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Real estate executives less likely to pay for green space: Study

DALLAS — Corporate real estate executives are less likely to pay a premium for green office space than a year ago, even though more of them place a higher priority on sustainability, according to a survey released this month by CoreNet Global and Jones Lang LaSalle.

“A year ago, most (corporate real estate executives) directors believed that improving energy efficiency and reducing carbon emissions would cost money, at least in the short run,” said Dan Probst, chairman of energy and sustainability services at Chicago-based Jones Lang LaSalle. “Today, they realize they can meet sustainability goals and save money at the same time.”

Of more than 400 real estate executives surveyed in September and October, 42 percent said they would pay more to lease green space, down from 77 percent last year. Tenants typically pay a 1 to 5 percent premium for environmentally sound office space.

But 69 percent said sustainability is a critical business issue, compared with 47 percent last year. In addition, 40 percent this year rated energy and sustainability as major factors in their companies’ location decisions and 36 percent called them tie-breaker issues between otherwise similar locations.

The report noted that companies are most likely to embrace practical green strategies. Most of the executives said their companies recycle, which requires little upfront cost, and about 60 percent have implemented energy management, which provides the highest potential cost savings. But less than 20 percent have broadly implemented strategies such as purchasing green power and investing in renewable power sources, which help the environment but cost more.

Many in the industry perceive green to be costly and unprofitable, but that isn’t necessarily the case. Dallas-area developers and builders involved in green projects say the average cost of a LEED-certified building is up to 4 percent higher, but operating costs are significantly lower.

A study earlier this year by CoStar Group, a real estate research firm based in Bethesda, Md., found that green buildings generate 3.8 percent higher occupancy rates and are up to 30 percent more efficient. Such buildings also command higher rent ($11.24 more) and sale prices per square foot ($171 more).

Future numbers may be affected as more cities across the country start requiring green building standards. Regulations will be phased in through 2011 to meet the U.S. Green Building Council’s basic Leadership in Energy and Environmental Design program or similar standard.

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