In the $90 billion U.S. office construction sector, Class A and Class A+ properties are the darlings of every major metro market. Owners and developers of these amenity-rich, high-performance buildings are competing to lure top-notch companies willing to pay the most lucrative lease rates—and to keep them there long-term.
There’s certainly plenty of money to be made in building and rehabbing Class A office buildings. But what about their less-flashy counterparts, Class B and Class C properties?
A new Urban Land Institute report, researched in partnership with the Rocky Mountain Institute and the Building Owners and Managers Association (BOMA), suggests that there is significant “hidden value” waiting to be unlocked by owners of Class B/C properties—and plenty of work for AEC firms that cater to these segments of the office market.
For myriad reasons, these properties are woefully outdated and in serious need of a tune-up to meet baseline energy efficiency standards. The ULI report found that even the simplest of energy efficiency measures—low- and no-cost tactics such as upgrading general office illumination to LED fixtures, optimizing HVAC schedules and setpoints, performing routine preventative maintenance, and engaging tenants in occupant behavior measures—could net an immediate 15% savings in energy costs.
Larger capital investments—such as improvements to the building envelope and roof system, or installation of high-efficiency building systems, sensors/controls, or solar panels—could slash energy use by 35% or more, with paybacks in the three-year range. “That can reduce a property’s operating expenses by $0.26 to $0.61 per square foot, increase net operating income by 1.9% to 4.3%, and boost property value by approximately $4 to $8 per square foot,” said the authors.
Why haven’t more Class B/C property owners taken steps to improve the energy performance of their buildings? The report pinpoints three primary reasons: limited working capital to pay for project costs, inadequate staff capacity to implement these measures, and a lack of priority versus other business activities.
Furthermore, by successfully instituting a green lease program, owners can recoup a sizable portion of the initial investment, which would further improve the financial outcomes for the property.
If all of this is so elementary, as the report outlines, why haven’t more Class B/C property owners taken steps to improve the energy performance of their buildings? The report pinpoints three primary reasons: limited working capital to pay for project costs, inadequate staff capacity to implement these measures, and a lack of priority versus other business activities.
“Staff working at Class B/C buildings wear multiple hats. Rarely do they have dedicated third-party management or building engineering staff with time to focus on identifying, championing, and implementing energy efficiency efforts,” said the authors.
The report offers a roadmap for getting started.
For a free PDF download of the ULI report, “Unlocking Hidden Value in Class B/C Office Buildings,” visit BDCnetwork.com/ClassBC.
Related Stories
| May 20, 2013
Jones Lang LaSalle: All U.S. real estate sectors to post gains in 2013—even retail
With healthier job growth numbers and construction volumes at near-historic lows, real estate experts at Jones Lang LaSalle see a rosy year for U.S. commercial construction.
| May 3, 2013
'LEED for all GSA buildings,' says GSA Green Building Advisory Committee
The Green Building Advisory Committee established by the General Services Administration, officially recommended to GSA that the LEED green building certification system be used for all GSA buildings as the best measure of building efficiency.
| May 2, 2013
A snapshot of the world's amazing construction feats (in one flashy infographic)
From the Great Pyramids of Giza to the U.S. Interstate Highway System, this infographic outlines interesting facts about some of the world's most notable construction projects.
| May 1, 2013
Groups urge Congress: Keep energy conservation requirements for government buildings
More than 350 companies urge rejection of special interest efforts to gut key parts of Energy Independence and Security Act
| Apr 30, 2013
Tips for designing with fire rated glass - AIA/CES course
Kate Steel of Steel Consulting Services offers tips and advice for choosing the correct code-compliant glazing product for every fire-rated application. This BD+C University class is worth 1.0 AIA LU/HSW.
| Apr 26, 2013
Apple scales back Campus 2 plans to reduce price tag
Apple will delay the construction of a secondary research and development building on its "spaceship" campus in an attempt to drive down the cost of developing its new headquarters.
| Apr 24, 2013
North Carolina bill would ban green rating systems that put state lumber industry at disadvantage
North Carolina lawmakers have introduced state legislation that would restrict the use of national green building rating programs, including LEED, on public projects.
| Apr 24, 2013
Los Angeles may add cool roofs to its building code
Los Angeles Mayor Antonio Villaraigosa wants cool roofs added to the city’s building code. He is also asking the Department of Water and Power (LADWP) to create incentives that make it financially attractive for homeowners to install cool roofs.
| Apr 22, 2013
Top 10 green building projects for 2013 [slideshow]
The AIA's Committee on the Environment selected its top ten examples of sustainable architecture and green design solutions that protect and enhance the environment.
| Apr 19, 2013
7 hip high-rise developments on the drawing board
Adrian Smith and Gordon Gill's whimsical Dancing Dragons tower in Seoul is among the compelling high-rise projects in the works across the globe.