<p><em>by Kurt Thompson<br />Market Leader for ecostrategy<br />Oculus Inc.</em><br /><br />Green
is a market differentiator.&nbsp; Even in today&rsquo;s tumultuous economy,
building owners, property managers, and tenants are maintaining their
commitments to green building and sustainability as key components of
their real estate portfolios.&nbsp; With investments at an all-time low for
new construction and the leasing outlook bleak, building owners and
developers are now retrofitting their existing retail and other
commercial building stock to increase the value and marketability of
their overall portfolios.&nbsp;&nbsp; A new tool called LEED for Retail is coming
online this year, and savvy developers are teaming up with architects
and sustainability consultants to bolster their balance sheets with
green retail building retrofits in a down market.&nbsp; <br /><br />The United
States Green Building Council (USGBC) has created LEED for Retail to
accommodate the unique nature of the retail environment, while keeping
in mind the different types of spaces that retailers need for their
distinctive product lines. There are two different tracks to follow
with LEED for Retail:&nbsp; LEED Retail NC, which is aligned with the
developers&rsquo; role; and LEED Retail CI, which is aligned more with the
tenants&rsquo; role in retail property design and construction.&nbsp; Both systems
are divided into five categories in which credits (points) can be
achieved:<br />&bull; Sustainable Sites<br />&bull; Water Efficiency<br />&bull; Energy &amp; Atmosphere<br />&bull; Materials &amp; Resources<br />&bull; Indoor Environmental Quality<br />&bull; Innovation &amp; Design Process<br /><br />The
total number of prerequisites and credits achieved by a project
determines the certification level of that project.&nbsp; Certification
levels include Certified, Silver, Gold, and Platinum. <br /><br />LEED
Retail NC puts greater emphasis on site selection and energy
performance, whereas LEED Retail CI emphasizes material selection and
indoor environmental quality as the main drivers of its rating system.&nbsp;
The LEED for Retail reference guide will be formatted to LEED 2009
standards, and is expected to become available by the end of the first
quarter of 2009 when the pilot versions are finalized.&nbsp; As part of the
LEED 2009 changes, the certification scale under LEED for Retail varies
between each track. LEED Retail NC has a higher maximum point
threshold, requires one additional prerequisite, and requires projects
to receive a greater number of points to achieve minimum certification.<br /><strong><br />Why Invest in Green Retail Building?</strong><br /><br />There
are several retail industry drivers influencing developers, building
owners and property managers to build green.&nbsp; The most powerful is the
potential to lower operating expenses and increase resale values.&nbsp; A
2007 study conducted by Davis Langdon concluded that on resale values
alone, a LEED building sold for a $171 per square foot premium versus
comparable &lsquo;non-green&rsquo; (brown) buildings designed and built just a few
years prior.&nbsp; The CoStar Group recently presented a study that found
that rent rates in LEED buildings were on average $11.33 per square
foot greater than comparable non-LEED peers.&nbsp; LEED certified buildings
also have higher occupancy rates, nationally, by approximately 360
basis points or 3.6%, according to the CoStar Group.&nbsp; All of these
traits increase the marketability of a project and create opportunities
for developers to maximize their return on investment.<br /><br />The
second most critical factor pushing commercial real estate developers
into green retail building is market competition.&nbsp; Nearly 90% of the
respondents to a national survey on Green Building published by
National Real Estate Investor said they will own, lease, or manage some
form of green building or real estate within the next five years.&nbsp; If
your firm is not engaging in sustainable development practices, the
strength of your holdings is likely to decrease as tenant demand and
government incentives drive investment away from non-green buildings
and into your competitor&rsquo;s green building down the street or across the
road.<br /><br />Commercial retail developers are acting quickly to take
advantage of a green building&rsquo;s benefits.&nbsp; Among the top trends
developers are utilizing in their projects are energy efficiency,
sustainable site development, and water efficiency.&nbsp; LEED for Retail
recognized these trends and stacked the points in each category by
working with developers to maximize their benefit.&nbsp; Smart developers
are leveraging these strategies to reduce operating expenses and
structuring leases to profit from green building and sustainable
design. <br /><br />Energy efficiency is a fundamental driver of LEED.&nbsp;
There are seventeen possible points to choose from in this category,
which represent the greatest potential for cost savings.&nbsp; Approximately
one third of the total savings associated with green building can be
attributed to energy efficiency, which is about $0.30 to $0.39 per
square foot in a LEED Silver plus building, according to a recent study
led by the CoStar Group.&nbsp; Developers and landlords can realize a part
of these savings by structuring lease deals appropriately.&nbsp; For
example, benchmark the energy costs of older, similar properties to
quantify the savings of your project and guarantee a lower cap rate on
operating expense cap by some percentage.&nbsp; Pass these savings through
to your triple net tenants in expense.<br /><br />Oculus Inc. and
ecostrategy recently helped a retail landlord in Chicago to meet the
burdens of new &lsquo;green&rsquo; planned development zoning requirements while
also saving money and generating positive publicity.&nbsp; A modular green
roof system was utilized to cover nearly 100% of the project&rsquo;s flat
roof space.&nbsp; This creative solution reduced the landlord&rsquo;s burden for
the remainder of the development significantly, and generated a great
deal of positive exposure through local media.&nbsp; The green roof enhanced
their public image and elevated their brand to &lsquo;top of mind&rsquo; among the
consumers.<br /><br />The second major trend for developers is sustainable
site development.&nbsp; Sustainable site development encourages developers
to analyze local population and infrastructure density as well as the
availability of alternative transportation methods in order to maximize
the site efficiency of the development.&nbsp; A smaller footprint in a more
densely developed area has the potential to require less capital to
construct, reduces the environmental impact of the project, and reduces
urban sprawl.&nbsp; Brownfield redevelopment can also be a critical strategy
for sustainable sites, especially when redevelopment credits are
available through the local and national government, which reduce the
developers&rsquo; investment and provide positive marketing exposure for a
project. <br /><br />Water efficiency can lower development costs and help
maintain lower operating expenses through innovative, yet
straightforward solutions that reduce the amount of potable water used
for non-essential items.<br /><br />In order to be successful at
implementing green building practices for retail developments or
retrofits, the entire project team must be on board from day one of the
project.&nbsp; Partnering with the right architect, sustainability
consultant, and contractor is paramount to minimizing the cost impact
of green design.&nbsp;&nbsp; With the right team in place, developers can achieve
these benefits for a cost premium between 2% and 7%, depending on the
local market, the intensity of sustainable design elements, and the
commitment of the project team, according to CoStar Group.&nbsp; <br /><em><br />Kurt
Thompson is the Market Leader for ecostrategy, which provides
sustainability and environmental strategy consulting and education
services to clients of Oculus Inc.&nbsp; Oculus Inc. is a WBE-Certified,
full-service architecture and consulting services firm with offices in
St. Louis and Dallas. </em></p>