Southern California Leads in Green Building Adoption

Southern California is among the top markets for green building. Both Los Angeles and Orange County ranked among the top markets in the country for both office and multifamily green building practices. The designation is likely because the markets have had strong construction activity, and many new developments are adopting green building practices as a standard.

“There has been so much new construction in Los Angeles and Orange County in the last five years, and everyone is building to a higher standard,” Dean Zander, EVP at CBRE, tells GlobeSt.com. “Most developers are building with sustainability and green standards automatically as part of their new product. With so many new units added to the supply, green adoption and amenities are becoming the norm.”

It isn’t only new developments that are driving the strong green building index. Investors are also adding new green amenities to redevelop properties. However, Zander expects that there might be fewer of these deals next year. “There was an incentive for owners to add green amenities from the agencies,” he says. “They were giving preferential pricing to new owners that would take properties that were older and incorporate amenities like new water features and better lighting. That program has stopped and that incentive is gone.”

It isn’t totally philanthropic. Developers are investors are seeing better tenant retention and higher rental rates in green buildings. “When future residents go to look at a property, they are trying to differentiate between several options. Everyone is going to have a fitness center and a pool or a pet station,” says Zander. “Having something that sets you apart, whether that is technology or sustainability for a healthier lifestyle, those are becoming increasingly important. Tenants are willing to pay more for those options.”

Usually, green properties also offer other amenities that help to boost the tenant experience. “Communities built with sustainable features tend to have other attractive features, like rooftop amenities. So, it is hard to say what green amenities capture,” says Zander. “You can really see it when you compare new buildings side-by-side. The one with the green features performs better.”

Compared to other markets, both Orange County and Los Angeles have a healthy supply of green buildings, but still, the total supply is relatively small. “It is only about 3% of our supply is considered green, so we have a way to go. Surprisingly, we are even above the Bay Area, even with all of their new deliveries,” says Zander. “Denver is leading on the multifamily side, which isn’t surprising because it is a healthy living environment. We rank much higher in green square footage in the office sector.”