Building for a Greener Future

How one real estate developer has the opportunity to re-take the LEED of sustainable development one building at a time.

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In the USA, the building sector accounts for 73% of electricity consumption, 41% of the country’s energy usage, and 14% of portable water usage.[1][2]Given the monumental opportunity for positive climate change impact, real estate development and investment firms are taking note, out of will or necessity. While I would love to espouse the altruism of developers, today’s reality is that:

  1. Opex, ambience and productivity conscious retail and office tenants place a premium on sustainable buildings. In a world where rent per square foot matters, LEED (Leadership in Energy and Environmental Design) certification has progressed from a ‘nice-to-have’ when the program emerged ten years ago to a pre-requisite. Additionally, federal and state tax rebates further reduce the burden of up capital expenditure. There are currently 82,000 LEED projects in 162 countries and territories.[1]
  2. According to NASA research scientist, George Tselioudis, there is a risk that we will see an increase in the intensity of extreme weather events in the 21st century due to global warming, prompting the development of future-proof structures resistant to floods and hurricanes.[3]

International real estate developer, Related Companies (“Related”) is changing the face of Manhattan’s West Side with the Hudson Yards redevelopment project. This will be the largest private development in US history, at $20 billion expected cost and 17 million square feet of commercial and residential space. By incorporating the work of the world’s most renowned visionaries, architects, and business leaders, the development is expected to attract 125,000 people per day. Furthermore, it is being built on top of 30 active rail road tracks, with the help of two 80 feet high platforms.

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Related’s innovative response to emerging trends in climate change can be summarized by:

  1. Efficient waste removal and recycling – A vacuum tube system transports waste at 45mph directly from chutes on each floor of the buildings to a central depository, eliminating refuse truck traffic  and allowing for efficient conversion of organic waste to fertilizers.
  2. Reliability and safety, the platform ensures that the building remains safe in the event of a flooded Hudson River.
  3. Efficient use of power sources by enabling neighboring buildings to share a power and cooling source. For example, in the event that an air conditioner is turned on in an office building, rather than powering up the cooling system, cool air can be circulated from a neighboring, active retail unit. Utilizing cutting edge technology, Hudson Yards’ operations managers are harnessing big data-capture systems to monitor traffic patterns, air quality, power demands, temperature and pedestrian flow, optimizing energy consumption.

This is significantly more than the effort of some of Related’s peers, but as industry leader, we should expect more. Related has successfully achieved LEED certification level Silver and above on their last 27 developments, and most of the Hudson Yards buildings are expected to reach Gold status. LEED basis its ratings on forecasts submitted during development however, with no consideration for actual performance once built. By some estimates, LEED buildings are therefore 29% less efficient than their commercial alternatives. [4] If Related truly prides itself on its green stamp, the company should publicize annual energy consumption in its buildings versus estimates, coupled with updates on measures taken to improve efficiency when it fails to deliver. This would either serve to debunk LEED’s critics, or begin to address a fundamentally misleading metric used by developers across the world.

References:

[1] Benefits of Green Building http://peer-credits.usgbc.org/articles/green-building-facts

[2] US Geological Survey (2000)

[3] Storms, Climate Change, and the US Economy: A National Analysis, George Tselioudis

[4] A Better Way to Rate Green Buildings, Henry Gifford

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5 thoughts on “Building for a Greener Future

  1. Hudson Yards is an amazing development. I agree with your criticism of LEED and would go even farther. Not only should Related publish data on building performance, but USGBC should have the ability to pull LEED certifications for buildings that don’t perform as advertised. Energy Star (the EPA system for green building rating) requires buildings to prove performance before certification — makes more sense than LEED certs which are based on computer models. Overall it feels like LEED is more a marketing scheme than actual attempt at energy efficiency. Your stat about LEED buildings being 29% less efficient than alternatives speaks volumes.

  2. My friend works at SAP in their new offices on the West Side, which is a Hudson Yards property. I just visited him and his offices yesterday and I completely concur with the author. This project is an efficient usage of space with intelligently crafted interior and exterior designs that maximize eco-friendliness. For example, all floors on SAP’s offices have automatic LED lighting that saves energy. And the windows are all slanted (in an “armor” like fashion) that blocks out sunlight, thereby saving on cooling costs. That being said, I agree with the author that there needs to be holistic accountability, which LEED seems to be unable to achieve. Perhaps one thing to do is for governments to create a “carbon credit” version on buildings to enforce both the design and ongoing maintenance of all properties. This may encourage older buildings to consider retrofitting and push them toward the right direction.

  3. Very interesting piece. As mentioned above, I wholeheartedly agree that LEED appears to be more of a marketing ploy than a real representation of a building’s energy efficiency. I also like the ideas put forth about how we could get to a more reliable and accurate metric. What remains unclear to me is exactly how much more efficient Related’s initiatives are and what the financial costs and benefits are to both the developer and the tenant. You seem to suggest there could be a win-win scenario which would lead me to believe there is a strong likelihood for rapid adoption of such technologies and thus able to make a dent in the energy consumption of new builds – which is great. However, I also wonder whether the economics would stack up for refitting existing buildings with the same technology. As you indicated, real estate is enormously energy intensive, and while improving new builds is a step in the right direction, my sense is that developers should consider addressing existing properties in order to truly move the needle in energy efficiency.

  4. I couldnt agree more with the author in this case. While I was not privy to the lengths that Related has gone to in order to develop eco-friendly buildings and while I am quite astonished by the capital intensity and scale of the Hudson Yard’s development (cudos to them), I do think Related and many other developers should be held to a certain standard as it pertains to achievement of eco-friendly metrics. Forecasts are good and well but if outcomes are significantly worse than projected there needs to be a fundamental shift in the scrutiny of projections or retroactive assessment of LEED certification levels. What is perhaps a bit concerning to me is, as you stated, tenants tend to put a premium on eco-friendly developments. Assuming this is reflected in valuation, one of the last points about LEED developments being 29% less efficient than there commercial alternatives is at best a marketing ploy, but at worse some what unethical. Individuals are paying premium valuations for something that is either value destroying or whose value is assumed to come at some point in what appears to be the distant future. This simply doesnt feel right to me and hence I unequivocally agree with the authors end conclusion.

  5. Great post! It seems insane to me that developers are able to achieve LEED certification on buildings based on plans, rather than the completed buildings themselves. With this system, there seems to be very little incentive to actually comply with LEED requirements in the actual construction of the buildings, especially if any of those requirements are more costly than less environmentally friendly alternatives. I agree that LEED certifications should be subject to review and revocation in the event that completed buildings don’t end up meeting standards.

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