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 4 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 8 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 9 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 10 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. 19 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 Bibliographies 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. 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, Christen, Kris. "Perspective Federal Buildings Increasingly Going Green."Environ. Sci. Technol. 38.12 (2004): 222 D. Langdon, “Cost of green revisited: Reexamining the feasibility and cost impact of sustainable design in the light of increased market adoption,” July). 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