Current Events in the World of Industrial Property

Tuesday, we had the opportunity to attend a conference on ”High Performance Green Building Retrofits” at the UCLA Ziman Center for Real Estate. #LEED

Notable statistics and facts in regards to LEED certified GREEN commercial buildings are as follows:

• 8-9% decrease in operating costs
• 7.5% increase in value over non-LEED certified
• 2% increased cost to design and construct a new GREEN building
• 6% ROI increase over non-LEED certified
• 3.5% increased occupancy
• 3% increase in rental rates per sf

These statistics were mainly based on office. The point to be made is that you might not be seeking a GREEN building or looking to retrofit your existing building however there are a growing number of tenants seeking a small supply of GREEN space. More importantly, these companies are willing to pay a premium for GREEN space.

Financial returns on LEED certified buildings are as follows:

• Fixed costs of a GREEN retrofit are low
• Rebates and financing are available from municipalities and local energy companies
• Resale prices are higher than non-LEED buildings
• If there are two buildings in the same area, one GREEN and one not GREEN; the GREEN building will achieve a higher rental rate
• Liberal based cities will pay a premium to be in a GREEN space
• Companies,located in higher cost for energy areas, are seeking GREEN buildings
• Oil, non-profit, banking and government companies occupy GREEN buildings when available

In OrangeCounty: The Koll Company, The Irvine Company and The Segerstrom Company are currently retrofitting some of their existing buildings to LEED certified buildings. Improved ROI and increased occupancy have resulted from these retrofits. Most importantly, The Segerstrom Company recently retrofitted an existing office building in South Coast Plaza. It received a complete payback within 11 months.

Industrial buildings have an advantage in the ability to harvest solar energy using their large flat roofs. Owners can lease this roof space back to the energy companies for direct capitalization. Conversely, they can harvest their own energy thus decreasing their buildings usage to zero and take advantage of the tax deductions.

In 2011, every new building in the United States will be required to be built to GREEN building codes. Converting your existing building to a LEED certified building is not a fad but a movement. We suggest you speak with a LEED certified consultant in the near future as utility rebates and financing incentives will not be around forever.

We would like to hear your thoughts and opinions. Please send us an email to info@odonnellgroup.com.

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