Experts Predict Tangible Green ROI in Sight


June 4, 2008

By Erika Morphy – GlobeSt.com

No one is claiming there is a straight, linear path to green building ROI–at least no one at Real Estate Media’s RealShare Green Building conference, held yesterday at the Grand Hyatt Hotel here. However the consensus among panelists and attendees is that both developers and tenants are forging ahead with a commitment to green in the expectation that it will pay off at some point in the future.

Part of the immediate problem is there is not enough data available to make the case to lenders and investors that green buildings will perform better, said Drew Flood, with Cassidy Pinkard and Colliers. “There have not been enough LEED certified buildings occupied for a long enough period of time that can be used to measure performance.”

To be sure, there is an intuitive case for green ROI – energy efficient buildings perform better, have lower vacancies, less velocity and attract top rental dollars as they also tend to be class A or trophy structures. But where it counts for many developers–in financing, in cap rates–green building does not have a measurable impact. Right now, said Steve Gossett Jr., vice president of development for Transcend Equity, “there is no direct correlation between financing and green development.” The debate is still active in the finance community over whether a green building is lower risk and thus deserving of a lower cap rate, said Nicholas Stolatis, director of Strategic Initiatives for TIAA-CREF Global Real Estate.




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