Page 229 - The Green Building Bottom Line The Real Cost of Sustainable Building

REALIZING THE VALUE OF GREEN FOR KEY USERS 207

TABLE 7.1 INDIRECT SAVINGS FOR A TENANT IN A GREEN BUILDING

Building square footage 170,000
Rent per square foot (annual) $28
Rent savings per square foot $1.72
% savings on rent per square foot 6.14%
SAVINGS
# OF COST PER
PEOPLE PER % REDUCTION CALCULATION SQUARE
CATEGORY ANNUALLY PERSON FROM NORM OF SAVINGS FOOT)
Turnover of regular 191 $ 25,000 3% $143,250 $0.84
staff
Turnover of key staff 21 $125,000 3% $ 78,750 $0.46
Reduced cost of 206 $ 7,000 5% $ 72,100 $0.42
hiring
TOTALS $294,100 $1.72

less time consuming. How much so? Hard to say. Willard suggests a 5 percent
reduction in hiring costs as a result of one’s sustainable orientation is appropriate,
a reasonably conservative estimate. The result is a savings annually of $72,100, or
$0.42 per square foot.

In short, we conservatively estimate the total indirect savings to a tenant in a green
building to be just over $294,000 a year, or $1.72 per square foot, 6.14 percent of the
total annual rent, as shown in Table 7.1.

EXPLICIT REVENUE ENHANCEMENT

Relative to current alternatives, the proposal for the Birmingham Federal Reserve &
Tower project contemplates explicit revenue enhancement from improved productiv-
ity and naming rights.

Improved Productivity
Labor costs are by far the largest expense for most companies. In fact, they account
for 92 percent of the life-cycle cost of a building, more than 72 times the cost of
energy. So small increases in productivity result in a tremendous improvement to rev-
enue and/or reduction in expenses. Sustainable buildings increase worker productiv-
ity. In a well known-example, the West Bend Mutual Insurance Company documented
a 16 percent productivity gain in the early 1990s following a move to a new 150,000-
5
square-foot green building. When multiplied by the tenants’ annual billings, such an