LEEDing the charge: Building's becoming lean, green machine
Franchise Times Magazine
November-December 2008

Green building requirements have already surfaced in mandates for public facilities. President Bush issued an executive order in January 2007 stating that construction and renovations of government buildings should comply with federal sustainable design principles. California has passed legislation regarding green building, and similar standards also are being considered at the city level. Atlanta is currently working on passing a green building ordinance.

Green building is more than just a passing fad. Sustainable design soon may be required in real estate developments.
 

"I think that government action will drive retail and all other commercial sectors forward in terms of complying with green building," says Scott Doksansky, director of acquisitions and development at Melaver Inc., a Savannah, Georgia-based real estate developer. Melaver has built several green properties, including the new Abercorn Common in Savannah. The 175,000-square-foot open-air shopping center is the first Leadership in Energy and Environmental Design (LEED) certified all-retail commercial property in the U.S., and it also houses the first LEED-certified McDonald's in the world.

LEED is a building rating system recognized as the leading benchmark for green building in the country. The LEED system certifies properties at silver, gold or platinum levels based on the number of points earned in different categories. In the past year, the number of LEED certified buildings jumped nearly 40 percent from 878 to 1,212 as of August 2008, according to the U.S. Green Building Council. That volume includes some 133 million square-feet of construction and major renovation on commercial, institutional, high-rise residential and retail properties. Another 8,088 buildings totaling 1.3 billion square-feet are registered or in the process of obtaining LEED certification.

Green Circle Shopping Center in Springfield, Missouri, is the first shopping center in the country pursuing a platinum-level LEED certification - the highest LEED rating available. "We think that the marketing value of having that more efficient space with lower costs and cleaner air is going to be a huge advantage," says Matt O'Reilly, developer and co-owner of the 23,000-square-foot center. O'Reilly is also a tenant with his outdoor specialty store, Dynamic Earth Equipment Co.

The environmentally friendly design was a big draw for tenants such as San Francisco Oven, a pizza restaurant; Mama Jean's, a natural food market; and Dynamic Body, a yoga and Pilates studio. O'Reilly saw a "huge interest" from tenants that target an environmentally conscious clientele, as well as more mainstream tenants. "We were full before the drawings were even done," O'Reilly says.

Cost vs. savings

So what is behind the recent surge in green building? There is a broader environmental trend being spurred by soaring fuel costs and concerns about global warming. U.S. buildings account for 70 percent of the electricity consumption in the country and 39 percent of all CO2 emissions, according to the U.S. Green Building Council.

An unprecedented level of government initiatives and improvements to sustainable building materials encourages green building. More real estate developers and companies are pushing sustainable design elements because they are realizing cost savings and value creation.

One recent industry study paid for by the U.S. Green Building Council shows LEED certified buildings use 25 percent less electricity than traditional buildings.

A fear in the real estate world is that by not building to green standards, a property may see a decline in value in the future as green building becomes an industry standard.

The cost of green construction varies depending on the extent and type of sustainable materials, equipment and processes that a building decides to incorporate. For example, the cost of building to the LEED silver standard is comparable to traditional construction, while costs typically rise with the more rigorous gold and platinum level requirements.

The Uptown Monterey Shopping Center in Monterey, California, is the first LEED-certified shopping center in California. Developer Foothill Partners was able to achieve its certification without adding time or expense. The project, a redevelopment of a former Safeway store, is anchored by a Trader Joe's grocery store.

Growing trend

Green retail centers are on the rise, and more restaurant and retail chains are adopting sustainable materials and systems into their own prototypes. For example, major brands from Wal-Mart to Subway have introduced eco-friendly stores.

Pizza Fusion, a Florida-based pizza franchise, requires its stores follow LEED silver or gold guidelines. The franchise currently has 75 locations in the pipeline across 15 states. Whether or not the store decides to pursue an official LEED certification is up to the franchisee. The LEED certification process requires additional paperwork that can add tens of thousands of dollars to project costs, which is why the company holds certification as an option rather than a requirement, said Randy Romano, Pizza Fusion's executive vice president.

Some of the green building design elements incorporated into the Pizza Fusion stores include insulation made from blue jeans, solar panels for solar power, recycled gypsum board and environmentally friendly paint produced without the VOC fumes.

In fact, it is the green aspect that attracts prospective franchisees to Pizza Fusion. Many of the people drawn to Pizza Fusion want a business opportunity that aligns with the way they live their lives - being environmentally sensitive, Romano says. Of course, the great tasting pizza is what clinches those decisions, he adds.

LEED Facts

• LEED is a nationally accepted benchmark for the design, construction and operation of green buildings.

• A recent study shows that occupancy, rental rates and sales prices are higher in LEED buildings than in conventional buildings.

• LEED buildings use 25 percent less electricity than traditional buildings.

• A property may actually see a decline in value as green buildings become entrenched as an industry standard.

• Members of the U.S. Green Building Council, which provides information about LEED buildings, include building owners, real estate developers, facility managers, architects and contractors.