by the system at a low rate-usually a rate that increases at a much slower rate than utility rates-for the duration of the agreement. Such agreements, which lower upfront costs, are among the latest financing tools being used to support the solar energy industry as federal, state and local governments cut back or suspend funding for renewable-energy rebate incentives.

Market Motivation “A few years ago, the large majority of property owners didn’t have to care much about operational costs because they only planned to hold onto a building for 12 to 24 months before selling for a huge profit and moving on,” says Al Skodowski, senior vice president for Transwestern, a national commercial real estate company with offices in Denver. “But the buyers aren’t there right now, so owners are looking at the bottom line and beginning to understand the financial and marketing benefits of greening their operations.”

To ride out the down market, Transwestern is encouraging its clients to earn LEED certification. The company currently has three multitenant buildings-two in Denver and one in Englewood-working toward LEED certification. The projects are largely minor fixture replacements and water retrofits.

Through green retrofits, existing buildings have the potential to reduce their CO2 emissions and energy consumption significantly. Case studies from the U.S. Green Building Council show that LEED-certified buildings can use up to 50% less energy and produce up to 40% less CO2 emissions compared to conventional buildings.

In addition, a study by the Commission for Environmental Cooperation—an international organization created by Canada, Mexico and the United States under the North American Agreement on Environmental Cooperation—suggests that green building could play a considerable role in the climate change crisis. Widespread adoption over the next two decades could reduce the CO2 emissions of North America’s buildings by more than 75% annually, the study says.

Photo by James P. Scholz

For commercial property owners, this added value can translate to premium rents-$11.24 per sq ft over conventional competitors, according to a nationwide study by CoStar Group Inc. of Bethesda, Md.-and higher selling prices, an average of $171 more per sq ft, according to U.S. Green Building Council estimates.

A recent study from the market research firm Deloitte, The Dollars and Sense of Green Retrofits, finds that existing commercial buildings that do not undergo green retrofits within the next three years will be at a competitive disadvantage.

The study, which was coauthored by the green real estate authority and consultant Charles Lockwood, urges building owners to implement green retrofits of their buildings and workspaces sooner rather than later to capitalize on the intangible benefits of being ahead of the curve in terms of brand image, greater attractiveness as an employer and better community relations.

Revised Standards Another factor driving the trend is the revised certification standards for LEED-EB (existing buildings). Since its introduction in 2004, the response to the EB program has been slow, largely because many of the architectural and design standards had been carried over from the new construction rating system and required investments that were not feasible for most building owners. As of September, there were only 102 LEED EB-certified projects, compared to 1,212 for new construction. Eleven of those were in Colorado.

“One look at Denver’s skyline and you can see that existing buildings are incredibly significant to how we manage our growth and development,” USGBC Colorado’s Kleinman says. “Our goal is to encourage more organizations to work with existing structures.”

To spur green retrofits for existing buildings, the council revised the standards to put greater emphasis on facilities and maintenance and allow building owners more flexibility with the retrofitting process. All existing building projects registered after Sept. 1 will be registered as LEED-EB:OM (existing buildings: operations and maintenance).

“The new version is much improved over the previous version,” says Joshua Radoff, a principal with YRG Sustainability Consultants of Boulder. “It does not have the cost barriers that previously kept building operators and owners from pursuing certification.”

In an effort to break down other barriers to sustainability, YRG Sustainability Consultants offers training public and private workshops. The firm, which is working on retrofit recommendations for two existing office buildings-one in downtown Denver and one in the Denver Tech Center-is also authoring the new reference guide for the LEED-EB:OM standards.

Public Sector Government mandates that require energy-efficient green building renovations are fueling the trend in the public sector. At the state level, the Greening State Government Executive Orders, signed by Gov. Bill Ritter in April 2007, have resulted in more than $10 million of retrofit construction within seven state agencies.

Projects range from geo-exchange and HVAC retrofits at the Department of the Corrections to lighting upgrades and boiler replacement for the Colorado School for the Deaf and the Blind.

Cities and counties have also adopted requirements. Leading the local effort are Denver and Fort Collins, where all existing municipal facilities must be maintained and operated using appropriate LEED-EB principles.

A prime example in the public sector is the $1 million mechanical and electrical retrofit at the Boulder County Justice Center. New high-efficiency hot-water boilers and chillers could save the county as much as $100,000 per year in operating costs for the 200,000-sq-ft facility. Future plans include thermal energy enhancements to the chilled-water system.

Green Intangibles For some owners, the decision to undergo a green retrofit is more about saving green than going green. But for most retrofit projects, cost reduction is not the primary motive, according the Deloitte study, which surveyed organizations that had undergone at least one LEED-certified green building retrofit.

Although expected savings from energy efficiency was cited as a priority by 75% of respondents, corporate environmental commitment was indicated as the leading driver. Also topping the list of motives was greater indoor air quality and environmental quality, public relations and publicity, improved employee productivity and enhanced employee attraction and retention.

The majority of the group also indicated that they are “very likely” to implement green retrofits in the future.

Environmental Impact According to the U.S. Green Building Council, buildings consume 70% of the electricity load in the United States and account for roughly one-third of the country’s CO2 emissions-more than either the transportation or industrial sectors. The council estimates that CO2 emissions from buildings will grow faster than any other sector over the coming decades, with emissions from commercial buildings projected to grow the fastest-1.8% a year through 2030.

Consistently ranked among the top 10 fastest-growing states in the country, Colorado will inevitably see an increase in CO2 emissions as more buildings come online to meet population demands. In the Denver area alone, as many as 1.3 million more people are expected by 2030, according to the Denver Regional Council of Governments.

“That means we’re effectively going to need to accommodate a new metro area the size of Denver, Aurora, Colorado Springs and Boulder combined,” says Aaron Nelson, with the Alliance Center (see sidebar). “Smart growth is a key component to that, but adaptive reuse of our existing buildings is essential for the preservation of our open spaces, environment and quality of life.”