Abacus DIVISIONS September 2011 News !
Green buildings – a great idea, but someone has to pay for it –Abacus DIVISIONS
The green building movement has come to the fore in recent years with a growing number of protagonists claiming it is the way of the future for buildings. But one aspect that might hinder this concept’s increasing uptake is that, in reality, there are seemingly additional costs to bear. So said Org Geldenhuys, managing director of property development company, Abacus DIVISIONS .
“Building green buildings is an admirable pursuit – or upgrading existing buildings into green buildings. But there are concomitant costs associated with this exercise and the problem is - just who is going to foot these additional costs?” Geldenhuys said that the concept of “going green” is more popular with owner-occupied building. This is fundamentally because the owner can reap the benefits over time of the additional “green costs”. But when it comes to multi-tenant office and retail spaces, there is a far slower uptake. ‘One of the reasons for this, is one of cost – landlords are often not happy to shoulder the additional costs of going green, and neither are tenants. Some kind of compromise will need to be reached,” said Geldenhuys, “that suits all parties.” Geldenhuys said that just converting a traditional air conditioning system to a “more green-operated one” could cost hundreds of thousands of Rands in additional expenses. “If a landlord does this, will the tenants be willing to pay additional rent to reap the benefits of
“Despite this cost quandary, we are nonetheless seeing a growth in the green building movement in recent years as governments, institutions and corporations finance the construction of high-performance buildings.” One of the reasons why multi-tenant office and retail spaces are lagging when it comes to opting for the green route is because of a complex co-existence between tenants, landlords and owners. The problem, according to new research out of Rocky Mountain Institute’s Built Environment Team (BET), is that common leasing structures create “split incentives among tenants, landlords and owners”. Erik Bonnet, BET fellow and co-author of the research, said the issue should be familiar to anyone who has ever rented an apartment and has had to pay the heating (electricity) bill.
“If you’re paying the utility bill in your apartment in the middle of winter you would probably want to close your window because that’s going to benefit your directly. However, having a really efficient furnace or having solar thermal panels...would be great for you, but it’s the landlord that would have to make the investment.’’ Geldenhuys said it is all about “finding common ground”. “But finding common ground between landlords and tenants,” he pointed out, “is no easy task. Why would a landlord spend additional money putting in solar thermal panels if it is going to cost him extra – but not earn him any additional income?
“One take on this could be the answer that, in the future, he could ask a slightly higher rental due to the fact that he could impress upon any future tenant that electricity costs are far lower than normal due to the solar heating. But there is a fine line between investing in green buildings and reaping real benefits from them – besides the obvious environmental green benefits,” said Geldenhuys.
However, there are also other barriers that have hindered the development of green multi-tenant buildings, according to Caroline Fluhrer, BET consultant and co-author of the BET report. “Most of the burden of creating a high-performance build-out falls on the (tenant’s) shoulders. Important decisions such as what kinds of lights to use and how to finish the interior are often left to people who – despite best intentions – may not be savvy about green building. That can compromise the end performance of the facility, according to the BET report. Another hurdle,” she pointed out, “is that people assume if you’re going to do a high-performance building, it’s automatically going to cost more.” Much of BET’s work has shown that this is not necessarily the case and that, in some instances, green buildings can cost less than traditional buildings.
Besides this interesting fact, Abacus DIVISIONS' Geldenhuys pointed out that tenants can also benefit from high-performance buildings, through advantages such as increased worker productivity, better retail sales – due to the improved aesthetics and environment - and healthier work environments. He said green buildings can reduce the consumption of energy and other resources, which is becoming increasingly important – “certainly in South Africa where we are seeing a massive increase in energy costs due to Eskom increases”. “From the landlord’s side,” he said, “if tenants do not buy into the concept of a green building, their behavior can actually defeat the very purpose of the building – most notably in areas such as energy usage and recycling schemes. “It is certainly not the case of simply liking the concept, buying into it and jumping on the green bandwagon - and then simply building high-performance, green, buildings . Very real benefits need to be derived – or else the current upsurge in interest in green buildings is, more than likely, going to wane.”