Nowadays, it pays to be green in real estate.
New York City, a few years removed from being battered by the deadliest storm to ever hit the northeastern United States, is now the epicenter for addressing climate change, with green buildings continuing to rise for reasons both benevolent and profitable.
Over the years, many developers have looked to gain environmental certifications like LEED for incentives such as tax credits.
LEED, which stands for Leadership in Energy and Environmental Design, is a seal of approval attained through the installation of eco-friendly features such as recycled flooring, green roofs and solar shades.
However, while LEED certification burnishes a property’s image as environmentally conscious, real estate firms are starting to recognize its economic benefits.
“There’s a push from tenants for sustainability and they also realize that it makes good business sense,” said Susan Persin, the senior director of research at commercial real estate analytics firm, Trepp.
According to Chris Pyke, the chief operating officer at sustainability research firm GRESB and the vice president for research at the US Green Buildings Council, creating sustainable buildings provides owners the dual benefits of reducing risks from future natural disasters and justifying premium rents to environmentally conscious tenants.
Regardless of the motivation, the real estate industry is helping address a significant problem.
According to a study from DB Climate Change Advisors and the Rockefeller Foundation, buildings consume 40 percent of the energy and generate 40 percent of carbon emissions around the world.
“We’re a big part of the problem,” Pyke said.
The reality of climate change bulldozed its way through New York City in 2012, in the form of Hurricane Sandy.
The storm, which caused the death of 72 people, was one of the costliest natural disaster’s in the nation’s history, generating about $50 billion in damages. It caused more damage than any other storm except Hurricane Katrina, which was responsible for $108 billion in damages.
“Hurricane Sandy gave a lot of New Yorkers a first-hand view of what weather conditions can do. It was a big storm that the coastal markets aren’t accustomed to seeing,” Persin said.
While the storm did not startle any scientists, it blindsided the real estate industry, which, as Pyke pointed out, previously operated with an air of invincibility. “In the real estate community, people didn’t think that Manhattan was a risky place,” he said. “A surprise like that, that comes up and smacks you in the face, that’s a surprise that you take seriously going forward.ˮ
According to Pyke, the disaster ushered in the next phase of the industry’s move towards sustainability — resilience.
After Sandy, the mandate of sustainability expanded from reducing emissions and cutting consumption to bolstering the ability of properties to resist the ravages of unforeseen disasters.
“Sandy opened everyone’s eyes that that was the next big thing,” Pyke said.
“When people looked around and they saw the lights on in certain properties, they saw that certain tenants were able to stay in place, that was something that they could relate to.
“They saw people continuing to get rent when they weren’t and that’s a big deal. That was an eye-opener not for sustainability generally — the city had gone on a trajectory for more sustainable properties for a long time, but it kicked us in the pants on that particular issue.”
The next phase of sustainability is creating buildings with net-zero usage.
This requires renewable generation of cooling, heat and electricity, meaning that the building itself produces everything it uses.
The Living Building Challenge, which certifies properties under the more stringent requirements, has only 12 net zero energy certified projects on its website, which includes the West Berkeley Public Library in California and the American Samoa EPA office in Utulei.