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by Barbara Crane
The State of California occupies approximately 127 million square feet
of office, warehouse and storage space -and with this comes the cost of
lighting, heating and air-conditioning all that real estate. On July 27
2004, Governor Arnold Schwarzenegger issued
Executive Order S-20-04, and began the
process of implementing the nation's first green building action plan.
The order, aimed primarily at reducing greenhouse gas emissions, requires
all new state construction to achieve LEED (the U.S. Green Building
Council's Leadership in Energy and Environmental Design certification
program) Silver certification or higher. It also requires renovation of
all state-owned buildings and certification of existing building stock
through the LEED for Existing Buildings program.
An often overlooked aspect of the plan, however, deals with the state's
leasing practices. Section 2.3 of the order specifically requires that
space be sought out that is certified and rated by the U.S. EPA's Energy
Star program.
This preference is significant, because the State of California leases
more 21 million square feet in more than 2,300 properties. The suggestion
that these spaces should all be green has the potential to change
practices in the leasing industry.
The Illusive Green Space
Locating green buildings available for lease, often referred to as
"green leases," is often more difficult than building a new state-owned
facility, says Patrick Foster, assistant chief of the Real Estate Leasing
and Planning Section in the Department of General Services. The average
leased space is about 10,000 square feet in a multi-tenanted office
building. In multi-tenant situations, existing leases and the concerns of
other tenants may make it difficult to negotiate for green capital
improvements or policies. In addition, "there aren't a lot of green
properties out there," he says. "Any new state buildings coming out of the
ground will be LEED. We see more and more product, but not nearly enough
to meet the state's demands."
When evaluating different properties, Foster looks for high performance
buildings with sustainable features. "When [the state is the sole] tenant,
we demand building commissioning" to ensure that the building systems
operate as intended, he explains. In multi-tenant situations, he says "we
make a pitch for commissioning and tell the owner how he would achieve
savings by having the systems perform more efficiently."
"Building commissioning is one of the most important energy
improvements in existing buildings," says Craig Sheehy, the president and
CEO of California-based
EnVision Real Estate Services. EnVision
describes itself as the largest LEED Existing Building consulting firm in
the country.
"We ask questions like, ‘Is the water at the correct temperature?' ‘Can we
start the system up later and shut it down earlier?'," Sheehy says.
"‘Are things running in the middle of the night?' It's like giving the
building a tune up and is worth up to six points in LEED."
Economic Sense in Greening Leased Space
EnVision is currently taking 60 properties through the LEED
certification process, including one new construction project
for the State of California. "It's not only feasible to make an
existing building LEED [certified]; we show that it makes tremendous
economic sense to do it. We are seeing all end costs, such as
certification, consultation and any retrofit produce a payback in less
than 18 months," Sheehy says. "Our average in LEED costs, including
registration, certification, consultation and any retrofits needed is $.21
per square foot. On that number we are averaging a 1.3 year payback on
just operational expense savings. This price includes buildings that
performed recommissioning and those that did not. There are still huge
opportunities in every building.
"We deal in Class A commercial buildings that are really well run," he
qualifies. "They are, on average, 20 to 25 years old, but they've been
upgraded during that time. There's not much to be done to achieve LEED
certification."
Patrick Foster notes that his team is making the best "economic deals" for
the people of the State of California. LEED certification, he says, is a
priority for his team, and they are "pursuing leases in energy efficient
buildings wherever we can."
Cost constraints can be a barrier to the state's effort to lease space in
certified and energy efficient buildings. "It's difficult for the state to
pay for improvements to a building, because doing so could be a gift of
public funds," says Roy McBrayer, deputy to the State Architect and
program manager for the Department of General Services Green Building
Initiative.
Nonetheless, the state continues to work through these issues and,
increasingly, deals between the state and building owners can be struck.
McBrayer cites an example of a lease renewal situation where the building
owner was willing to invest in significant energy efficiency improvements
to retain the state as a tenant. In one situation, he says that the state
"…offered a slight concession on the rate…[and]…offset [the cost] by
energy savings." According to McBrayer, in this situation, the state was
able to "help the owner amortize the cost of the capital upgrades to the
building over the term of the lease."
As a commercial broker and LEED consultant, Sheehy believes the state
should be willing to make rate concessions more frequently. "The state's
rate structure presently makes it impossible to retrofit [many existing]
buildings. I think it needs to look at the big picture more; for example,
the energy and operational savings and factors such as reduced employee
absenteeism in green buildings. If an owner can make an extra 25 cents a
square foot a month [over the state's rate of $2.25 to $2.50 per square
foot] maybe the state can get into more green properties."
Making Progress
In the almost five years since the governor issued his executive order
on green building, the state has made significant progress in finding
green facilities to lease. An example is the remodel of a former cannery
in Sacramento, which is slated for completion this year. The 300,000
square foot space had been converted into office space for the California
Health Services Department. It then sat vacant for several years.
The project owner is now converting the existing shell buildings into a
new campus for the California Highway Patrol and is pursuing LEED Silver
certification. Five thousand confiscated weapons are being melted down to
use for rebar to add a helicopter pad, a feature touted as one of the most
innovative ever created for LEED, which awards one rating point for
innovation.
The DMV is committed to adhering to LEED standards for all its buildings,
both owned and leased. To date, the state has leased eight Department of
Motor Vehicles (DMV) field offices that have been awarded, or are applying
for, LEED Silver certification. Seven were built specifically for use by
the DMV or are in the site selection process; an eighth, in West
Hollywood, is a remodel of a 1930s building. The Riverside East office was
LEED certified in January. Applications for LEED certification for offices
in Tracy, Clovis and West Hollywood are in progress. Sites for green
leases are being selected for the El Monte/Lincoln Park, Lodi, Stockton
and Thousand Palms offices. LEED certification for the DMV's Southern
California Telephone Service Center, located in Riverside, is also being
sought.
Upon final certification the DMV's 9,600 square-foot facility in
Tracy will achieve LEED Silver and will be the first
LEED-certified building in southern San Joaquin County. The building
design and site development incorporate sustainable building materials,
energy monitoring building systems, on-site energy production through the
use of roof mounted photovoltaic panels, extensive use of day lighting and
glazing systems, drought-tolerant landscaping, and water-efficient
plumbing and irrigation systems.
With every new lease, the impact of Executive Order S-20-04 is being felt
throughout the commercial real estate industry. While challenges remain to
finding and leasing space in green buildings, the state's priorities have
been set and its objectives are closer to being achieved.
According to Roy McBrayer, the state's leasing policies and preference for
certified and energy efficient green space are "sending a clear signal to
the marketplace that this is the future." Patrick Foster adds that "the
industry as a whole is shifting..green will become the standard, like
seismic soundness, ADA compliance and the prohibition against lead-based
paint." Foster says he is "having conversations with developers who are
building green because they think that before long the code books will
read like a LEED manual."
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