Articles - February, 2007

Would You Pay a Premium to Lease Green Space?

Usgbc

Here’s the situation.  You have two new 15-story buildings in a good location near downtown.  Both buildings have received several inquiries from potential tenants.  Building #1 is a traditionally-built, modern facility.  Building #2 is similar, but it’s green (LEED-CS + LEED-CI).  A lease for 40,000 square feet of space at #1 is $35 and #2 is $36.50 per square feet.  Would you pay the extra $1.50 per square foot to lease space in the green building?  We’re talking about a serious premium.  I’m interested to hear what your perspective is on this. 

According to the U.S. Green Building Council, these rents are justifiable for a few reasons.  I’m going to clip out a few comments from their article, but feel free to read the entire thing

  • Organizations with business models reflecting sustainability will be more likely to pay the premium. 
  • Although green buildings are going up at an incredible rate, most of these are for use by the owners and most developers view speculative green developments as risky. 
  • There is a dearth of tenable green lease space and requests for green space are falling on deaf ears. 
  • The market is tenant driven right now and tenants have had success cooperating with owners to make green improvements or renovations. 

I think there will be a paradigm shift, but I don’t know how it will happen.  Somehow, the values of individuals and organizations need to shift towards an appreciation of sustainability, and that will create serious, mainstream adoption of green buildings.  Maybe the impetus will be regulatory?  Self-imposed?  Strategic?  I learned in Starting a Business 101, that some of the best opportunities in business become available due to a void or an absence in the market.  If it’s true that some customers and tenants are requesting green space, but the inventory isn’t available, there’s a void in the market that will be filled by the first innovators.  The rest will wake up some day and think, "I thought green buildings were for hippies?!  What’s going on?"  Which is partially an answer to my post the other day.  Via Appraisal Podcasts

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