The road to greener commercial buildings isn’t easy
Seattle has been leading the way in green building since Tom Paladino and others helped create the first Leadership in Energy & Environmental Design (LEED) rating system and training programs in the late 1990s. In downtown Seattle today, nearly 32 percent of the commercial properties are LEED certified and 44 percent are Energy Star rated by the U.S. Environmental Protection Agency. The U.S. Green Building Council estimates that by 2015, 58 percent of America’s nonresidential building starts will be “green” and the market will be worth more than $200 billion.
But with greenhouse gas emissions continuing to grow dramatically and office buildings contributing nearly 35 percent of those emissions nationwide, cities must do much more to cut energy use. That situation was the inspiration for Seattle 2030 District, which was launched in 2010 and set ambitious goals, including a 50 percent reduction in total energy use in the downtown area by 2030 and an immediate 60 percent reduction below national averages in energy use of new buildings. Not only will the climate benefit, but tenant costs will also fall as landlords see the values of their buildings rise, says Brian Geller, executive director of the organization. Given comparable locations and amenities, adds Geller, “The buildings with the lowest energy and water use per square foot have the competitive edge.”
To achieve such ambitious goals, dozens of existing buildings in Seattle must undergo substantial retrofitting. That process requires significant capital investments, often costing $1 million or more for a single renovation. Since energy is a building’s highest operating cost after taxes, investing to cut energy and water use can bring attractive returns.
Unfortunately, the way the industry structures capital budgets and leases makes it difficult for landowners to justify undertaking the long-term investments.
For minor upgrades and maintenance, managers use conventional off-balancesheet financing so they needn’t dip into capital budgets. This approach involves repaying efficiency investments over time through energy savings, then reinvesting money year over year on the operations side. Tax, bond and grant programs from federal, state and local entities (such as Washington state’s Jobs Now), also provide funding sources, along with utility rebates and incentive programs.
But for major improvements, there are other obstacles. Many building owners assume that they may sell a given building in two years or less—which makes any investment that doesn’t bring a shortterm return appear unattractive. Another challenge is the “split incentive” built into