Ahead of the curve
- September 28, 2009
Westerre III and IV face off across a parking lot in Henrico County’s West End. Both are speculative Class A office buildings owned by Liberty Property Trust, a real estate investment trust. Neither boasts a green roof or solar panels. No recycled symbols grace the foyers’ marble floors. So how can you tell which one is the high-efficiency building?
Check the utility bills. And the leases.
Higher rents have long been touted as a reason to build green. But does that benefit still fly in today’s tenant-driven market?
According to Liberty, a national leader in green commercial development, the answer is yes, no, and it doesn’t matter.
In March, Westerre IV was certified gold under the U.S. Green Building Council’s Leadership in Energy and Environmental Design program (LEED). The first privately owned Class A office building to attain the high rating in the Richmond region, it surpasses its conventional sibling in water efficiency, energy efficiency, indoor air quality and waste reduction, generating roughly half the construction waste of III.
It also costs more to rent. Westerre IV leases for $22.50 per square foot (including operating expenses), compared with Westerre III’s $19.50. That’s several dollars more than the average for Class A office space in the Richmond region, $19.62, according to Thalhimer’s second-quarter report.
The newer building costs more to rent because it cost more to build. Pennsylvania-based Liberty has built 36 LEED-certified properties, including three in Virginia. Experience means the company can reach high-efficiency standards with a mere 3 percent bump in budget. In the long-run, officials say that investment is recouped through lower operating costs. In the short-term it is passed on to tenants.
“We do walk a fine line in terms of creating the LEED-certified environment and having costs be in keeping with what the market will bear,” says Dana Dame, Liberty’s senior project manager for the mid-Atlantic region.
For some clients, paying a premium for green space is an ethical choice.
“We’re hoping to preserve a lot to pass down to our children,” says Dyanne Walker, CEO of Web Teks Inc. In February, Web Teks, a Hampton Roads-based computer applications development firm with 30 employees, became the first tenants at Liberty’s LEED Gold-certified Independence Place in Chesapeake.
But doing the right thing hasn’t been a sacrifice. “It’s a beautiful building,” says Walker. “And the rates are pretty competitive with non-green buildings in the area.”
So competitive, notes Dame, many Liberty tenants view the green factor as a perk.
The first tenants moved into Westerre IV in June. By August the building was more than two-thirds full; not bad given the economy, says Jay Kraft, the vice president who manages Liberty’s Richmond office. He does not find it troubling that none of the tenants credit the hard-earned LEED Gold status as a primary draw. Liberty is building for a future where high efficiency is standard, notes Kraft.
“We feel we’re out ahead of our clients. It’s what our clients will want.”