Real Estate Brokers Report Increase in Demand for High-Performance Buildings

Demonstrating the cost benefits of smart building

When will building to the net zero energy standard make sense from an economic point of view? Maybe it already does. In the case of NZE office buildings, cost benefits are demonstrated by a dozen or so metrics, including recruiting value and employee retention, says RMI Senior Consultant Cara Carmichael. That said, productivity improvements dwarf them all.

"Having access to daylight and access to views and individual thermal comfort and good air quality – each one of those factors can add up to an 18 percent increase in productivity," Carmichael says. "We super conservatively estimated just a 3 percent change in productivity, and that totally dwarfed any kind of energy savings we were going to see. So we realized that yes, there is a cost premium today to get to net zero energy, anywhere from very slight to up to 10 percent. But that will have a return for an owner-occupant in terms of increased productivity, and for a landlord, reduced vacancy."

Several other states, beginning with Pennsylvania, have incented the even more rigorous Passive House standard for LIHTC (Low-Income Housing Tax Credit) developments. Consequently, there's a proliferation of affordable housing developments, including Belfield Town in Philadelphia, built at little to no additional cost compared with conventional builds. 

It's unclear how this might impact Colorado's building standards. Statewide, a total of 43,975 single- and multi-family housing permits were issued for the 12 months ending October 2017 – a 26.9 percent increase over the preceding 12-month period.

"I think more than influencing standards, we want to this be a profitable model that other developers will want to follow because it earns them more money," Carmichael says.

Little hard data is available on green building in Colorado, but real estate brokers report a definite increase in demand for high-performance buildings. Homebuyers are also becoming savvier with regard to what kinds of features to look for and what questions to ask. The cost premium for high-performance buildings also is shrinking markedly due to the falling cost of PV and availability of contractors trained in green building techniques.

“We see the prices already coming down a lot as subcontractors learn how to do this,” McFaddin says. “It’s much easier, and there’s less uncertainty. I think the uncertainty has a cost premium to it, but once they’ve done it it’s like ‘Oh yeah, we can actually save money by doing this.’”

McFaddin also notes that the market rate for drilling to install geothermal systems has fallen sharply, improving the financial feasibility of achieving NZE.

Eric Abrahamson, the leasing broker for the Commons, also speaks of costs and tenant affordability. “From a leasing standpoint, we are well within market on our per-square-foot lease rates and expenses for construction on this area of Boulder. People aren’t paying a premium for being in a net zero energy lease.”

“We’ve almost gone to where selling net zero is a secondary feature that is a great benefit of the building,” says Andrew Bush, principal at Morgan Creek Ventures. “But the really great thing about the building is that it’s a wonderful place to work in, with great daylight, great lighting and great heating and cooling systems.”

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