Green beats up brown

Developers latch onto LEED standards and tout the advantages of energy efficient buildings — greater flexibility, healthier-happier employees, better lighting, lower heating/cooling bills and a host of other pluses with some hype included. The PR value of going green, both for builders and tenants, helps offset marginally higher construction costs and should permit for higher rents. Emerging Trends interviewees were quick to cite the green wave as “here to stay” and “no flavor of the day” fad.

In easy-build, growth markets, “brown” developers risk competitive disadvantage going head-to-head against green projects. But investors in existing properties need to factor green issues into their underwriting too. Non green buildings are difficult and costly to retrofit. Yesterday’s A-quality product could turn into B-quality compared to new green construction. In high barrier-to-entry, difficult-to-develop markets like New York or Boston, existing brown building stock should be more insulated from a future green incursion. But if energy costs keep rising and carbon footprints remain a contentious issue, brown owners may be forced into those costly retrofits anyway.