Go Green: Boost Your Property Value and Gain Tenants

Guest Blog Post by Kris Lindahl, RE/MAX REALTOR

Going green can increase the value of your commercial property over the long term. It can also help you attract tenants who will view you as a savvy landlord and appreciate your commitment and forethought. Depending on the lease term and other benefits you currently offer, you might be able to increase the rent, add extra months or years onto the lease term and interest higher quality tenants. In some cases, by offering access to green benefits, you can negotiate tenant payments for additional leasehold improvements as well.

According to the U.S. Green Building Council, there are two primary reasons for building green: Client demand and market demand. If you own a building with limited green features, adding cost-effective green features can lead to financial rewards. A published global survey notes that 65 percent of construction firms planned new green projects between 2013 and 2015, but that a whopping 50 percent also had green renovations waiting to start.

Improvements With Value

Among the priority targets for green renovation are energy-efficient heating, more effective and air conditioning and ventilation, and water-saving plumbing fixtures. Modern technologies can be installed to monitor and improve daylighting and air quality that are important to building “health” and also improve employee productivity and job satisfaction. More mundane improvements always include stylish, efficient windows and interior lighting, and the addition of quality amenities that might incorporate open spaces, interior atriums, kitchen facilities and cell phone lounges, break rooms and networking or presentation spaces that feel more homelike than commercial.

Green goes hand in hand with smart technology and automation, and it’s difficult to consider one without the other, according to modern designers, architects and space planners. Anything that adds to environmental quality and lower operating costs is an advantage for the building owner. While energy savings were the initial target of the LEED Certification program, today the focus has shifted a bit to include all the “high-performing” building attributes that factor into leasing decisions and occupancy choices.

It’s a new world of concern for a building owner, and from a purely economic perspective, the area of “social responsibility” can have dramatic financial impact. The percentage of consumers willing to pay more for products and services from companies with demonstrated commitment to positive social and economic impact continues to grow, according to a global Nielson report. The real estate industry demonstrates its concern with environmental factors primarily through compliance with green building principles. Owners who embrace LEED Certification and take the initiative to improve lease space in accord with modern standards will enjoy higher acceptance among forward-thinking companies.

Green Building: Looking at the Numbers

Current data bears this out:

  • Lease up rates for green buildings are typically 20% higher than for comparable non-green space;
  • ROI boosts average 19.2% for existing building renovations and 9.9% for new construction.

That’s impressive, but additional scholarly studies prove that the indirect benefits of going green are at least as impressive:

  • There is an increase of at least 16% in worker productivity in companies that can be considered green firms;
  • Mental acuity and memory tests are higher among workers who have a view compared with those who have no view;
  • Improved lighting reduces headaches; better air quality reduces days lost to employee illness;
  • Health care costs associated with allergies, respiratory disease and non-specified complaints have been reduced from between nine to 50% among employees in buildings retrofitted with features that improve the environment.

LEED Certified buildings typically command higher prices; but even without the official certification, building owners can expect higher rates following installation of green features. Vacancy rates are similarly lower for buildings with green features.

A 2012 World Green Buildings Study confirmed the trend:

  • Operating costs decreased by 13.6% for new construction and 8.5% for existing building projects.
  • Building value increased by 10.9% for new construction and 6.8% for existing building projects.
  • Increased asset valuation: New green building projects 5%; Green building retrofits 4%.

With an estimated $960 billion expected to be invested globally, for both new construction and retrofits, prior to 2023, why would you want to be left behind? Investigate the many cost-effective ways to boost the value of your commercial property and assure that you will have happy, productive tenants willing to pay a premium for your space.