The verdict is in. Green buildings do improve financial performance of properties, reports the U.S. Department of Energy (DOE) in its recently released report Energy Efficiency & Financial Performance: a Review of Studies in the Market. The report was designed to build the business case for energy efficiency by reviewing empirical evidence from 50 other relevant, independent studies.
The study was compiled as part of the DOE’s Better Buildings Initiative, which is pursuing strategies to accelerate investment in energy efficiency. The goal is to make commercial and industrial buildings 20% more energy efficient over the next 10 years and accelerate private sector investment in energy efficiency.
Green Certified Buildings are More Efficient
A key barrier to underinvestment in energy efficiency, according to the DOE study, is the lack of information about how energy efficiency upgrades may improve a property’s financial performance.
The DOE report was designed to determine the extent to which evidence in the existing studies demonstrates that energy efficiency contributes to the bottom line.
The studies reviewed by the DOE sampled thousands of buildings nationwide with LEED and ENERGY STAR certifications. These are the key conclusions:
- Higher Rental Rates. Class A LEED buildings display a 15.2-17.3% premium and ENERGY STAR buildings display a 7.3-8.6% premium over similar non-rated buildings.
- Higher Occupancy Rates. LEED buildings have 16-18% higher occupancy than non-rated buildings, while ENERGY STAR buildings have 10-11% higher occupancy.
- Lower Utility Costs. Electricity and gas expenses in ENERGY STAR buildings are more than 13% lower compared to similar non-rated buildings.
- Increased Sales Prices. LEED buildings exhibit a 10-31% premium and ENERGY STAR buildings exhibit a 6-10% premium over non-rated buildings.
- Low Construction Cost Premiums. Construction costs for new or renovated LEED buildings are typically equal to or only slightly greater than the costs for non-rated buildings, primarily due to the actual costs of certification versus construction itself (approximate 2%).
Future Areas of Study
There were also some findings that the DOE felt warranted more research. For instance, there is preliminary evidence that green buildings attract high quality tenants (defined as tenants that exhibit a greater likelihood of rental collection or longer term occupancy, based on their credit ratings).
The DOE also found preliminary evidence that green buildings improve the health, well-being and productivity of building occupants, citing the 2011 Notre Dame study conducted on PNC bank branches that found LEED certified facilities annually opened up 458 more consumer deposit accounts and had $3,032,000 more in consumer deposit balance per facility per year.
However, the number of studies and inconsistencies in some definitions such as “productivity” meant that the DOE couldn’t state a conclusive finding.
Other future areas of research identified by DOE includes sector specific studies looking at different geographic regions or market segments; more granular information on the performance of LEED or ENERGY STAR buildings at different rating levels or scores; and more in-depth studies into financial impacts such as operating expenses, cap rates on building sales and insurance rate premiums.
The DOE has undertaken a number of programs partnering with companies, academics and local communities. For example, through its Better Business Alliance, the DOE is working with commercial enterprises to develop and deploy energy-saving technologies and solutions.
The Alliance’s 200+ members cover key market sectors: retail, food service, commercial real estate, hospitality, health care, higher education, and state and local building owners and managers. More than 120 industrial organizations have signed voluntary pledges to reduce energy intensity by 25% over ten years.
The DOE’s annual Better Buildings Case Competition (BBCC) engages interdisciplinary teams of university students to gain critical skills and experience to start careers in clean energy.
DOE’s Better Buildings Accelerators program calls on leaders in business and the academic community to undertake specific innovative policies and approaches to accelerate investment in energy efficiency.
For more information about the DOE’s collaboration with business on energy efficiency, visit DOE’s Better Building website.
Brad Pease is Director, Signature Buildings Practice, AIA, LEED AP BD+C, in Paladino Austin.