Making the Business Case for High Performance Buildings

To create a more diverse economic engine that Governor Sandoval calls the, ‘New Nevada Economy,’ the small and medium sized businesses in Southern Nevada are critical partners in the development of innovative projects and urban infrastructure that are designed to create a more livable, healthy environment that will also be more financially resilient over the long term. As members of the development community we must support these businesses in finding ways to design, construct, and operate their facilities as efficiently as possible so that they make solid business and economic sense. If a project is profitable and does right by the community and the environment, that is what constitutes a true ‘win-win-win’ because it hits on all the aspects of the, ‘triple bottom line’ of people, profit and planet.

Until recently, LEED-certified buildings were concentrated in the public sector and national corporate entities. A recent research report funded by NAIOP found that over the last few years, large, commercial real estate companies, particularly real estate investment trusts (or REITs), have also begun to green their properties, spreading any incremental costs over their portfolios. MGM, Caesars and Blackstone are prominent local examples of this shift in the adoption of LEED. The small-to-medium sized commercial real estate companies on the other hand have been slower to embrace LEED and consequently make up a small fraction of LEED-certified buildings. This gap in LEED adoption may be due partially to the lack of readily available information regarding soft and hard costs, payback and operational savings of specific green strategies (Source: A. Johnson, 2009 NAIOP Research Report).

It is also important that the tourism and convention industries outside of the region begin to take Las Vegas seriously as a sustainable destination in addition to being the entertainment capital of the world. As of 2015 Nevada has moved up to the 6th ranking state nationally for LEED certified space per capita and as more buildings are designed or renovated to green standards Las Vegas will be able to market our leadership as a sustainable city which attracts more conventions, tech businesses and talent.

Common Misperceptions
Contrary to much anecdotal information overheard at the water cooler, green buildings do not cost significantly more than conventional buildings (Refer to national cost studies by Kats and Davis Langdon). A LEED Certified or Silver rated building costs from 0.4% to 1% more than a code-minimum building on average. LEED and Energy Star rated buildings are meant to incentivize building owners and developers to go just above code minimum and there is a large amount of flexibility built in to those programs to allow for the design and construction teams to integrate sustainable measures without affecting the building functionality or project budget.

The fastest growing sector of the green building industry is existing building retrofits. Almost 50% of all green projects nationally are renovations and ‘deep energy’ retrofits and these straightforward projects typically provide a simple ROI of less than 2 years. It also helps that there are significant tax incentives in place at the state level to act as a catalyst to taking that first visionary step.

A Bit of Vision
All of this takes vision and a perhaps a small amount of courage because there are still only a few dozen green buildings in Las Vegas so the appeal of market differentiation is not as visible as it is in other Western states. National companies with a large local facility like Levis, TJ Maxx, CDW and most recently, IKEA have recognized the benefits far outweigh the incremental cost increase of building or renovating to a green standard like LEED or Energy Star. Renewable energy is another solid investment for commercial and industrial properties and IKEA made a bold statement with its 1.14 megawatt rooftop solar installation at its new Las Vegas store.

Leading the Charge
IKEA chose Helix Electric to install their first of its kind, utility-scale solar project and there are numerous other local companies and individuals who have become recognized leaders in sustainable design and construction. Architects like Mike Del Gatto, Gary Congdon, Chris Teachman and Sean Coulter to name a few have understood the big picture of sustainable design for years- they know that they are serving their clients better when they can provide a sustainable, high performance building, even if a client may not understand or value the benefits of going through with LEED certification. Most of the commercial general contractors in Las Vegas have had experience on at least one or more LEED projects which has reduced the learning curve over the past 7-8 years and consequently also reduced the cost premium for those projects because their estimators and subcontractors understand the process and no longer fear them.

One good example of this transformation is Service Plus Plumbing, a local plumbing and maintenance subcontractor that has begun to offer a menu of water saving technologies to their clients on all of their projects, regardless of whether they are seeking LEED certification or not. The owner, Justin Donald had this to say about his new ‘green’ plumbing approach, “I don’t want to just provide a code minimum fixture or water heater- I want to educate my customers on the value of saving water which also reduces their operating costs. If they agree I will find them an affordable and efficient solution which helps me stand out from other plumbers.” Being a leader and an early adopter of sustainable building is a market differentiator because clients perceive an added value to the services they are buying.

Carrots, Not Sticks
Integrating green buildings into the standard operation procedure for commercial and industrial projects in southern Nevada needs to be more about the financial incentives, savings and multiplying benefits to the owner than it does about being a responsible corporation with a green page on their website. The International Energy Code will continue to require our buildings to be more efficient but there are other benefits to the bottom line with green buildings. One great example is the commercial property Tax Abatement Program for LEED certified buildings available through the Nevada Governor’s Office of Energy. This popular program has helped many Strip properties and other commercial building owners take that first step to greening their buildings by reducing the ROI of deep energy/ LEED retrofit projects from about 6 years down to 2-3 years.

[Rick Van Diepen, LEED AP is past president of the US Green Building Council Nevada is a founding principal at Greenview Global Consulting, a Las Vegas based green building consulting and professional training firm]