THE BLOG

When Does Green Real Estate Development Finally Take Hold?

03/18/2010 05:12 am ET | Updated May 25, 2011

The Urban Land Institute (ULI), is an organization of community
builders and
members who develop and redevelop neighborhoods, business districts,
and
communities across the U.S. and around the world. Comprised of
thousands of
property owners, investors, architects, lawyers, planners,
contractors,
professors, and others allied to the industry, the ULI
convenes each November for its annual fall meeting. This year, San
Francisco was the host city. Over 6,000 people attended, in spite of difficult
market conditions.

Much of this year's meeting focused on the impact of the great
recession, lack of financing options, and what lies ahead when the
recovery
takes hold. And, of course, there was a portion dedicated to
green and sustainability. Would there have been more devoted to this
aspect of real estate if the economy was stronger? Hard to say.

"Emerging Trends in Real Estate," published by the ULI and
PricewaterhouseCoopers, is released each year at the fall
meeting. The 2010 edition, authored by Jonathan D. Miller of
MillerRyan LLC,
may give an indication of where green and sustainability rank in
the current food chain. According the study, which draws on
more than 900 interviews and surveys, "Since the industry ices most
development activity, momentum for eco-friendly, energy-saving
buildings
stalls." One leading institutional investor said, "The recession makes
it
less of a priority and nobody has extra money to spend retrofitting."
However this is just a momentary slowdown, like much of the economy.
The
report goes on to say that "most interviewees expect developers to seek
LEED certification" for most future projects. "Tenants want reductions
in
energy costs and big companies need cover for their corporate
responsibility statements." Also, "Investors realize that 'a green
story'
helps lease space faster even if "tenants won't pay for it." Climate
change is less at the forefront of the decision making and more due to
the
fact that office tenants are gravitating to buildings with
systems that foster healthier workplace environments. Simply put, "Tenants will demand these systems once they experience the
difference" as
mentioned by another response to the study.

On the ownership front, there is a real possibility that the building
will
garner a bigger price in five to ten years when the property is ready
for
sale.

The costs for retrofitting can be prohibitive, but considering the
alternative, an empty building and a property that is unable to be
leased
or sold, it appears that once the economy starts humming along once
again,
green and sustainable practices are going to be the way of doing
business.

Jonathan A. Schein is publisher of MetroGreenBusiness.com and GreenBusinessCareers.com