4 Green Building Benefits That Improve Your Bottom Line April 9, 2015 | Samantha Dubrow

We know that green buildings and smart cities are good for the environment, and that they cost less to operate, but are they actually worth more?

 
The answer is yes! Despite common myths about energy efficiency, green buildings do actually have higher value.

 

1. Green Building Tenants Pay Higher Rent

You read that right. Commercial building tenants will pay 2-17% higher rent for green buildings. Why? A few reasons: (Tweet this stat!)

 

1.Green buildings attract more sophisticated tenants to buildings, who consider sustainability to be an important consideration for their businesses.

 

2.Tenants expect sustainable buildings to have fewer problems and lower operating costs.

 

3.Green leases show tenants that you care about the building.

 

Green buildings can have demand, meaning you can charge tenants higher rents. This competitive advantage may not last forever though. As energy efficiency becomes more commonplace, green buildings will soon be an industry standard, not just saved for industry leaders.
 

 

2. Green Buildings Have Higher Occupancy Rates

Green buildings have 0.9-18% higher occupancy rates than standard buildings. (Tweet this stat!)
 
Once again, this is directly related to the fact that businesses, especially young businesses, consider sustainability to be a vital part of their business model. When looking for a new office space, tenants are going to prefer green buildings.
 

Green leases are an even better reason for tenants to choose sustainable buildings. They implement certain standards that tenants can hold their landlords accountable for, so the tenants can feel more comfortable signing longer leases.

LEED and ENERGY STAR certifications look especially good for buildings, because even tenants with only a basic knowledge of sustainability know what those certifications symbolize. Is a green building going to win over tenants 100% of the time? No. But, if a tenant is choosing between two similar buildings and one has a sustainability certification, that will be the building they sign a lease with.

 

3. Green Buildings Have Lower Operating Expenses

It’s a given that the more efficiently your building is operated, the less expensive it will be to operate. But how much less expensive? According to the Institute for Building Efficiency Report, it can be up to 30% lower. That’s no small number, considering how important operating expenses are in determining your NOI. (Tweet this stat!)
 
The future of green buildings is to be strategic about how to invest in energy efficiency. Whether you choose to purchase new light bulbs or do an HVAC retrofit should be data-driven decisions. With real-time energy data you can see which of your appliances are using the most energy. You may find that just a few simple changes can help you dramatically increase your Energy Star Score
 

 

4. Green Buildings Have a Higher Net Operating Income (NOI)

So what happens when you have more tenants who pay higher rents and you have lower operating expenses? On average, your net operating income increases by 5.9%(Tweet this stat!)
 
And, when you have a higher NOI, your cap rate also increases, meaning your rate of return on your investment in the property increases.
 
Energy efficiency and green buildings are not just for tree huggers. They actually increase the value of your buildings and will easily help you improve your bottom line.
 
Convinced yet? Start optimizing your building today with this free eBook!

 

 


Article References:
http://www.institutebe.com/InstituteBE/media/Library/Resources/Green%20Buildings/Green-Building-Valuation-Fact-Sheet.pdf
http://www.green-buildings.com/content/78348-green-office-space-higher-lease-premiums
http://www.pillsburylaw.com/publications/green-leasing-landlord-and-tenant-perspectives
Green Buildings, Green Leases, Sustainability

About The Author

When Samantha isn’t writing for the blog or managing our HR like a champ, she studies Organizational Psychology at George Washington University.