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Leveraging LEED for Cost Savings

Posted: January 6, 2018 | Project Management

By Aline Althen, Communications Manager

Market demand for green buildings is driven by a variety of financial, environmental and social factors. As green building has become more prevalent over the past two decades, developers, financiers, owners, and occupants are paying more attention to the cost savings green buildings can deliver. Green buildings bolster the triple bottom line of people, planet and profit – regardless of location or space type. Demand for high performance, environmentally friendly buildings only continues to grow.

Basic economics dictates that demand is a function of desire, quantity, and price. Demand for green buildings is no exception to the general rule. As consumers devote more attention to the social and environmental good of their purchases and investments, and as technology eases the first cost burden of designing, constructing and operating green buildings, demand continues to increase.

The 2015 Green Building Economic Impact Study, released by the U.S. Green Building Council (USGBC), found that green construction contributes significantly to the U.S. Gross Domestic Product (GDP). In 2014, green construction had a net direct economic impact of $53.2 billion and an indirect impact of $59.4 billion on U.S. GDP. The same study projected a 41 percent increase in these figures in the four year period from 2015 to 2018, asserting that green construction will account for 1.1 million jobs and $75.6 billion in wages in the United States by 2018, contributing a total of $303.5 billion to U.S. GDP.

With green construction on the rise, the Leadership in Energy and Environmental Design (LEED) green building rating system has only grown in prominence. The most widely recognized and used rating system for green building design and construction in the world, LEED promotes transparency in the built environment. The rating system provides project owners, operators, and occupants with peace of mind and the knowledge that their efforts to develop healthy, sustainable buildings are making the desired impact.

Developed by USGBC in 2000, LEED provides building project teams a clear roadmap to develop and maintain buildings that address water and energy conservation, use healthy materials, promote responsible siting decisions, and take human health and experience into account. A study also showed that in 2014, LEED directly contributed $20.7 billion to U.S. GDP, accounting for 37.5 percent of green construction jobs. Apart from its impact on the national economy, LEED serves local communities and businesses of all sizes through higher lease-up rates, increased worker productivity, and reduced environmental impact.

The common perception of LEED as a costly add-on to conventional buildings is misconceived. While first-costs for high performance buildings are an upfront investment, a 2004 study by the consulting firm Davis Langdon found that, on average, LEED certification represents one to three percent of a project’s total budget, and can be recovered in the first one to three years following construction or major renovation. And every year after that provides additional savings.

Initial investment in LEED certification is primarily recouped via operating cost savings but can also be attributed to higher lease-up rates for building owners and increased worker productivity for those companies that both own and operate their facilities. LEED-certified buildings are proven to use 25 percent less energy than non-certified buildings of comparable size and function. A 19 percent reduction in aggregate operating is typical of a LEED-certified building, according to a post-occupancy review of nearly two-dozen buildings owned and operated by the U.S. General Services Administration.

Strategies like increased daylighting, the installation of high-efficiency energy sources, low-flow water fixtures and the implementation of advanced waste management systems all lead to cost savings.

The value of LEED-certified buildings has not gone unnoticed by the real estate development and financial communities. Lease-up rates for LEED-certified Class A office space can range from average to 20 percent above average. A study of the San Diego real estate market in 2012 showed that the overall vacancy rate for green buildings was four percent lower than for comparable non-green buildings. The cost incurred day over day by an unoccupied tenant space can quickly amount to an overwhelming burden. In the commercial real estate sector, LEED certification is a major differentiator for owners and tenants alike.

Businesses choosing to lease LEED-certified office space make a bold statement about their values, and a smart choice to support the health and productivity of their workforce. Many corporate leaders believe that sustainability leads to market differentiation and improved financial performance.

We spend 90 percent of our lives indoors. Don’t we want those spaces to have better indoor air quality, awash in daylight and comfort?

In one study, office workers with the best possible view of the outdoors, as opposed to no view, performed 10 to 25 percent better on tests of mental function and memory recall. Additionally, companies that subscribe to more rigorous environmental standards within their workspaces enjoy 16 percent greater productivity than their non-green counterparts. Companies embracing LEED make a statement to current and prospective employees, as well as investors and clients or consumers that they care about the greater good.

Today’s knowledge workers seek opportunities to align their skills with companies that share their values and are actively engaged in CSR activities. Apart from hiring and retaining top talent, showcasing concern for sustainability also attracts loyal consumers. Corporate leaders expect to attract and retain customers as a direct result of their sustainability efforts.

The proven cost savings of LEED-certified buildings are significant and represent a key driver of demand for increased green building across sectors, localities, and building types. Touching on the needs of people and the planet, green buildings boost the financial bottom line of individual companies and of the greater national economy.

About the author:

Aline Althen is USGBC’s Communcations Manager, based in Washington, D.C. Ali has an MBA from George Washington University with an emphasis on corporate social responsibility.