June 28, 2001

Built for life

Photo by Eduardo Calderon Seattle City Light’s Built Smart program offset the costs of insulation, envelope and lighting upgrades at Site 17 in Belltown. The $5 million Harbor Properties mixed-use project was designed by GGLO and completed last year.

Often the immediate challenges of initial financing, marketability and schedules faced by developers and corporations override issues of sustainability and environment. This leaves society and the owner with the burden of inefficient buildings that use more energy and offer fewer amenities than their more environmentally friendly cousins.

While green developments can be cost-effective, higher initial costs create a financial challenge. Creative planning, innovative financing mechanisms, or emphasis on the other long-term benefits can be used to obtain the necessary funding.

Successful methods include phased construction and presale of units or lots. Flexibility of the building to accommodate different users and tenants can also make a financier more receptive to innovation. When proposing unconventional building practices, support the investment by speaking the financier’s language and providing information on how sustainable strategies translate into projected revenues and expenses.

Key to sustainable economics, life cycle cost analysis (LCA) demonstrates significant benefits while achieving the most cost-effective environmental performance over a given timeline. This timeline is typically seven years for the private sector, but ranges from 20 to 100 years in the public sector. The entire life cycle of a building includes planning, design, construction, operation and maintenance, and demolition. By using LCAs in the decision-making process, operating, maintenance and disposal costs factor into selecting competing options in addition to the initial capital costs or first costs.

Over the life of a building, approximate costs are 2 percent for the initial construction, 6 percent for operation and maintenance, and 92 percent for personnel. While requiring more time in design up front, integrating life-cycle thinking is effective in meeting energy and environmental goals, particularly when operation and maintenance cost is a major factor. Simple design changes, such as the use of daylight with its natural heating and cooling potential, incurs minimal costs since producing an artificial indoor climate accounts for 50 percent of building energy use.

According to Paul Anseeuw at Keen Engineering, one of the barriers to sustainability for private developers is linked to how the market charges for utilities in commercially leased space. Currently, the practice of triple net rent requires that the tenant pay for all the utilities plus rent, which provides little or no incentive for the developer to provide energy-efficient systems.

A shift to gross rent wraps the utility costs into the leasing rate — providing an incentive for the developer to incorporate energy savings into design. While changing financial models in the real estate market is complex, “green leases” can be structured to reward efficiency while reducing overhead costs, effectively passing on the savings to the developer who made the initial investment.

Beyond green leases, sustainability reaps its own rewards for speculative developers. Seeking to alter the standard process in constructing Fisher Plaza, Fisher Properties invited their employees and industry experts to guide the planning to identify innovative design strategies.

They researched facilities worldwide, resulting in a building complex that exemplifies sustainability along with comfort, convenience and flexibility for the tenants. Designed by Lance Mueller & Associates, the facility boasts raised flooring that incorporates an air distribution system, natural daylight and temperature control for the tenants. By inviting feedback from future tenants, Fisher Properties gleaned vital information to serve the needs of the building occupants.

The developers of 2211 West Fourth, a mixed-use complex in Vancouver, B.C., took advantage of extensive media coverage and a central location, saving $850,000 in real estate agent fees. The building was 85 percent leased or sold prior to completion, and is now heralded as a case study for sustainability.

The building’s green profile contributed to its positive response, says developer Harold Kalke. Designed by Hotson Bakker Architects, the 2211 West Fourth incorporates geothermal hot water with geothermal heating, energy-efficient gas fireplaces and a filtered water system. The resulting energy and operating savings were passed on to the retail, office and residential tenants, and allowed the landlord to increase rents over the long term.

Harbor Properties worked with GGLO to use Seattle City Light’s Built Smart program in designing Site 17, which consists of apartments, artist lofts, retail and office space in Belltown. Built Smart incentives totaled approximately $50,000, offsetting increased costs of insulation, envelope and lighting upgrades.

According to Harbor’s project manager, Tim Able, “overall it’s a wash [economically], but you get a nicer, more comfortable building with more daylight, less energy consumption and more-efficient light fixtures.” Lower utility bills have also been an incentive for urban renters who are more aware of the true cost of housing — rent plus utilities.

While sustainable development results in superior products at premium prices, it also affords higher sale and occupancy rates, increased property values, and lower operation and maintenance costs. When the developer will be occupying or operating the building after completion, life cycle analysis makes the case for sustainability. Energy use in operating a building accounts for 80 percent of its total energy consumption, while only a fraction occurs in manufacture of building components and construction of the building.

The Neighborhood Planning Project, which supports the Seattle Comprehensive Plan to reduce urban sprawl and traffic congestion, includes over 30 Seattle neighborhoods. Increasingly, neighborhood groups are incorporating sustainable design guidelines into their plans.

Such guidelines can include amenities that enhance our lives socially and environmentally. Dense and walkable or bikable environments can integrate green elements and reduce the ecological footprint to the mutual benefit of the people and the community.

Single homes, neighborhoods, buildings and urban development can also be scaled to reduce the ecological footprint, such as La Salle, a transit-oriented development in Portland designed by GGLO. Locating housing near retail, services and mass transit decreases dependence on the automobile.

Developers and financiers often claim that there is no market for green real estate. Yet customers are accustomed to responding to familiar procedures and are generally not aware of how changing financial models can benefit them as a consumer. Typical market research considers standard practices, neglecting to ask the more telling questions. People must be informed about available options and potential gain, while the building industry needs to know that customers will support sustainable projects.

Collaborative, interdisciplinary approaches are vital to the future of sustainability, including private industry, government, and consumers: Together we can enhance economic growth, competitiveness, and profitability. In Seattle, we are learning that urban management, policy integration, ecosystems thinking and partnerships profit the environment and the economy. The economic risk is no longer in developing sustainable buildings, but in failing to do so.

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