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Chris Brandt, an associate in the Los Angeles office of Jones Lang LaSalle, recently produced a podcast on sustainability in industrial buildings. After listening to the 90-second recording, GlobeSt.com asked him to go into greater depth on the feasibility of building industrial product to LEED standards. In the first part of the interview, he deals with the general development issues. In part two, to follow, he talks about the likely impact of the current economic crisis on sustainable development.

GlobeSt.com: In your podcast, you mention there’s been a major shift among developers and tenants toward green building. How big a shift do you think this is?

Brandt: Almost all the country’s largest industrial developers have begun integrating green building elements into their new developments, but this is a fairly new shift. In 2002, there were only four new industrial buildings in the US that registered for LEED certification. In 2007, this number had grown to 111. I’d expect this number to be even higher in 2008.

GlobeSt.com: What is the evidence for your statement that tenants would prefer to be in a green building?

Brandt: Since there were very limited green options for industrial tenants five years ago, this is likely the first time they have even considered occupying a LEED Certified building. If a tenant has an option between two buildings that have the same functionality and total occupancy cost, I would assume any tenant would prefer to have less of an impact on the environment and improve their corporate image by occupying a green building.

GlobeSt.com: Is the 1% to 3% rental differential you mention in your podcast realistic?

Brandt: Although the cost premiums of green development will ultimately be passed onto tenants through rent, we have seen green industrial buildings being offered at competitive rates in comparison to other new but non-green industrial buildings on the market. Rent is only one component of the tenant’s occupancy cost. The important number to look at is the aggregate of all costs, and in many cases this aggregate number in a green building is lower than in non-green buildings. The US Green Building Council estimates that 1-3% is the actual cost increase that a developer incurs to build a LEED Certified building as opposed to a non-LEED certified building.

GlobeSt.com: Does it apply to gold or platinum certified buildings as well?

Brandt: Gold and platinum certified buildings will most likely require a slightly higher cost. Nevertheless we are still seeing developers construct gold certified buildings. I know of only one industrial platinum in the US.

GlobeSt.com: How long does it typically take for savings to show up?

Brandt: Different aspects of green construction have different payback periods. Things that will take less than 5 years to pay back include: energy efficient lighting (T5s, T8s and LEDs); daylight harvesting; reflective roof membrane; natural ventilation; and energy management systems. Strategies requiring longer than five-year payback include: rooftop solar harvesting; rainwater harvesting; vegetative roof; and low-flow plumbing fixtures. You may also lease rooftop space of your building to local utilities for solar cell installation. This is no-cost source of income and/or power.

GlobeSt.com: You say industrial lighting costs can be reduced by “up to 40%,” but what is the average savings? How much additional upfront costs would be involved to reach the 40% figure?

Brandt: From a tenant’s perspective, often new buildings can come outfitted with energy-efficient T5 or T8 lighting already in place. There are no direct costs for this tenant, only savings in their monthly electricity costs. Other times this cost will come out of a tenant improvement allowance. A general estimate is that T5 or T8 lighting will require a 15%-25% premium over the cost of metal halide lighting. The actual average savings is tough to estimate as other factors such as daylight harvesting, motion sensors, interior painting, and skylights all affect the final number. While this might not be as high as 40% for all tenants, any savings they can realize over older metal halide lighting will help to improve their bottom line.

GlobeSt.com: Do skylights always improve energy savings?

Brandt: Most new industrial development does include a roof with 2-3% skylights. That being said, it costs about $500 to install each skylight in a roof. In a 100,000 sf building, this can raise costs up to $50,000. Skylights can also interfere with future installation of solar panels.

Look for part two of this interview next week’s on GlobeSt.com’s industrial page.

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