High Performance Buildings deliver

Increased Market Value and R.O.I.

Value in a commercial building is determined by Net Operating Income -- NOI -- not by how much it cost to build the building. The traditional way of increasing NOI is to reduce operating expenses -- maintenance, energy, management, insurance, and vacancy and credit losses.

But, looking at the chart below, reducing operating expenses may be missing the really big financial opportunities.

Consider that increasing worker productivity by only 1%, equal to $2.00 per square foot per year, exceeds either maintenance or utility costs.

Case studies in this report show that High Performance Building strategies can achieve results well beyond a 1% productivity improvement.

Then consider that tenants might be willing to pay a portion of potential productivity in increased rent if they could lease the type of space that could realize those results, increasing NOI by increasing income.

Increased Market Value Case Studies

Sieben Energy Associates performed an energy audit for management firm Scribcor for a bank office building for sale in suburban Chicago in 1998. At about $3/s.f./yr, energy bills for the 108,000 s.f. building were about $1/s.f./yr more than normal. Ten no- and low-cost measures were projected to save $10,000 to $20,000 per year and seven more expensive measures costing $300,000 to install but saving over $100,000 a year. Of these, the largest and most cost-effective opportunities were lighting retrofit and air handling system measures. In all, energy efficient measures reduced building's energy costs to about $1.90/s.f./yr, a reduction of 40% or $130,000/year. Assuming a cap rate of 10%, an increase in net operating income may have increased the building's value by as much as $1.3 million.

Costa Mesa, CA
Croxton Collaborative -- Architects

In 1992, employees formed a Performance Improvement Team that convinced management to pay added up-front costs for a healthier building by demonstrating an energy savings payback of 4.5 years.

The project was an upgrade of a 76,000 square foot building that included a series of roof skylights, energy efficient air handlers, natural gas fired cooling system, high performance windows, 60% more insulation than code and occupancy sensors. On sunny days, workers use only natural daylight and small task lights.

Cost was $39 per square foot. These are the results Verifone found:

• absenteeism dropped 40% due to improved comfort
• productivity increased 5%,
  reducing payback time to under one year -- a 100% ROI
• 50% energy savings

Building Design & Construction, April, 1997, pg.51; J. J. Romm, Cool Companies -- How the Best Businesses Boost Profits and Productivity by Cutting Greenhouse Gas Emissions, 1999, Island Press, Washington, D.C. & Covelo, CA, referenced by The Multiple Benefits of Energy Efficiency, August 1999, J. Wise, Eco·Integrations, from Pape, Willian (1998) Healthy, Wealthy, and Wise, Technology, #2, pg 25

Oak Creek, WI.

A "high benefit lighting" retrofit reduced operation and maintenance (O&M) costs by 45%, from $3,896 per year to $2,148 per year for an installed cost of $2,980.

Benefits:

• Energy savings -- $1,748 (1.7 year payback)
• Error reduction -- $37,460 annually
• Reduced equipment downtime -- $5,376/year
• Absenteeism dropped because of less glare and fewer headaches
• totaled $44,584, taking productivity and quality into consideration for an actual annual reduction of 1,144.4%.

Case Studies show the following are some of the strategies that can make buildings healthy, comfortable and productive:

• daylighting
• properly commissioned and maintained HVAC systems
• narrow floor plans to optimize natural daylight
• high benefit lighting upgrades
• under floor air distribution and displacement ventilation
• occupant control of heat, light and air
• operable windows and mixed mode HVAC

Buildings consume 40 percent of the world's total energy, 25 percent of wood harvest and 16 percent of water consumption, according to the U.S. Department of Energy's Center of Excellence for Sustainable Development.

But only 2 percent of the 30-year costs of a building are in its initial construction -- another 6 percent is expended on operations and maintenance and the remaining 92 percent is spent on the people who work there. A one percent savings in personnel costs could justify increased construction cost for an improved working environment.