John Salustri, national online editor of GlobeSt.com, addressedthese issues on GlobeSt.com's hour-long Business of Green webinar,held on Monday, March 24 at 12:30 p.m. More than 500 webcastattendees joined panelists, which included Larry Heard, president& CEO of Transwestern; Victoria Kahn, managing director at INGClarion; Jim Lutz, SVP of development at Liberty Property Trust;Brenna Walraven, president of BOMA International & executivemanaging director of National Property Management, USAA; and DanYoung-Dixon, director of design at Opus Architects & EngineersInc.

The Business Case ForGreen Recorded MondayMarch 24, 2008, 12:30 PM EDT

The webinar began with the discussion of whether or not one canbalance both the need for sustainability and the need to driveprofit, which at the same time improves performance. "If we becomemore efficient in how we operate our business, it will increasereturns on the bottom line," Walraven began. She further explainedthat tenants will stay longer at green buildings.

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Walraven noted the importance of being competitive in today'smarket. "What happens when most of the market is moving to green?What happens when you can't compete?" she queried.

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The cost to go green is becoming less and less, panelistsconcurred. Young-Dixon said that sustainability is becoming bestpractice, and pointed out that cost for sustainability is becomingless. He explained that "sustainability has bourn down on ourindustry like a tsunami." There seems to be a much greater interestfrom both buyers and sellers, he said, adding that beingcompetitive has in the marketplace has impacted the way OpusArchitects & Engineers' designs buildings. "We have redesignedour systems to incorporate sustainability into our standards."

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Heard agreed that the cost to go green is less, noting that "ourdata shows the savings are more than we had previouslyanticipated." He also pointed out that when a building is LEEDcertified, it is going to be attractive to more tenants.

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When asked if you can quantify the minimal cost involved indesigning and building an energy efficient building, panelistsagreed that the cost has reduced considerably from what it oncewas. Lutz noted that cost is an important issue to discuss because"I believe it is still the single largest misconception." Hecontinued that there is only a small premium and a significantportion is the paperwork, which is getting more effective, headded. "The percentage is so low--around 0.5% to 1% the cost--so itdoesn't make sense not to do it simply because of that."

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Using LEED as a benchmark, Young-Dixon noted that "we can do itfor 1% to 2% to cost," but he explained that "we can green thefacility for little or no cost," and in some cases, even reduce thecost.

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Walraven said that certainly there are costs to go through acertification process, "but I think increasingly what you areseeing in the marketplace is that there are tradeoffs to get to asame total budget." She explained that data has increasingly shownthat there is not a cost premium on a total cost basis. "There aremore products and supplies available today," she said. "It madesense that there was a premium in the early days of LEED and ofgreening, but as people are getting more proficient in it, theredoes not have to be a cost premium."

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Kahn noted that she believes most if not all class A new productwill be green whether it is certified by LEED or any othercertification. "Personally I think you are going to see that costpremium--if there is any--will diminish to nothing very soon." Whendiscussing lease rates, Kahn said that she does not think tenantsare less willing to pay for green. "There is a demand for betterquality and they are paying more it. Demand from the consumer sideis there and I don't think that is going to go away."

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Heard explained that Transwestern has scored and priced a numberof clients' buildings to go green and has found that the paybackcould be two to 2.5 years, "and that is conservative," he said,"but you will have a product that will appeal to a broadercross-section of tenants by being green, so you are adding morevalue than any other cost that you are seeing." He added that hehas continually seen that the savings has been greater and the costhas been less.

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Lutz didn't think that tenants needed to pay more money, becausethe cost differential is so small. "Having product differentiationis the think that is going to be the holy grail of the greenmovement," he said, "and as more and more studies come out, you aregoing to have HR [human resources] directors insisting that ifthere is a green building, they want it."

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Heard was willing to predict that the lending community willultimately only be lending to construction that is green. "I thinkthat this is such as tidal wave that lenders will join."

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As far as greening other asset types besides office, Kahn saidthat the cost factors more over the greening certification thananything else. Young-Dixon noted that residential is differentbecause of what the standards are for residential greendevelopment. "It is difficult to get a LEED certification onresidential buildings because you have to change thestandards."

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Heard said that "office is leading the way. They have thegreatest environmental impact. Retail and industrial will, overtime, follow suit over residential."

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Young-Dixon said that he is hoping that going green will become"best practice for our industry. You will have to get to a pointwhere you will have to identify why a building shouldn't be greeninstead of why it should."

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Walraven concurred, noting that "we are going to see sooner thanlater that new building code will be to a higher green standardthat will tie in with LEED but will also tie into othersustainability practices." She further explained that there arebetween 10 and 14 federal regulations that have been focused onimproving emission reductions and performance in both existingbuildings as well as new buildings. "This is where the industry isgoing," she said.

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"It is important to recognize that the US is lagging in globalsustainable environment as far as codes go," Kohn pointed out."There are several different standards for sustainability in Europeand another in the UK that are going to cross the bond veryquickly."

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Walraven agreed with Kohn, nothing that "we are in a globalmarket place." If you look at carbon emissions in the EuropeanUnion, she explained, "sustainability has flowed to utilities."However when asked whether or not city or local municipalitiesshould mandate the efficiency of buildings, Walraven explained that"if we had a choice, we prefer incentives versus mandated."

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Heard agreed, adding that "we have seen local governments take aleadership role, which is good. …The information pertaining togreen will be so overwhelming going forward, but I think having aproactive government behind it to accelerate approval processes andpermitting processes in buildings is beneficial."

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Walraven closed the webinar pointing out that larger fortune 500firms are absolutely choosing green. "They are committed tosustainability for recruitment, retention, HR strategy, and costsavings from operations and from the people side of the business,"she said. "They are not waiting for studies to support that. Theysee that it makes more sense."

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Natalie Dolce

Natalie Dolce, editor-in-chief of GlobeSt.com and GlobeSt. Real Estate Forum, is responsible for working with editorial staff, freelancers and senior management to help plan the overarching vision that encompasses GlobeSt.com, including short-term and long-term goals for the website, how content integrates through the company’s other product lines and the overall quality of content. Previously she served as national executive editor and editor of the West Coast region for GlobeSt.com and Real Estate Forum, and was responsible for coverage of news and information pertaining to that vital real estate region. Prior to moving out to the Southern California office, she was Northeast bureau chief, covering New York City for GlobeSt.com. Her background includes a stint at InStyle Magazine, and as managing editor with New York Press, an alternative weekly New York City paper. In her career, she has also covered a variety of beats for M magazine, Arthur Frommer's Budget Travel, FashionLedge.com, and Co-Ed magazine. Dolce has also freelanced for a number of publications, including MSNBC.com and Museums New York magazine.