The Business of Building Green

Love Affair With Sustainable Building Gets Pragmatic

By Alex Padalka

Green construction has taken over New York's tri-state area in just a few years. LEED-Silver is everywhere, LEED-Platinum buildings are slowly becoming a reality, and owners across the board, regardless of their buildings' LEED status, unanimously tout each new development as environmentally-friendly and healthier for the occupants. While this may seem a fad and a shameless display of an industry patting itself on the back, green construction, unlike, say, the luxury marble countertop, is here to stay, if only for one simple reason: sustainable buildings save money.

Not Going Away

A few years ago, any project that had green elements, regardless of its LEED status, was guaranteed to generate publicity. Unscrupulous builders touted their green credentials with elements that cost little to nothing to introduce, such as low-VOC finishes or cheap recycled-content materials. For a brief time, green building appeared to be another fad.

Newark's Liberty Plaza is scheduled to be New Jersey's first ever sustainable office building as it is seeking LEED Gold certification. (Image courtesy of RMJM Hillier.)

Now, industry experts from across the region agree that not only is sustainable building here to stay, but that the industry has barely scratched the surface of what is possible. The reason is not pure altruism – it's economics.

"People talk about [green building] on a moral plane, that we should do it for the environment – and we should," says John Locke, a LEED-certified senior associate with New York-based architecture firm RMJM Hillier. "But many clients think of it in terms of cost of the project, and the basic message is that while there are some additional costs upfront, the long term may balance or outweigh them. Energy costs today means that this is not going away."

An important contributor to the spread of green construction have been local governments: when Mayor Michael Bloomberg unveiled the PlaNYC 2030 initiative, aiming to reduce the city's carbon footprint by 30 % from 2005 levels, in part by having all government-owned projects achieve LEED certification, contractors, engineers and designers knew to pick up some green know-how. But this thinking seeped into the private industry too.

Last year, New York-based Tishman Construction Corp. launched a separate affiliate, the Tishman Sustainability Corp., to act as advisor on the sustainable elements for the 10.6-million-sq-ft Echelon casino complex in Las Vegas [the project was suspended in August "due to weak economic conditions," according to Tishman's website], where the parent Tishman was also the construction manager. The new corporation is now set up to advise clients worldwide and act as an intermediary between the client, designer and construction manager.

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"You have your green evangelist-type people that preach the green gospel, but they don't take into consideration that you have companies here that have the bottom line," says Jeff Smitley, chief sustainability officer and head of New York's Tishman Sustainability Corp. "That's where we come in."

While Tishman's example is unique, every major player in the building industry -- including top construction managers such as Bovis Lend Lease and Structure Tone -- has boosted its LEED-accredited professionals to between 10 and 20 percent of their total staff. Design firms have been even more aggressive: New York-based Cook + Fox, which designed the LEED-Platinum-seeking Bank of America tower by Bryant Park, has close to 80 % of the entire firm LEED-accredited.

In fact, by 2013, 53 % of building industry leaders from firms polled across 45 countries believe that they will have a majority of their projects dedicated to green building, compared to 30 % today, according to a report released in September by the McGraw-Hill Construction Analytics.

Green Building: What It Costs

That same report found that 83 % of these firms expect a rise in sales and profits from green building – despite the fact that there is still an estimated premium as high as 10 % and over associated with projects implementing LEED points.

Many agree that the initial premiums associated with green construction are dropping every year – some claim that, with adequate planning, LEED-Silver costs are now on par with standard construction.

Pinning that to a percentage point has proven difficult, however.

At the heart of calculating the cost of going green lies one problem: a scarcity of projects to compare to each other. Taking a Superfund site green involves a completely different set of rules, and is eligible for a considerably different set of LEED checkpoints, than building a green museum.

Many are looking at the Bank of America building at One Bryant Park in Manhattan as the "game changer" in terms of green building. (Image courtesy of Cook + Fox.)

"Anyone that's throwing out cost premiums, I don't know how they can do it – it depends on so many numbers," explains Tishman's Smitley. "It depends on whether it gets certification, it depends on the geographical location, climate, availability of local sources, site, types of terrain, design team expertise. In other words, there are low-cost LEED-Silver and high-cost LEED-Silver, low-cost Platinum and high-cost platinum." Furthermore, in addition to federal, state and local tax incentives, such as New York State Energy Research and Development Authority's programs, there are life-cycle cost savings on reduced energy and maintenance needs.

"The mistake often made is taking a building and saying, 'Let's make it LEED.'" says Andrew Topinka, chair of USGBC-New Jersey chapter. "It shouldn't cost you more - but it can if you don't have the right people.”

According to Topinka, LEED-Gold or Platinum can raise the costs between 2 and 10 %. Serge Appel, associate partner in charge of construction on the Bank of America tower for Cook + Fox, says LEED-certified cost 5 to 8 % extra 5 years ago, but today does not cost more than 1 to 2 %, while LEED-Platinum can be had for 3 to 4 % more.

"If you're looking at it with a payback, it's less than that," Appel says. "But it's very project-dependent. For example, the Bank of America building would be less than that because the project is so large that the green is so much less of a percentage."

Finally, to an owner-occupant, the increased performance of its work force (less sick days due to cleaner air and more natural light) is another cost saving that often makes the original construction and development premium disappear altogether. Only recently, again due to the relative youth of green building and the United States Green Building Council's LEED system, did organizations start tracking life-cycle performance.

The Brooklyn Navy Yard Development Corporation is spending $25 million to install wind turbines on its four buildings as part of a pledge to follow Mayor Michael Bloomberg's PlaNYC 2030 program.

On the design side, most of the costs associated with green or LEED-certifiable buildings are transferred to the owner or client in increased fees. According to Locke, these costs have already come down because of a better understanding of what green entails, and the same goes for contractors, engineers and some of the bigger and savvier subs. According to Locke, with proper planning, basic LEED certification now entails premiums of 1 percent or less; going platinum tacks on 6 to 7 percent.

"We have better tools than we had five years ago," Locke explains. "The basic message is, if [green building is] done properly, if it is holistic and integrated into the project process from the start, there are cost-effective ways."

There are already several green technologies today for which the cost benefit is almost instantaneous. In Brooklyn Navy Yard, for example, powering the new street lighting with wind-solar technology installed on each post individually will eventually save on electrical needs for the entire site; more obviously, not having to bury miles of wiring and pipes saves on installation immediately.

Who Is Profiting?

While the end user is touted as the biggest beneficiary of green construction, the most obvious dollar rewards accrue to savvy developers and owners.

In practice, architects, engineers and construction managers pass on whatever extra cost to the client. And while growing expertise certainly streamlines a greener process and makes it cheaper in man-hours to build green, these "savings" turn into more competitive bids rather than a bigger profit -- although a few firms can, as Tishman did, turn this new knowledge into a separate niche profit center.

When green building was in its infancy in the 1990s, certain manufacturers participated in "greenwashing," charging contractors and owners extra for greener products that were the same in price as standard materials. That practice, however, has been largely eliminated by the birth of a healthy competitive market for greener products and better education. Therefore, aside from being able to hold on to business as building turns greener, suppliers have also lost the edge to eek out an extra profit from green.

"I may be somewhat biased, but I think the end users and owners profit the most," says Hillier's Locke. "There's clear evidence that buildings that are sustainably designed afford higher rates of productivity and return on investment in terms of lower energy costs, for owner and client."

"I do think if the owner can get over the first cost, they can truly benefit the most," says Todd Renz, president of Connecticut Green Building Council.

Green building is even permeating a sector of construction not only associated with decidedly un-green practices, but one that is often considered the most at risk of leaving New York City altogether: industrial manufacturers' spaces.

The 300-acre Brooklyn Navy Yard, administered by the non-profit Brooklyn Navy Yard Development Corporation under a contract from the city, has over 40 buildings comprising 4 million sq ft of leasable space and 98 percent of it leased out over going on five years. Going on this success, the development corporation has pledged to follow Mayor Michael Bloomberg's PlaNYC 2030 plan, which is aimed at reducing energy use by city agencies and LEED certification on all new construction. In addition to going LEED-Silver on all new buildings, the site will undergo such as improving storm water runoff collection, adding green spaces for water capture and installing 150 street lamps to be powered by a combination of solar and wind power. The Yard is also the first site in Brooklyn, according to Kimball, to use solar-powered trash compactors, which reduce the number of trash pickups, emissions and spillage.

"We expect that over time those industrial tenants will pay a premium to be here because of not only a great location, but because of the premiums inherent in green."

The bet appears to be paying off already. The development corporation put up a brand-new $25 million multi-story building, its first new building on the site, constructed with a system that recycles rain water for building use and includes both photovoltaics and "turbies," or small turbines, for supplementing grid power. The building, slated for LEED-Silver, was originally intended for several tenants, but an existing tenant, a fine art restoration and storage company, agreed to take the whole space at a 15-percent premium and sub-tenant the unused space to their subcontractors.

Other LEED-Silver buildings are already in the works. The photo supplies reseller B&H Photo Video went into construction on a new building, and Steinway Studios are part of an adapative reuse of a seven-story building. All of them will aim for at least LEED-Silver.

The Holy Grail

With the race to a more sustainable and energy-efficient reality, the most ambitious goal today is a zero-net-energy building -- one that can remain completely off the grid. While such building already exist in China and even Hawaii, New York's temperate climate makes this an ambitious aim. Even so, according to Hillier's Locke, we are 15-20 years away from achieving it here.

Overall, restructuring the industry for greener building does not stop with accruing LEED points and adding sexy green materials, however. Firms across the region are implementing simple procedures right at their offices -- consolidating the printers in a slightly inconvenient area so staff are less likely to print, or tagging their emails with "Think before you print" slogans, installing water filters instead of ordering containers, getting rid of styrofoam and just turning off the lights.

"There's an environmental revolution going on right now," says USGBC's Topinka. "Whether you believe in global warming or not isn't really the issue. The issue is, you can do things now -- that are cost-effective -- in the right way, and we have a road and a method to follow to do it the right way. So why not do it the right way."