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NEW YORK-Green office buildings may not increase tenant productivity, but they provide other sometimes intangible benefits that encourage green development and leasing, said a panel sponsored by the Royal Institute of Chartered Surveyors (RICS) held here.

There are four main reasons why companies lease green, said Rick Recny, director of asset management, Time Equities, New York City: a decrease in human resources and payroll costs attributed to tenants in green buildings; lower operating costs; doing the ‘right thing’ by helping to resolve global warming, and a demonstration of a commitment to social responsibility. Landlords have similar reasons, including lowering operating costs, maximizing profits and attracting the best tenants.

“But even when the lease is long-term, some of the benefits exceed the life of the lease,” Recny noted.

The panel was held in conjunction with RICS’ announcement of its Global Climate Change policy document, which will include among its priorities: providing standards, guidance and information on climate change and best practices; standardizing sustainability measurement and reporting; engaging with governments; and committing to a research program on sustainability issues.

“We’ve decided that the focus of our work should revolve around measurement, reporting and the capture of value, trying to pin down if a sustainable building is worth more than its non-sustainable counterpart,” said Ursula Hartenberger, global head of sustainability policy for London-based RICS.

Tenants seem to think so, according to RICS’ quarterly survey of tenants. Full third quarter results will be released next week, but Hartenberger previewed some changes, including client demand for sustainability now outstripping legal compliance as a motivator for going green.

“There were fears a year ago that [a commitment to sustainability] would be dead,” Hartenberger said. “I said it would prove to be a temporary thing.”

Still, the growing chance of regulation is a concern, and one reason why green will be valuable in a lease. “Global leaders realize the urgency of this issue,” Hartenberger said. “The world is changing. Buildings do have quite a role to play in reducing greenhouse gases, and it’s relatively low hanging fruit.”

The result is that owners should look at greening buildings before they are compelled to do so, and reap competitive advantages by being early adopters. “Governments are becoming increasingly proactive on green legislation,” Recny said. The implication is simply that landlords and tenants will have to go green whether they want to or not.

Awareness is growing that they should want to. Energy represents 7% to 9% of all occupancy costs, and a number of investment funds are focusing on green buildings, said John Quigley, Professor of Economics at the University of California, Berkeley, a co-author of the RICS-sponsored study “Why Do Companies Rent Green? Real Property and Corporate Social Responsibility,” undertaken by Maastricht University in The Netherlands and the University of California, Berkeley. Green buildings, as a result, have better, more stable, occupancy; higher office rents–between 6% and 9% higher; and higher selling prices–approximately 16% to 17% more. “This can be attributed to energy efficiency, but also the labeling effect,” Quigley said.

Other factors are the role renting green can play in burnishing a corporate reputation, a reason why petroleum and gas companies are “far more likely to locate in green office space.” One benefit does not seem to be greater productivity, Quigley said, though there could be indirect benefits.

But the downturn is having effects, said sustainability expert Paul King, former vice president of sustainability for Bovis Lend Lease. Companies are holding back on retrofitting offices “because it’s not the right thing to do while you’re laying people off.”

President Obama has backed away from a strong US commitment to the Copenhagen Climate Change Treaty draft, which calls for a national commitment to greenhouse gas reductions. “It’s sent a shock wave through the environmental community,” King said. “But it will have to move forward at some point, because it hasn’t gone away.”

Another problem on the building front is that many technologies have extremely long paybacks, a disincentive for investment for anything other than new buildings and a major retrofit. “Some can be 20 to 50 years,” King said. “You’ll need other incentives to do most, and I suspect that will be regulation.”

But with populations increasing, governments and companies have no choice to pursue all energy alternatives, King noted.

“[The earth's population] will be at 9 billion by 2050, and the trend is toward the western lifestyle, which is very energy-intensive,” King said. “Regardless of your political beliefs, we are not in the Middle East just to spread democracy. Windmills and solar panels will exist. The world has to move in this direction.”

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