The Sustainability Gap

This past Thursday was Earth Day, and here in New York City, the day was also marked by the Bloomberg administration unveiling an update of its wide-ranging, four-year-old PlaNYC sustainability initiative. While much of the attention was focused on Mayor Michael Bloomberg’s proposal to bring solar panel installations to landfills in Brooklyn and Staten Island, a project he said would generate up to 50 megawatts of electricity, the mayor also acknowledged that the ambitious PlaNYC had hit roadblocks over the past four years.

Not least of those obstacles was the turn of events we’ve seen since the spring of 2007. Within a few weeks after the mayor unveiled PlaNYC with the obligatory fanfare and confident predictions, the first signs of the credit crisis came into view. Not unlike a number of big acquisition bets that were made here and across the US just before the market’s exuberance began to fade, the plan—and, by extension, the sustainability movement in commercial real estate—got caught up in the downturn.

For quite some time following the near-meltdown of the world’s financial system, the rap against “green” buildings was that that while eco-friendly real estate was a fine and noble cause, it was too expensive to implement. The payback period was too long, the benefits were not clear and sustainability was far from top of mind for cost-conscious tenants who wanted to save their capital rather than the earth.

It was all very nice that forward-thinking owner/developers such as the Durst Organization came up with billion-dollar showcases such as the Bank of America Tower at One Bryant Park in Midtown Manhattan—after all, the argument went, they could afford to do so. For everyone else, sustainability fell into the category of bells and whistles.

Fast forward to the spring of 2011, and we’re now beginning to hear a different story. Even without the Obama administration’s Better Buildings Initiative or the possibility of legislative mandates (the “stick” for commercial property owners who don’t take the “carrot” of tax and financing incentives), the word is getting out that owners who have taken steps to improve building performance soon will have an edge in the marketplace. More to the point, failing to take those steps will eventually be a liability in terms of both occupancy and resale value.

Of course, there have been folks saying these things all along, people who kept advocating for sustainability even at the trough of the market. But now there appears to be at least the beginning of renewed momentum. Still, to gauge how long the road ahead is, consider that to date the US Green Building Council has awarded about 6,000 LEED certifications across the US. That’s equivalent to less than 1% of all the properties in New York City alone. Obviously, un-sustainable buildings continue to dominate; I’m predicting another 20 years before the scales tip the other way.