Page 226 - The Green Building Bottom Line The Real Cost of Sustainable Building

204 CHAPTER 7

Let’s consider this last part in more detail. Based on our analysis of the Birmingham
Federal Reserve & Tower, rental payments could conservatively be reduced by 50 per-
cent owing to specific green features of the building. These savings, which may be on
the low end, are contingent upon the particular tenant, its business model, etc. Much
is made of the fact (in literature on green buildings generally and in several chapters
of this book, specifically) that green pays. But financial analysis is almost always
viewed from the perspective of the developer or the owner. However, despite paying
no premium for the green building it inhabits, a tenant receives a host of benefits.
When a company calculates the value it receives for the rental rate it pays—and it
absolutely ought to—it should view its evaluation through four lenses. The company
should consider the direct and indirect savings that a certain building may provide in
operating expenses. It should also consider the direct and indirect revenue-enhancing
aspects this building could provide. Let’s consider each lens in greater detail, in the
context of the Birmingham Federal Reserve & Tower project. As with all other chap-
ters in this book, we will identify the financial values of green whenever it meshes
with our own direct experience, affix numerical valuations where we have been able
to validate these assessments, and make a concerted effort to be conservative in our
estimates and projections. In the calculations that follow, we will be using 170,000
square feet as the rentable area of Birmingham Federal Reserve & Tower’s office
component, and $28 per square foot as the average base rent for all office tenants,
resulting in gross rental income of $4,760,000 annually. It is estimated that the total
tenant workforce will be approximately five per thousand square feet, or 850 people.

DIRECT COST SAVINGS
Relative to current alternatives, The Birmingham Federal Reserve & Tower project
proposal contemplates these direct cost savings for tenants: energy savings, water sav-
ings, lower common area costs over time, and lower cost for reconfiguring office space.
Let’s examine each one.

Energy Savings
We anticipate energy savings of 40 to 50 percent. In our proposal to prospective office ten-
ants, our company structures common area cost savings below a pre-determine expense stop
1
on an equal basis with the tenant. As such, energy savings accrue directly to the benefit
of the tenant, even before considering the cost of operations outside normal business
hours (when a tenant absorbs the full costs of utilities). Energy savings could effectively
reduce the tenant’s occupancy costs by approximately $0.65 per square foot annually. 2

Water Savings
We anticipate water savings of 30 to 40 percent. Our proposal shares common area
cost savings below a pre-determined expense stop on an equal basis with the tenant. 3
As with energy, water savings accrue directly to the benefit of the tenant. Such reduced
water consumption is typical of the green building industry in general and is borne out
by our own projects, primarily through use of low-flow water fixtures.