Q&A: EBI Consulting’s Chris Corsten on the Value of Green Certification

The definition of “green” or “sustainable” in commercial properties is becoming clearer. Less clear is the ROI factor, and many building owners continue to find the expense of green certification hard to justify. Chris Corsten, sustainability consultant with EBI Consulting, has had ample experience in helping owners see the value of certification and mapping out their paths to getting there. Connect CRE recently sounded out Corsten for insights into this conversation; his answers appear below. 

Q: Although developers of new properties frequently include certifications when discussing their project’s attributes, other property owners see certifications as not being cost-effective. What are some of the reasons industry members continue to maintain this belief?  

A: This is all about the market. If renters are willing to pay a premium to live in a greener building, then I think the building managers will want to respond by getting certifications to distinguish themselves from other buildings. If there is no demand for green buildings in the area and price is the main driver of demand, then building managers will not bother to spend the money on it, unless there are other factors such as investor or government compliance demand pushing the building managers to be greener. 

Q: Younger industry members tend to be more environmentally aware compared to industry veterans. Do you find that as they come up through the ranks, the younger generation is able to influence senior management to pursue certification, or are younger executives not really part of the educational process when working with clients?  

A: From my experience, the push for greening buildings has to come from the top management. There may be some influence from younger managers, but only if they can justify the green building practices with cost savings or gains in efficiency that will have a good ROI. 

Q: One of the arguments in favor of certifications is that property owners who avoid certifications may eventually be left behind in the leasing or sales markets. Beyond the negative impact of not pursuing certifications, what are some positive effects on NOI and market appeal?  

A: Again, this is probably market driven and will vary between different markets. Pursuing green initiatives and getting certifications to show these attributes can demand higher rental prices in the right markets and these green initiatives normally lead to more efficient, cleaner, safer buildings that can influence tenants to not only stay longer once they get used to having these amenities, but also saves money due to lower utility costs. 

Q: What does the ROI for certifications look like? Does it pay off over an extended period of time or are there benefits that can be realized quickly?  

A: According to a 10-year study of commercial real estate data, LEED certified buildings earn 3.7% higher rents and 4% higher occupancy rates and Energy Star certified buildings earn 2.7% higher rents and 9.7% higher occupancy. This would normally mean that benefits are realized over the long term. However, certain projects pay off quickly, such as switching lighting to LEDs, which has a payback of only a few years.

Larger projects such as HVAC upgrades normally will take longer to pay back, depending on the change. Likewise, some water upgrades such as changing faucet aerators from high flow to low flow can pay off in just months. 

Q: Not all certifications are equally expensive or as complex as LEED. What are some smaller/easier certifications and what are the advantages of pursuing them?   

A: Two of the smaller/easier certifications are IREM Certified Sustainable Property, which deals with adding efficiencies and waste saving measures to the property. It is a cheaper and easier replacement for LEED. Fitwel is a smaller/easier certification that deals with health aspects of a building and is a cheaper and easier replacement for WELL certification. The advantage of these certifications is to show similar green attributes as LEED and WELL with lower cost and easier implementation. 

Pictured: Indeed Tower in Austin, which is LEED Platinum certified.