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   ARTICLE   |   From Scotsman Guide Commercial Edition   |   April 2008

The Bottom Line Goes Green

Environmental friendliness can be a solid business proposition for many of your clients

Environmental awareness has hit a fever pitch recently. As public perception evolves and environmental groups worldwide step up their efforts, green issues find themselves at the forefront of civic consciousness.

Already, numerous cities around the country require that new public buildings incorporate green construction techniques. Eventually, all new commercial buildings may be required to have ecologically friendly features. As this transition occurs, banks and other lenders will more-readily acknowledge the increased value of environmentally sustainable buildings. These lenders also will likely alter their loan programs to finance such properties.

Green-Building Standards

What is ENERGY STAR? It is a joint program of the U.S. Environmental Protection Agency (EPA) and the U.S. Department of Energy. According to the EPA, it provides an energy-performance rating system and recognizes top-performing buildings. It offers a strategy to measure current energy performance, set goals, track savings and reward improvements. The rating system can be applied to appliances, construction materials, lighting and more.

What is LEED? According to the U.S. Green Building Council, LEED -- Leadership in Energy and Environmental Design -- is a national benchmark for the design, construction and operation of green buildings. It recognizes performance in five main areas: sustainable site development, water savings, energy efficiency, materials selection and indoor environmental quality. Commercial buildings can receive four different levels of certification -- certified, silver, gold and platinum.

For more information, visit energystar.gov or usgbc.org.

 

As a commercial mortgage broker, you can benefit from understanding the long- and short-term goals of commercial owners and developers who seek to make their projects more environmentally friendly. Further, by making clients aware of programs that encourage sustainable commercial-building practices, you can tap into an emerging market.

Impact and certification

Property-owners often will ask three questions when considering whether to build green:

  1. How does it impact my bottom line?
  2. How does it improve my image?
  3. How does it help the environment?

Out of those three, how the development affects the bottom line is usually the determining factor in whether an owner will choose to employ environmentally sustainable materials and design. Higher sales prices and lower operating costs are two items that have a clear impact on the bottom line. When those savings come at the expense of higher upfront or development costs, however, the choice to go green may not be so simple.

Many groups are sensitive to this fact, and they offer programs that make it easier and more enticing for developers to build green. Two of the more-popular programs are the U.S. Green Building Council’s Leadership in Energy and Environmental Design (LEED) certification and the U.S. Environmental Protection Agency’s (EPA) ENERGY STAR program (see sidebar).

LEED certification is a standard by which buildings are measured. It includes an analysis of materials, structure, energy efficiency and overall sustainability. Buildings that are LEED-certified will often bring a higher price upon disposition because of their long-term operational savings. Moreover, as green buildings continue to gain popularity among the general population, property managers are starting to see a higher rental premium for properties with LEED certifications.

The EPA’s ENERGY STAR program was developed to promote energy-efficient products in homes and commercial buildings. It provides an energy-rating system, measuring current performance. The rating system can be applied to building resources such as appliances, construction materials and lighting.

Builders can incorporate one or both of these standards into their building plans, or they can look to a separate sustainability standard altogether.

Further, property-owners who can’t build new are starting to retrofit their buildings with more-efficient products. Some inner-city buildings are starting to make better use of their roof space, which had previously gone unused. Some owners are adding green roofs, which are a combination of living materials such as grass and plants that capture water from rain and snow and combine it with the buildings’ water systems to reduce water usage and stormwater runoff. This all translates into operational savings.

Partnerships

In exchange for going green, many city governments offer developers increased floor-area ratios and lower parking-density requirements. They also may waive city charges such as impact and permit fees. In some cases, cities have joined with developers to share parking spaces. Some municipalities have even provided funds to developers for the infrastructure.

In addition, many organizations and nonprofits work to encourage sustainable, environmentally friendly practices in commercial real estate. For example, local district councils of the Urban Land Institute work to provide leadership in responsible land-use and in creating and sustaining thriving communities.

Although they are usually careful not to lobby or to play politic, groups such as this have become catalysts for changes in governmental legislation. More important, they are shaping the way we go about business in the real estate industry.

In many cases, property-owners and builders are even seeing the impact that sustainable-building practices have on greater communities. The U.S. Green Building Council has conducted studies that tie green building features to healthier living and more-productive workers.

Indeed, many people find comfort in working in buildings with filtered air, mold-resistant walls, access to mass transit and prime parking spots for rideshare programs. These elements help building- and business-owners’ bottom lines and create positive images for their firms.

Mortgage brokers who lead their borrowers in this direction should find both short- and long-term advantages for themselves, their customers and their own bottom lines.


 


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