LEED Building Design:
An overview of government and market driven incentives for “Going Green”
An investigation of funding, costs, savings and ecological impacts of LEED Design
A research proposal submitted to the Urban Studies and Planning Program
University of California, San Diego
Andrew Johnson
USP 186/187 Senior Sequence
a6johnso@ucsd.edu
February 22, 2011
Abstract:
Green building design has become an increasingly popular way to apparently reduce energy,
water, and resource consumption. Considering commercial LEED certified buildings (Leadership
in Energy and Efficiency Design) cost anywhere from 3-10 percent more that standard building
construction, this article attempts to dismantle the mechanisms that drive the LEED industry
despite these higher start up costs. For the purpose of this study, I have classified incentives into
two categories; 1.) State and local government incentives. 2.) Market driven incentives.
Conclusions drawn from this study find that state and local governments offering incentives such
as expedited permitting (Priority in building permit processing and plan review), tax reduction
(particularly property tax abatements), density bonuses and reduced-cost building permits
offered for LEED certified commercial buildings have not been widely adopted. Also, the
corporate decision to “go green” is predicted by a succession of factors including the condition
of ownership, target marketing, and the role of the company in relation to environmental
stewardship. The research was composed through email, over the phone and in person interviews
with LEED building project managers, architects, consultants, and other knowledgeable staff.
This study has contributed to literature regarding the role of economics in the context green
commercial infrastructure. My findings have been shared with planners, environmental activists,
local developers and interested business professionals in order to provide information regarding
the policy and market driven motives driving green technology.
Key terms: LEED building design, market incentives, government incentives, ecological
footprint, environmental policy
1
Introduction:
Global Context: Increased environmental pressure spurs sustainable building design
When we begin to think on the basis of global longevity, we must bring into question
areas of our daily lifestyles that we have the ability to change and improve upon. Deforestation,
record carbon dioxide levels in the atmosphere and ocean pollution are among a few areas of
concern that must be addressed to minimize irreversible effects. Although there are numerous
contributing factors to degraded urban and natural environments, here I would like to focus on
one small aspect of how mankind is making a step towards reducing negative environmental
impacts and making efforts towards a sustainable future; LEED building design.
In an increasingly urban world, almost half the world's total population and over threequarters of the population of high-income countries now live in urban areas.1 The global
contribution from buildings towards energy consumption both residential and commercial has
steadily increased reaching figures between 20% and 40% in developed countries.2 Within the
built environment, LEED certified buildings have become a new type of building design that
have apparently reduced their ecological footprint when compared with standard construction
methods.
Sustainability Paradigm: A change in the way we view the environment and conduct business
The sustainability paradigm is a contemporary phenomenon in which not only
environmental activists, but also industry professionals, multi-national corporations and state and
Barney Cohen, “Urbanization in developing countries: Current trends, future projections, and
key challenges for sustainability,” Technology in Society 28, no. 1-2 (January): 63-80.
1
Luis Pérez-Lombard, José Ortiz, and Christine Pout, “A review on buildings energy
consumption information,” Energy and Buildings 40, no. 3 (2008): 394-398.
2
2
local governments are shifting the way they relate to consumption, efficiency, and pollution.
Whether it is a multi-billion dollar company, a small business, or a local social movement, we
are becoming aware that as global civilization, must change the way in which we produce,
consume, and reuse our resources and energy. In the midst of a substantially more limited
resources supply, companies are adopting sustainable practices to ensure monetary savings while
promoting their product and increasing social appeal.
Mechanisms for ensuring urban and environmental longevity are predicted by
environmental awareness, efficient economic strategies reinforced by policy. Together, these
three components will morph cities and businesses into more efficient consumers of energy,
water, and resources while also minimizing pollution. Adoption of sustainable practices will
allow for us to meet the needs of our current generation while ensuring access to resources and a
livable environment for future generations.
Aim of this study: Impact of incentives for green infrastructure offered by governments and
the role the free market
The purpose of this study is to understand the motivation for businesses to adopt LEED
building design despite the higher initial cost these buildings require. Furthermore, to come away
with an understanding of the economic role of the free market and government that either
support or refute sustainable building design. The findings of this study are aimed to educate
planners, developers, international businesses, and local businesses about the possible reasons to
adopt or deny LEED in terms of economic practicality.
3
Conceptual Framework and Literature Review:
Sustainability in essence, could be the form of simple living, such as growing what you
eat or constructing your house out of materials that grow easily and are extracted locally. But as
we know, inside of densely populated areas, farmable land and access to fertile hinterlands are
scarce. In densely populated cities, urban sustainability will eventually revert (and it has already
begun) to technology in order to increase energy and resource efficiency from within. Scholars,
scientists and economists alike, have a general consensus: as cities continue to grow, the longterm presence of the population will depend on conservation and recycling of water, resources
and energy. This transformation of our urban system will rely on reevaluating our cradle to
grave system of consumption and redirect our focus into the cradle to cradle system.
Cradle to grave can be thought of as a linear system, in which the producer and consumer
are not concerned with the lifecycle of a resource or product. It is an inefficient system of
consumption, where the lifecycle of resources and energy are treated as infinite and expendable
and thereby eventually disposed of in a grave of some kind, usually a landfill or incinerator.3 The
opposite of the cradle to grave system is the cradle to cradle system. In this system, energy is
generated by renewable sources and the lifecycle of resources flow in a regenerative, non-linear,
closed-loop cycle.4
LEED certified buildings encapsulate the idea of applying the cradle to cradle system
into a building design. LEED building incorporate recycled construction material and efficient
water, energy, and HVAC systems. The design and incorporation these systems are thoughtfully
D. Langdon, “Cost of green revisited: Reexamining the feasibility and cost impact of
sustainable design in the light of increased market adoption,” July). Authors listed within as: Lisa
Matthiessen and Peter Morris. Unpublished paper at (2007).
3
W. McDonough et al., “Peer Reviewed: Applying the Principles of Green Engineering to
Cradle-to-Cradle Design,” Environmental science & technology 37, no. 23 (2003): 434–441.
4
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reviewed to ensure lower environmental impacts than standard buildings. Literature on the topic
of sustainability and energy conservation share a clear consensus that there is an increasing need
for consumers and producers to become aware of the environmental impacts of their decisions.
Carbon emissions, which have become a subject of increasing concern which are largely
produced by buildings. Accordingly buildings are responsible for approximately 50% of U.S.
carbon emissions. Studies show that LEED certified buildings have a much smaller carbon
footprint that offers a carbon savings of 35%.5 The chart below shows the national average for
the environmental impact of standard buildings.
Environmental Impact of Buildings in the U.S.
 65.2% of total electricity consumption
 >36% of total primary energy use
 30% of total greenhouse gas emissions
 136 million tons of construction and demolition waste
 12% of potable water in the
 40% or raw material use globally
(USGBC)
LEED buildings offer a way for nations, states, developers and businesses to make
environmentally conscious decisions by advocating for this type of construction. Back in 2000,
the World Commission for Water concluded that we are on a path toward a water crisis and that
business as usual is unsustainable.6 Rising levels carbon retained in the atmosphere also lends
itself to reinforce the appeal of green buildings. LEED building performance analysis show
LEED buildings average substantial savings.
Green Building Average Savings
Energy
30%
Carbon
35%
U. S.G.B Council, “Leadership in Energy and Environmental Design (LEED),” LEED Home
Page 8 (2001).
5
K. D Frederick, “Marketing water: The obstacles and the impetus,” Resources for the Future
132 (1998): 7–10.
6
5
Water Use
Waste Cost
(USGBC)
30-50%
50-90%
Scientific data also show that globally, cities are polluting more than ever before and
consuming our natural resources at unprecedented rates. These rates are expected to increases
exponentially as our population increases in developed countries and as developing countries
industrialize. Although most people would agree that a clean environment is desirable,
widespread adoption of sustainable building design will need to be reinforced with economic
incentives.
Under the umbrella of sustainability, LEED certified buildings have become iconic
examples of how applied technology can be used to conserve the throughput of energy and
resources. Many studies suggest that the startup costs of LEED construction is 2-7% higher than
traditional building methods.7 Some argue that 2-7% is not a substantial amount when compared
worth the total energy and water savings over time. According to Greg Kats, principal at Capital
E. Consulting Company for Clean Energy Technologies and High-Performance Buildings;
A primary driver behind this growing trend to build green is cost. For as little as
2–7% more in frontend costs, owners save more than 10 times the initial capital
investment over the building’s lifetime through lower utility bills and operations
and maintenance costs.8
Gregory Kats referrers to an increased 7% start up cost as low due to the
prolonged savings achieved over time. However, I believe 2-7% increase in start up costs for
LEED buildings compared to standard construction is substantial and could potentially deter
investors from constructing LEED buildings. Breaking through the cost barriers will require
7
G. Kats et al., Green building costs and financial benefits (Massachusetts Technology
Collaborative Massport, Ma, 2003)
8
Christen, Kris. "Perspective Federal Buildings Increasingly Going Green."Environ. Sci.
Technol. 38.12 (2004): 222
6
government leadership, private-sector ingenuity, and public support. As my findings suggest,
there are more incentives than lifecycle costs that will assist the developer or building owner
achieve a substantial return on their investment.
LEED buildings have been merited for lowering green house gas emissions (GHGs) which
has become of rising concern since the Earths Summit in 1992 that raised awareness of the
adverse affects of pollution in a global context. However, one of the main barriers to the wider
adoption of sustainable design and construction solutions is the perception that these incur
substantial additional costs.9 A discernable movement is now afoot for government to play a
significant role in promoting green building projects.10 My research has revealed what types of
government and market incentives are shaping the future of growth in the industry of LEED
projects in California, specifically San Diego. As me move into the 21st century and
environmental awareness at government level takes effect, LEED buildings have become
promoted and embraced as a means for the state and local municipalities to encourage
development that reduces ecological impacts. According to Christen Kris:
The biggest hurdles we had to overcome was the notion that building green costs a whole
lot more and fighting the tendency to do things the way they’ve always been done.
In 2002, however, the Office of Management and Budget issued guidelines directing
agencies to use a lifecycle cost approach in all design and financial decision making. As a
result, now “almost all federal construction projects are incorporating many sustainable
features.
California government has recently passed legislation in aimed at reducing GHGs. AB32
was a law passed in 2006 which strives to lower the state’s total emissions to 1990 levels by
Carl J. Circo, “Using Mandates and Incentives to Promote Sustainable Construction and Green
Building Projects in the Private Sector: A Call for More State Land Use Policy Initiatives,” SSRN
eLibrary,2008
9
10
Circo,2008
7
2020. With the passing of this bill, there is a sense of urgency to target buildings because of their
high contributions of GHGs. Setting the example, starting in 2013, all new buildings on military
bases must attain standards set by the U.S. Green Building Council for LEED Silver.11 In
California, all new State buildings and major renovations of 10,000 sq. ft. and over and will be
designed, constructed and certified at LEED Silver or higher.12 Adopted in 2002 by the City of
San Diego, all new municipal buildings and significant remodels larger than 5,000 square feet
are required to meet LEED silver13
Various financial incentives exist for developers to build green. Nationwide, building
green incentives have included property tax abatements and preferential lending opportunities.14
According to the United States Green Building Council, incentives that have been utilized for
LEED construction in California have included tax incentives, expedited permitting, grants, fee
reductions and density bonuses.15
Local and state governments have begun to show support for LEED buildings through
incentives. According to the United States Green Building Council, structural and financial
11
"Military Building Designed to Meet LEED Silver Standards." Green Building News.
12/20/210. Web. <http://www.greenbuildingnews.com/articles/2010/12/20/military-buildingdesigned-meet-leed-silver-standards>.
12
"State of California Green Building Action Plan." California Energy Commission. Web.
<http://www.energy.ca.gov/greenbuilding/documents/background/02_GREEN_BUILDING_AC
TION_PLAN.PDF>.
13
Jackson, Mandy. "City Takes LEED in Green Building." SAN DIEGO BUSINESS
JOURNAL23.24 (2002). 18 Nov. 2002. Web.
<http://www.sandiego.gov/environmentalservices/energy/news/pdf/021118leed.pdf>.
14
Circo,2008
"Summary of Government LEED® Incentives – March, 2009." United States Green Building
Council. 29 Mar. 2009. Web. <http://www.usgbc.org/ShowFile.aspx?DocumentID=2021>.
15
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incentives exist in San Diego. The structural incentives available for commercial projects in San
Diego include; expedited permitting review and processing, density bonuses. Financial
incentives include tax credits and abatements, fee reductions or waivers, grants and revolving
loan funds.
Contrary to the idea that economic models represent the economy as essentially separate
from and independent of “the environment,”16 monetary profit and environmental sustainability
can in fact work together. In this model, LEED building design works to profit the business
while reducing environmental impacts. The study reveals the role of incentives that are specific
to green building design. These various incentives allow sustainable building design to prove
practical from a financial standpoint because constructing a LEED building can mean savings
through lifecycle costs, lowered capital investment through utility company and government
based incentives and profits through increased marketability, worker productivity and tenant
attraction.
Research Strategy:
Research outset and redirection
Although the government incentives are stated as available, the buildings I was able to
survey did not use them. Composing a data base representing quantitative relationship between
the number of LEED buildings and the rate of government incentives utilized on a per building
basis was the initial goal of this study. However, acquiring such data has been substantially more
difficult than anticipated. Turns out, the information regarding the use of government incentives
if often unknown by the current owners or tenants of any given LEED building. Therefore I have
Rees, W. “Ecological footprints and appropriated carrying capacity: what urban economics
leaves out.” Sustainability: Sustainability indicators 4, no. 2 (2005): 137.
16
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redirected my research to interview a variety of professionals from related fields to understand
the question; “what are the mechanisms and motivations that have influenced company’s
decisions to opt for their LEED certified buildings over baseline building design despite the
higher costs they incur?” Through interviewing affiliated business personal, I was able to draw
conclusions related to the appeal of LEED in terms of financial and social aspects as it relates to
business decisions.
Contacting industry professionals to reveal motivations for achieving LEED Gold certification
My research method was composed of interviewing industry professionals
knowledgeable about the market driven and or government offered incentives that have
influenced the industry to adopt LEED infrastructure into their business practices. The study
focused solely on the LEED buildings within San Diego, all of which met a minimum Gold
certification level. My reasoning for choosing to research buildings that met LEED Gold was
that this certification level shows the company’s commitment to producing a high quality
building. Generally speaking, achieving LEED Gold certification results in substantially higher
costs start up costs. These costs typically are due to the more rigorous design phase as well as
increased construction material costs than subsequent LEED certifications and other baseline
projects. Therefore LEED Gold buildings have been targeted for this study in order to understand
how the owners of these buildings justify the added cost and how the investment pays off either
through either enhanced marketability, lifecycle cost savings or government/utility company
based incentives
Due to the qualitative nature of this study, interviews were the preferred method of data
collection. Determining which buildings to contact was addressed by selecting LEED certified
building through the certified project directory provided by the United States Green Building
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Council (http://www.usgbc.org/LEED/Project/CertifiedProjectList.aspx). From this project
directory, I was able to make contact with the building’s main line and from there I was
redirected to individuals that could answer my questions. Interviewees include; Drew George
LEED consultants, downtown San Diego architects, property managers, head of development
and sales and construction and commissioning, along with other affiliated personnel. Analysis of
the research findings were also compared to the findings of a survey administered by The
National Association of Industrial and Office Properties. This survey revealed the most widely
adopted green building incentives across the country, which allowed for more substantial
conclusions regarding general trends of LEED incentives
Limitations of the study
The coverage of my research is partial because not all LEED buildings in San Diego were
accounted for and therefore this research serves as a somewhat preliminary study. Other
limitations of my study include lack of a global context because this study will pertain
exclusively within San Diego. Also worth motioning is that this study will register the personal
accounts of a relatively few number of processionals which reflect personal opinions. This study
will however, offer a general insight to current trends of the LEED building industry in the San
Diego region.
Findings and Analysis
Local and state governments have begun to show support for LEED buildings through
incentives. According to the United States Green Building Council, structural and financial
incentives exist in San Diego. The structural incentives available for commercial projects in San
Diego include; expedited permitting review and processing, density bonuses. Financial
incentives include tax credits and abatements, fee reductions or waivers, grants and revolving
11
loan funds. Although these incentives are stated as available by the state and local jurisdictions,
the majority of the buildings I was able to survey did not use them.
La Jolla Commons: LEED Gold. Property Manager and Head of Development - Shawn
Tobias
Of the many buildings that were contacted, I was only able to obtain feedback on a
handful of projects. La Jolla commons was one of them. According Tobias, for the La Jolla
Commons office building, no government incentives were utilized. He stated “during the
construction and financing of the building, nobody was aware of any government incentives.
Given that the building was constructed in 2008, it may be possible that no incentives were
available at the time.” Upon research it was determined that government incentives were offered
2008 for such projects.
However, according to Tobias, the fact that La Jolla Commons is LEED certified Gold
offers a number of advantageous marketing capabilities. For one, it increases the rate or lease-up.
This translates directly to increased revenue. Shawn pointed out that a typical building may take
anywhere from twelve to eighteen months to reach full occupancy while their LEED Gold office
space was fully rented out within three to six months. The increased rate of lease-up multiplied
by the occupied square footage directly relates to regaining dollars spent on the higher start-up
cost. Tobias attributes the increased rate of lease-up to the desire of the tenants to leases out
LEED office space because it will save them money on operating costs. The operating costs are
significantly lower in LEED buildings due to efficient lighting, water, and HVAC systems.
He also noted that not only are tenants initially more inclined to lease LEED office space,
the La Jolla Commons is more likely to retain high occupancy. It was pointed out that this is due
to the appeal by the employees occupying the leased space which prefer to work in a LEED
12
building. Reasons for this include a notably healthier indoor atmosphere and employee support
for the environmental responsibility of their company.
Another important aspect that makes LEED buildings worth paying higher initial cost is
cap rate compression that LEED buildings produce. This occurs because the building produces a
high net operating income relative to the initial capital investment. Not only is this profiting the
building owner, it attracts investors because of the hard value of these buildings. As mentioned
earlier, the high rate of tenant occupancy contributes to the stability of a high net operating
income. The net operating income is enhanced further through a substantially lower operating
costs achieved through efficient energy and water saving systems. Tobias finds the cap rate
compression that the La Jolla Commons has produced plays an important role in the current U.S.
economic situation, where foreign investors are more likely to invest in a company that restrains
a high market value.
Hotel Indigo: Certified Gold - Head of Marketing & Sales
The Hotel Indigo is the only LEED certified Gold hotel in San Diego and from a
marketing perspective has a niche market for the area. Upon interviewing the head of sales and
marketing it became apparent that the incentives for building their hotel to meet LEED standards
stretches beyond incentives mentioned previously. According to the head of sales, Hotel Indigo
is the flagship of the father company, the InterContinental Hotel Group. It was explained that
Hotel Indigo is constantly being refined to be at the top of the market and in doing so, meeting
LEED Gold certification has been a part of that effort. The fact that the hotel is based on green
design principals, this has worked in favor of advanced marketing strategies. For example when
13
asked; “Do you believe that because your hotel is LEED certified, it brings in more
environmentally conscious guests?” The response was “that is absolutely the case”.
According to IHG, renewal is the soul of Hotel Indigo’s retail-inspired design concept –
thoughtful changes that are made throughout the year to keep the hotel fresh, similar to the way
retailers change their window displays.17 In the midst of our current “green” trend, businesses
and the everyday people may very well choose to stay at a green hotel for what LEED represents.
According to the head of sales, the LEED certified Hotel Indigo appeals to guests unlike other
hotels. When traveling business personal is in town for a meeting or convention, they may opt to
stay at green hotels as part of the company policy. Given that Hotel Indigo is the only LEED
hotel in downtown, gives them marketing advantage over other non-LEED hotels I the area.
When asked if any government incentives were utilized, I was referred to their LEED consultant;
Drew George.
Drew George LEED Consultants - Project Manager - Tyler Farmer
The San Diego based LEED consulting firm Drew George has worked on numerous
LEED projects, the Hotel Indigo being one of them. The primary contact for my interview was
the LEED Project Manager, Tyler Farmer. He informed me that the Hotel Indigo did not utilize
any government incentives, however they did participate in the Sustainable Communities
program offered by San Diego Gas and Electric (SDG&E). The Sustainable Communities
Energy Efficiency Program (SCP), is a way for a LEED or other energy efficient facilities that
meet specific energy efficiently requirements to partake to lease out rooftop space for the
17
"IHG Lodging Brands." IHG Lodging Brands. InterContinental Hotels Group. Web.
<http://www.ichotelsgroup.com/h/d/6c/1/en/c/2/dec/6c/1/en/ob.html>.
14
installment of photovoltaic systems through SDG&E. Part of the requirements to qualify for the
program is to achieve an energy-efficient building design beyond what is required by Title 24.
Although the energy produced by the photovoltaic system is channeled to the grid and not
directly linked to the facility itself, the program does allow for the building to collect LEED
points for having the photovoltaic system. More points mean a higher LEED rating. The other
incentive for the building to partake in SCP is the revenue earned through leasing out the
otherwise dormant roof-space. The generated revenue leased roof space is another way a
building can regain lost money that was spent on the higher design, materials, and construction
costs affiliated with LEED projects. Hotel Indigo declares that they participated in the program.
Unfortunately I was not able to obtain the details agreement. According to the SDG&E director
of Commercial and Industrial Services, Joe Valesquez, , “we are limited on the amount of
customer/project specific information to include on the case summaries which depends on how
much a customer wishes to make public about their project.”
Besides incentives offered by energy companies, according to Tyler Farmer, LEED
buildings do not necessarily cost more to design or construct more than baseline projects. Farmer
attributes the cost savings by hiring on an experienced design team. The hard-costs are relatively
fixed, however in the area of soft-costs there is room for savings. He explained that “it is
important to have a design team that knows what works and what doesn’t work, this can reduce
cost substantially.” Over the years Drew George has designed and consulted for upwards of onehundred projects including airport terminals, community centers, medical buildings, mixed-use
retail office/commercial, military, fire stations and various building on the University of
California, San Diego campus including the Muir College Apartments and Stewart Commons
Dinning.
15
SDG&E - Savings by Design
Another program that reinforces the appeal of constructing a green building is Savings by
Design. This program is statewide, and is funded by California utility customers and
administered by SDG&E (See appendix A. for statewide account of participating utility
company’s). According to the 2010 - 2012 Program Cycle Participant Handbook, participant
incentives include:
Projects participating in Savings By Design receive services including design
assistance, owners incentives, design team incentives, and energy design resources.
Services begin in the project design phase and continue through construction completion.
Design assistance can range from simple plan review and efficiency upgrade
recommendations to complete computer simulation analysis comparing a number of
alternative systems and integrated building design options. Financial incentives, to help
offset increased design interaction and potential costs of construction, are available for
projects that exceed thresholds established by the program.18
If the project meets ambitions energy efficiency targets , the building owner and design
team may be rewarded cash to help offset the higher cost to the owner and the to the design team
for an exceptional design. To receive incentives there are two primary approaches, Whole
Building Approach and a Systems Approach. For the Whole Building Approach, the owner may
receive up to $500,000 if the project exceeds Title 24 or standard practice baseline by at least
18
"Savings by Design, 2010 - 2012 PROGRAM CYCLE PARTICIPANT HANDBOO." Savings
by Design. 2010. Web. <http://www.savingsbydesign.com/pdfs/2010-2012-SBD-ParticipantHandbook.pdf>.
16
10%. Design teams of the project may be eligible for up to $50,000 and a Integrated Design
Stipend is available to the Design Team Leader upon completion of the schematic design if
certain requirements are met.19
X-nth Consulting Engineers - Head of Construction and Commissioning - Ben Gilbert
The X-nth Consulting Engineers office space (formally TKG Consulting Engineers Inc.)
is a LEED certified Gold building in San Diego which has participated in SCP. For this building,
the guidelines of the SCP have been disclosed. For this project, the SCP provided cash incentives
for the energy saved and offset fees for LEED™ registration and certification. SDG&E also sited
a 40 kW photovoltaic array on the building to provide renewable power for its distribution grid.20
According to the Head of Construction and Commissioning Ben Gilbert, no other
government incentives were used on this project. He stated “the main player when it comes to
any incentives or programs that I have seen, in terms of the volume of money given out, has been
by far through the programs by the utility companies.” The X-nth office space is owner
occupied, and when asked about the motivations for attaining the LEED certification, Ben
Gilbert replied “the increased quality of the indoor environment and lifecycle cost savings played
a part in deciding to build to LEED specifications, but also we wanted to show the level of our
commitment to the industry.” X-nth is responsible for the design electrical systems during the
construction phase of commercial and industrial projects. The quality of their own building is
19
"Overview." Savings By Design. 2010-2011. Web.
<http://www.savingsbydesign.com/overview.htm>.
20
"Sustainable Communities Program TKG Consulting Engineers Inc. Office
Building." SDG&E. 2004. Web. <http://www.sdge.com/documents/environment/TKG.pdf>.
17
thought to reflect their values in terms of good design, high grade building materials and
environmental responsibility.
Awbrey, Cook, McGill: Architect & Principal Design Director - Dennis Rogers
Dennis Rogers has over twenty-five years experience as an architect in San Diego and
has witnessed the increased demand of green buildings in recent years. Dennis agrees that the
greening of buildings is becoming more prevalent due to the attention that the company will
receive for the fact that it is LEED certified because the general public is supportive of the green
movement. He stated that “people today are more environmentally conscious, and they want to
see that in the products they buy or companies they support.” He agrees that the initial
investment for a LEED building is generally higher but feels that overall lower lifecycle costs of
the building provide substantial savings in the long term. He also attributes the heightened
popularity of LEED buildings to the improved indoor environment of these buildings which he
believes encourages work productivity.
The National Association of Industrial and Office Properties (NAIOP) research foundation
A study prepared and funded by NAIOP research foundation determined which
incentives for “going green” are used most widely. The numbers of survey respondents were as
follows, percentages are shown in the table below:
Survey
# Responses /Total Sent
% Responses/Total Sent
Developer
53/295
18%
Architects
37/201
18%
Municipal Government Officials
22/47
47%
18
The table below shows incentives that were offered by various local governments, listed
in descending order of frequency.
Type of Local Incentive
Incentive payment from a utility energy efficiency program
Percent Offering
57%
Direct monetary payment from a city or county
(grant, rebate or reimbursement)
52%
Expedited permit processing
36%
Marketing/publicity/awards
35%
State income tax credit
29%
Property or sales tax rebates or abatements
22%
Density bonus
21%
According to the developers, architects and municipal government officials, the most
commonly used incentive was provided through the energy and utility companies followed by
other incentives through local governments. The findings of my study are consistent with that of
the NAIOP in terms of the most widely adopted incentives, which were offered through the local
utility company.
Conclusion
From the industry professionals that I was able to interview, government incentives do
not appear to be an important factor for businesses to adopt LEED infrastructure into their
business models. In one case, according to Barney Mecretshaw with Crick Communications
Head quarters, their building actually paid extra to have their permit expedited. Shawn Tobias
point out that the slow pace of government may deter companies from participating in the
incentive process.
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In recent years as the popularity of LEED has increased, the hard cost of construction has
decreased. Post-construction, the higher rate of lease-up in LEED buildings when compared with
than other baseline infrastructure allows a company building a project as speculative space to
regain the extra money spent on construction and design phases. Reduced operating costs
through efficient energy producing photovoltaic, water conservation systems and HVAC also
reinforce the long term appeal.
Other benefits, which can be more difficult to quantify, include enhanced advertising
capabilities and increased employment attraction. In a study of public health by the University of
California San Diego, the effects of improved indoor environmental quality (IEQ) on perceived
health and productivity in occupants who moved from conventional to green office buildings
found LEED building in fact do have an improved IEQ. The improved IEQ contributed to
reductions in perceived absenteeism and work hours affected by asthma, respiratory allergies,
depression, and stress and to self-reported improvements in productivity.21
Advertising is also perceived as a strong point among LEED building owners. Chris
Bonvie, the San Diego Yacht Club Executive Assistant and Director of Human Resources feels
that their LEED certified gold building helps with advertising. He stated that “companies may
build LEED in hopes of getting their name out there”. LEED hotels may perhaps opt to build
LEED in order to increase occupancy, particularly in the midst of companies becoming socially
and environmentally accountable, thereby requesting employees to stay at green hotels when on
business trips.
21
Singh, A., M. Syal, S. C Grady, and S. Korkmaz. “Effects of Green Buildings on Employee Health
and Productivity.” American journal of public health 100, no. 9 (2010): 1665.
20
The local governing district sets forth the parameters of applicable local based incentives
for LEED infrastructure. Tyler Farmer pointed out that Encinitas is tune with the processes that
promote LEED projects through incentives than San Diego. This may be a reason why my
findings have not showed widespread adoption of incentives in the San Diego region.
The allurement of adopting LEED infrastructure into a company’s business model is
dependent upon the perceived outcome of how well the building will profit the company.
Calculating the various factors that would offset the initial investment comes down to
determining the LEED buildings potential, in terms of: occupancy retention, high net operating
income/low operating cost, utilization of utility company incentives and or government
incentives if they exist. As well as in the increased marketability in terms of sales, employee
attraction and general social appeal of the environmental stewardship that the company possess,
which is seen as admirable in during this time in age.
21
Appendix A. Utility companies offering “Savings by design” for energy efficient buildings.
Appendix B. Applicable incentives, either factual (F) or perceived prevalence (P)/
Incentive
Governemnt Incentive
Enhanced Marketability
Utility Based Incentive
Life Cycle Cost Savings
Hotel Indigo
F
F
F
Cricket
HQ
P
F
Drew Geroge
F
P
F
F
Architect X-nth
P
F
F
F
F
La Jolla
Commons
F
F
22
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