Putting a Value on Sustainable Buildings

Two years ago, we had the pleasure of talking with Theddi Wright Chappell, the managing director for Cushman & Wakefield's National Green Building and Sustainability Practice and Valuation Services team in Seattle, Washington. Chappell specializes in analyzing the potential value of sustainable development. Here's an edited version of our interview:

Q: How do you get to the hard numbers, how do you get to quantifying sustainability?

Obviously, energy is one of the most tangible ways; I refer to it as the low-hanging fruit of these sustainable initiatives because it's more easily quantified. But there are ways beyond just energy, things to look for in terms of maintenance, operating expenses, in terms of improvement costs, the types of tenant improvements that are done: Are they more flexible, do they take more or less time to complete, down time between leases? If in fact there is greater tenant satisfaction, does that mean they will stay in one place longer and are they more likely to renew their lease? So you're going through the same questions you would ask with a traditional property, but being sensitive to some of the reasoning that goes into a tenant's decisionmaking.

Q: It seems to cover a broad range of things, starting with energy-efficiency, but including air quality and the health of the building in a sense.

Right, well, I think it comes down to a really basic concept: What do we value? What makes something valuable? I talked with a property manager this morning and she is just seeing a tremendous shift in the types of things that peopel are asking for. Tenants are asking for LEED-certified buildings. They're asking for things to be LEED certified when they don't even know what that means. What they're asking for is a better work environment. And they've heard that that is what LEED certification means. If you've got a right-sized, high-performing air system, then technically, it's a healthier place. People hear about that and it's attractive. People always want to go where the grass is greener, and if given an option, I think most people would choose to work in what they consider a healthy environment.

Q: I was talking to a smaller developer who does sustainable work here, and one of the things he mentioned was that it's fun for them to do this kind of development, they have a passion for it.

Well, you feel like you're doing the right thing. Doing the right thing should get the right results, which should be as much or more profit. And I think, if in fact this becomes the prevalent mentality--building a high quality product--then everyone will benefit from it: the building inhabitants, the owner, the developer, it will go all the way down the chain. Everyone wants to save money, but it's how you save it. And if you save it through greater efficiency, through more thoughtful design and construction, that's a whole lot different than just spending less on something else.