News

How Soon Can You See Green From Building Green?
April 20, 2010

By Eugene Gilligan
Appeared in The Commercial Observer

Jason Black has found that going green can become a habit.

The director of architecture and sustainability for Reckson, a division of SL Green, said the firm began its green initiatives by recycling carpet and ceiling tiles in its suburban office portfolio, then graduated to lighting retrofits and to installing a solar roof on one of its office buildings in Greenwich, Conn. Finding savings in one area emboldened the firm to find "green savings" in other areas, and Mr. Black said Reckson's portfolio of suburban properties is being used as a proving ground for measures that could eventually be adopted in SL Green's New York City ones.

Other building owners may also get into the habit. Whereas such development could sometimes mean waiting 10 to even 15 years for a noticeable payoff, a confluence of factors, ranging from improved and cheaper green building products, greater knowledge on how to make these projects pay and, ironically, the slowdown in New York City construction, has meant that more green new buildings and retrofit projects can pay dividends in a three-to-five-year horizon.

"A lot of significant measures don't have a 10- or a 15-year payback period," said Katie Rothenberg, manager of commercial real estate for the U.S. Green Building Council. "The more you know, the more feasible it becomes."

Some green building initiatives can be implemented for minimal cost and produce an almost immediate payback, according to Robert Bolin, senior vice president at Syska Hennessy Group. For example, a building can introduce a "smart lighting" system-which encompasses daylight-responsive and occupancy-sensor lighting-that can save on energy because less lighting is used and the air-conditioning loads drop, because rooms are cooler when lights are off, he said.

"This is a simple double whammy," Mr. Bolin said. "This is low-hanging fruit that provides an almost immediate payback."

A LIGHTING RETROFIT at 21 Reckson properties, completed in May 2009, in Westchester and Fairfield counties replaced older, three-lamp lighting fixtures with two-lamp fixtures that emitted 40 percent more light, thus enabling Reckson to reduce the amount of fixtures needed. The project cost $1.4 million to do, but means an energy savings of $500,000 a year, or about a 1.4-year payback, when incentives from the New York State Energy Research and Development Authority (NYSERDA) and Connecticut Light and Power are figured into the equation, Mr. Black said.

Building owners can also receive fairly fast and generous returns if they commission their building, which involves a run-through of all of a building's mechanical systems to see if they are operating at peak energy efficiency, Ms. Rothenberg said.

A 2004 study conducted by the Lawrence Berkeley National Laboratory, Portland Energy Conservation, Inc. and the Energy Systems Laboratory found that for existing buildings, commissioning costs were 27 cents per square foot, with the end result an energy savings of 15 percent, translating to a payback in seven months. "You're talking about getting a payback for this in under a year," Ms. Rothenberg said. "That's a no-brainer."

Reckson's payback on its solar roof will take longer. The solar roof on the Greenwich building, completed earlier this year, will provide approximately 5 percent of the building's annual energy needs, and counting state and federal incentives, including some from the Connecticut Clean Energy Fund, the payback will occur in a 4.5-to-5-year time frame. The panels will allow the building to reduce its peak load energy demand because of its on-site energy-generation capacity, Mr. Black said, and he believes that there will be opportunities to use solar power at some of SL Green's New York City buildings.

"We're definitely looking at opportunities down the road," he said.

However, Mr. Bolin of Syska Hennessy says that some highly visible green energy markers, such as solar panels and wind turbines, typically have long payback periods that can range from 10 to 15 years. He points out that the Empire State Building will have a much shorter payback period with its headline-making retrofit. The iconic building, which will reduce its energy usage by 38 percent when the retrofit is completed, will contain neither solar panels nor wind turbines.

The total incremental cost for the sustainable retrofit of the Empire State Building, which began this year, is projected to be $13.2 million. At the retrofit's conclusion, in 2013, the building will qualify for LEED Existing Building Gold, with an Energy Star rating of 90, putting it in the top 10 percent of buildings in the U.S.

With annual energy savings of $4.4 million per year, the payback period is three years, with 55 percent of the energy savings to be harvested by the end of 2010. Rather than one silver bullet, a multifaceted energy-savings approach is being used, which ranges from retrofitting the chiller plant to upgrading all of the building's windows to improve the thermal resistance of the glass, which will cut the solar heat gain by more than half. Getting tenants on board is also crucial to the blueprint, said Fred Posniak, senior vice president of W&H Properties, the building's owner. A larger number of tenants in the building will be submetered and will have access to online energy and benchmarking information.

SOMETIMES, HOWEVER, THE payback equation is not always as clear cut. The decision to go for LEED Gold on the $50 million rehab at 545 Madison Avenue, at 55th and Madison, was in part launched to make a statement of the building's quality, said David Sigman, senior vice president of LCOR, the building's owner.

The building, built in 1955, was retrofitted to be more energy efficient as part of a total rehab, Mr. Sigman said. Completed in the fall of 2008, it gained some LEED points for its urban location and proximity to mass transit.

Mr. Sigman said, however, that it is still too early to determine the building's total energy efficiency, since it is only 25 percent occupied. But there is value in going for Gold, he said.

"It's in a prime location and it's a prime renovation," Mr. Sigman said. "We wanted to have an outside imprimatur of quality."

LCOR's experience is not that unusual, according to Christopher Mills, senior vice president at Plaza Construction. New York City's building codes are so strict that LEED certification is largely attainable, he said. "If you're building a new, high-end condominium, achieving LEED Silver is not a stretch," Mr. Mills said.

Costs for LEED have also come more in line in part due to the near halt in new construction projects in the city. "Five years ago, subcontractors could pick and choose the projects they worked on, and there was a 'fear factor,' as some subcontractors weren't that familiar with [green building] techniques," he said.

But, with the dearth of construction projects today, subcontractors will now fight over these jobs, Mr. Mills said.

Also, government and utility company incentives have also made going green more cost-effective. NYSERDA incentives helped pay consultant fees on the 545 Madison project, and Mr. Black of Reckson argues that because of the credit crunch, these government incentives can make a huge difference.

Green building consultant Mychele Lord, principal of Lord Green Real Estate Strategies, argues that today's cost structure makes this an opportune time for building owners to institute energy-saving retrofits.

"You can do it slow and expensive, or you can do it fast and cheap," Ms. Lord said. She argues, though, that any retrofit's end result should be LEED certification or Energy Star rating attainment. "The real value is in the exit strategy," she said. "You say you own a green building, but what does that mean? You want to have the third-party certification. You own a LEED building-well, there aren't that many of those around."

GREEN BUILDING EXPENSES could fall further if these projects are undertaken "more holistically," Mr. Mills of Plaza Construction said. He notes that some office buildings are required to keep a tank of water on premises in case of fire; one facet of green building is storm-water retention. Mr. Mills wonders if, in some cases, these could be combined.

A key part of the cost equation is whether green buildings will attract tenants who will pay a premium to rent office space there. Billy Cohen, executive vice president and principal of Newmark Knight Frank, the leasing agent for the Empire State Building, said he believes the building will attract corporations with a major focus on sustainability.

If a corporation has sustainability as an important part of its marketing message, it may "pay a little extra" for the space, Mr. Bolin of Syska Hennessy said.

But Reckson's Jason Black believes that, ultimately, tenant buy-in should not be the deciding factor in whether to go green. "We believe this is the right thing to do," he said.