Cost is one of the biggestchallenges to developers looking to go green. This is especiallytrue for short-term investors, who might see green development asan obstacle to a larger return. Green construction—including LEEDcertifications—have grown wildly in popularity and have become away to drive value and occupancy at an asset. Even industrialdevelopment has turned to greener building and LEED certification,disrupting the reputation of industrial properties as dirtymanufacturing plants.

“Building to green standards often means increased costs,especially if the goal is to attain LEED Platinum, the highestlevel of LEED certification,” Jon Pharris,president of CapRock Partners, anexperienced industrial and green developer, tellsGlobeSt.com. “For long-term owners/investors such as REITs orsovereign wealth funds, those additional features may be a valuableand worthwhile investment. However, for short-term players theadditional expense does not always directly translate to aquantifiable return on investment.”

One of the challenges could be achieving higher rents in aenergy-efficient or LEED certified property, as some developersexpect. “LEED platinum or gold buildings do not always generateobtainable lease rates substantially different from those ofCalGreen building,” says Pharris. “While manycorporations want to pursue a carbon neutral footprint, it is rarefor a tenant in Southern California—where the base new industrialdevelopment complies with CalGreen—to refuse to lease a CalGreenbuilding instead of a LEED certified building.”