LEED: The Green Market Maker

LEED, USGBC, San Francisco, Bay Area, sustainable development, green construction, New Buildings Institute, Living Building Challenge, Energy Star

LEED USGBC real estate The Registry

LEED continues to be the dominant rating system, and it’s global aspirations look healthy.


By Neil Gonzales

[dropcap]T[/dropcap]he Leadership in Energy and Environmental Design program emerged at a perfect time during an era of increased consciousness about greenhouse-gas emissions, climate change and energy efficiency. When the U.S. Green Building Council launched LEED in 2000, government policies and other initiatives to combat global warming and heighten environmental stewardship were gaining momentum.

As part of this movement championing environmental responsibility, commercial construction increasingly was looking to incorporate sustainable elements such as solar power and recycled materials. In the years leading up to LEED’s creation, “there were efforts to make buildings green, but there wasn’t a consistent way to evaluate and verify a building was green,” said Ralph DiNola, executive director for the New Buildings Institute, a nonprofit based in Vancouver, Wash., that works to improve the energy performance of commercial buildings.

“Then LEED came about,” DiNola said. It became “a tool for market transformation. It really met a market where [companies] wanted to be leading edge.”

[quote]One key reason why LEED is the ratings standard-bearer is that it is a flexible grading system covering an array of sustainability issues, including energy, water, waste, supply chain and location.[/quote]

Today, LEED is far from the only rating system. Also competing for attention are Energy Star, the Living Building Challenge and Green Globes. But LEED remains the undisputed standard for green-building certification in the U.S. and internationally. LEED is expected to remain the coveted designation for those wanting to show not just their building’s strong sustainable capabilities but high overall quality.

LEED provides a framework for identifying and integrating practical and measurable ecologically friendly components in a structure’s design, construction, operations and maintenance. To date, about 54,000 commercial and residential projects in 135 countries are participating in LEED, comprising more than 10 billion square feet.

The growth in LEED certifications of American office buildings has been particularly dramatic in the past decade. In 2005, LEED-certified buildings represented less than 1 percent of the total office stock across the 30 largest markets in the country. That has risen to 5.1 percent this year, according to the National Green Building Adoption Index report by the commercial real estate services firm CBRE.

Among the factors behind that surge “is the active implementation of energy-efficiency programs by most large institutional owners across very large portfolios,” the report said. “This has been the result of a desire to reduce operating costs, a genuine interest in demonstrating environmental stewardship to investors and recognition that many Fortune 500 firms—the most desired tenants—are now demanding sustainable buildings to meet their own environmental policies.”

One key reason why LEED is the ratings standard-bearer is that it is a flexible grading system covering an array of “sustainability issues, including energy, water, waste, supply chain and location,” said Nils Kok, the report’s project leader. In addition, “LEED is grounded in a series of industry best practices and addresses issues important to institutional investors.”

While LEED certification in the U.S. distinguishes a structure as having been built beyond the minimum code compliance, Kok added, it gains even more weight in many non-U.S. markets because that designation “represents a high-quality building and is pretty much a requirement for attracting high-quality multinational tenants that are mostly found in institutional investment portfolios.”

While the U.S. Environmental Protection Agency’s Energy Star program is complementary to and incorporated into LEED as a best practice, Kok said, it “is not a holistic green-building rating. It’s single-issue (energy only) and gives a rating on comparative energy use for a whole building.”

The Seattle-based nonprofit International Living Future Institute issues the Living Building Challenge certification, which requires a project to meet a series of ambitious criteria—including net-zero energy—over a minimum of a year of continuous occupancy. Net zero means a building produces the same amount of energy that it consumes.

DiNola pointed out that the Living Building Challenge, unlike LEED, is based on a building’s actual performance, not just what it’s projected to achieve. He believes that attaining Living Building Challenge status is the future trend in green construction.

“It’s an aspirational program getting a lot of traction,” he said. “It’s a market differentiator. Companies know [achieving net zero] is the next big thing, and they want to lead it.”

California is encouraging net-zero construction. The state’s energy and public utilities commissions have called for all new homes to be constructed to net-zero standards by 2020 and all new commercial buildings to be that way by 2030.

But the Living Building Challenge has a high degree of difficulty—even more so than LEED’s top rating of Platinum certification. “Frankly, the Living Building Challenge is hard,” said David Pogue, CBRE global director of corporate responsibility in San Jose. “Over time, people could move closer to that goal, but I don’t see a lot of clients clamoring for that now.”

Green Globes was developed by a division of Chicago-based commercial real estate services firm Jones Lang LaSalle. This system is structured as a self-assessment done in-house by a project manager and a design team. Last year, the U.S. General Services Administration recommended Green Globes and LEED as the certification options for federal construction projects.

While popular in Canada, Green Globes has never really caught on in the U.S. partly because it “essentially is self-scored,” Pogue said. “People give more validity to third-party scoring like LEED.”

Lesser-known rating systems are trying to draw more attention and acceptance by focusing on a niche market, Kok said. Build It Green, for example, targets residential projects, and Enterprise Green Communities covers affordable housing

Other systems used across the globe include Green Star in Australia, CASBEE in Japan and BREEAM in the United Kingdom.

But experts say LEED will continue to lead the pack. “Although the barrier to entry for other rating systems could be somewhat low,” Kok said, “switching costs are high as LEED is the dominant language of green building. I think the future of LEED both in the U.S. and internationally is very bright.”

Graphic courtesy of USGBC

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