Why Green Buildings Fatten Your Bottom Line

By Doug Smith
Seattle Daily Journal of Commerce
May 2, 2002

You can save on much more than your utility bill

Bellevue Community College anecdotally reports significant improvements in
student grades and attendance at its new LEED-certified R Building.

A funny thing happened on the way to green buildings — energy efficiency
improvements and other green measures not only reduced utility bills, they
improved productivity of building occupants — in some cases dramatically.
Astute members of the commercial building industry and sustainable design
movement have recognized this powerful effect, and are forming teams to produce
the next generation of “high-performance green buildings” — buildings which are
green, sustainable and give occupants and owners a strong competitive advantage
moving into the new century.

Many longtime proponents of green building have always felt sustainably designed
buildings would result in productivity improvements, but this has been a tough
sell due to the difficulty in objectively measuring productivity on a very
limited number of projects.

Simpler to comprehend are easy-to-measure savings such as lower energy cost due
to added insulation and double-glazed windows. New to the picture is a small but
growing body of data proving productivity gains that were previously only theoretical.

As one might expect, among the first to embrace the idea of high-performance
green buildings are high-value companies with steep knowledge worker costs.
Examples include research-and-development operations, software companies and
professional-services firms. Also taking note are schools and certain retail businesses.

Case studies

Key to transforming the market place is case studies that prove high-performance
green buildings improve occupant productivity significantly. Dozens of these
studies are published by various organizations, including Seattle City Light,
U.S. Green Building Council, Rocky Mountain Institute, and the American Society
of Heating, Refrigeration and Air Conditioning Engineers. Here a just a few examples:

Boeing implemented the EPA’s “Green Lights” program, achieving an amazing 90
percent reduction in lighting energy cost, but more significantly, measured
sharp drops in both work defects and accidents.

The Seattle School District, under a study commissioned by PG&E, found student
grades increased about 10 percent following improvement in daylighting (use of
more natural and less artificial lighting, also resulting in lower energy bills).

Wal-Mart’s new “Eco-mart” store sales increased significantly (other retailers
report 20 percent to 30 percent) in areas where light-diffusing skylights are
located above merchandise displays.

Knowledge worker office environments typically show 5 percent to 10 percent
increases in productivity, and in the case of West Bend Mutual Insurance, 16 percent.

Nearly all green buildings with well engineered indoor air quality systems and
modest daylighting report absenteeism drops of 15 percent, almost universally.

Financial performance

From historical and case study data of green and high-performance buildings
several rules of thumb have been developed to place the economics of
high-performance green buildings in perspective.

Typical commercial office building 30-year life cycle costs are broken down as
follows: 92 percent staff, 6 percent operation and management, and just 2
percent initial building capital cost. Hence, small changes in staff
productivity affect business profitability far greater than even major changes
in building operation and management or initial capital cost.

Business and building costs are as follows on an annual per-square-foot basis:
staff, $200; lease/mortgage, $20; utilities, $2; maintenance, $2. Hence, the
widely used rule of thumb: a 2 percent improvement in staff productivity
equals the entire building operation and management cost. Another rough rule
of thumb is green measures that reduce operation and management costs will pay
back 10 times faster when the measures also improve productivity, which is the
case for nearly all green measures.

Technology traits

So, what are higher-performance green buildings? As a minimum, most are U.S.
Green Building Council LEED (Leadership in Energy & Environmental
Design)-certified, and possess some or all or following features: clean, fresh
air; connection to nature; daylighting, views and vistas; interior design and
artwork; human factors design to facilitate work process; personal
control/customization of the workspace; wired for flexible low-cost,
high-bandwidth digital services; comfort (thermal, olfactory, noise and
vibration, and ergonomic); and creature comfort amenities (gyms, colorful break
rooms, casual meeting nooks).

Other considerations

Business economics aside, green buildings are fundamentally easier on the
environment and the occupants. Staff working in green buildings are healthier,
happier, more productive and theoretically better off financially. This ultimate
end-user driver alone is enough to transform the market over the midterm. In the
long run, even greater returns are expected as businesses in green buildings
enjoy increased employee longevity and health, and even greater customer loyalty.

Issues and trends

The single largest issue in the high-performance green building concept is
demand development. Currently interest is largely from the high-end of the
market and certain government sponsored programs, such as the city of Seattle’s
groundbreaking Green Building program, which requires all city-funded projects
over 5,000 square feet to be LEED silver-certified. It is hoped the market will
accelerate as the body of knowledge grows based on the projects completed, under
way or planned by industry leaders.

Over the last decade, green buildings have been pushed from the top down through
various incentive, awareness and government demonstration programs. The projects
emphasized reduction of building life-cycle cost, without any credit for
positive impact on building occupants. Now that substantial improvements in
staff productivity are being well documented, the interest in high-performance
green buildings is expected to accelerate rapidly over the next five to 10 years.

Already progressive businesses are insisting on and paying premium rents for
space in high-performance green buildings. In soft markets vacancy rates for
these buildings run lower, and in strong markets they command significant lease rate premiums.

Cutting-edge organizations and companies are developing, designing and occupying
high-performance green buildings. These developments are based in part on a
growing base of knowledge demonstrating very high returns on investment due to
staff productivity increases that far exceed savings in operation and management costs.

Doug Smith is a senior mechanical engineer at the Seattle office of Carter & Burgess.


Promoting Green Building Design, Construction and Operation, Sustainable Living,
Clean Technology, Renewable Energy Resources and Energy Independence