Green certificates of office buildings increasingly interest tenants

A total of 11,924 square metres of offices comprises the basic parameter of the second biggest lease transaction in the domestic property market in the second quarter. This involves the pre-lease of office spaces by PricewaterhouseCoopers (PwC) in the prepared City Green Court administrative complex, which is currently being built by the developer Skanska Property in the Pankrácká plán area of Prague 4. This project is the first in the Czech Republic to receive LEED Platinum pre-certification, which is the highest possible level of the latest version of the LEED system awarded to efficient buildings. “I can confirm that PwC chose from among several projects and an environmentally friendly approach was one of the main criteria,” says Jaromír Smetana, Business Development Director at the Prague office of DTZ, which took part in the lease transaction.

According to Lenka Šindelárová of DTZ’s Consulting & Research Department, demands for “green” certification are beginning to appear very frequently and with a high degree of importance in the requirements of firms seeking new offices. “Developers are responding very flexibly to this trend in demand. In Prague alone, early 124,000 sq m of offices, which should be certified using one of the recognised international methods, are currently under construction or being renovated. By 2013 office projects with a combined are in excess of 400,000 square meters will be strengthened with a certificate.” According to the latest study conducted by the international consulting firm DTZ, focused on “green” and efficient buildings, certification does not take into account only the efficiency of energy consumption, but also CO2 production, processes and materials used in construction and, of no less importance, the prioritisation of public mass transport and bicycles over automobiles. Though energy efficiency is one of the fundamental parts of the evaluation, certification is also comprehensively focused on economic, ecological and social criteria.

According to DTZ, there is no doubt that, besides tenants of green buildings, investors will continue to monitor this trend: green buildings represent lower risk for investors. It is expected that in future such buildings will be more competitive than uncertified buildings in re-leasing, will have a lower risk of obsolescence and will also better fulfil ever stricter demands imposed by Czech and European legislation.

Energy efficiency and construction of green buildings are among the main trends in development in the long-term horizon. As tenants increasingly push for lower rates for services and institutional investors give priority to long-term sustainable projects, green buildings can offer fulfilment of these requirements. However, the indisputable benefits of green buildings can be reflected also in the increased costs of acquisition. Additional costs significantly depend on the type and version of the chosen certification and primarily on the timely selection of the particular certification. If the developer decides in a timely manner, prior to starting work on the building’s design, additional costs can be very low (0-1%). The later a decision is made, the higher the cost rises, by 5% to 10% depending on the attained level of certification and other factors.

From the perspective of developers, tenants (operating costs) and final investors, the advantageousness of green buildings is apparent in their quantifiable benefits: according to studies published by the U.S. Green Building Council, energy consumption in such buildings is reduced by 24-50%, CO2 production by 33-39%, water consumption by 40% and the volume of solid waste by up to 70%. Converted to operating costs, this means savings of roughly 8-9%. Conversely, the value of a property with green certification increases by 7.5% on average and return on investment improves by 6.6%. Statistics also indicated a 3.5% better occupancy ratio and 3% higher realised leases. For the Czech environment it is currently very difficult to determine the quantifiable benefits due to the fact that construction of green buildings is still in the initial stage of development here and long-term experience is thus lacking.

The previously mentioned costlier inputs on the part of green-building developers may be reflected in relatively higher rental rates in comparison with conventional buildings. However, tenants more frequently and pragmatically monitor total costs including fees for services and energy in addition to rent. The lower fees for services and energy consumption offered by green buildings fully compensate for the possible increase in rent. Therefore green buildings are fully competitive on the property market. Besides the economic aspects, image enhancement and connection with firms’ social responsibility programmes are important for corporate tenants. “Green-building tenants therefore often include international firms, where this approach is part of their overall philosophy. Important corporate tenants with a strategy focused on green buildings in the Czech Republic include, for example, Siemens, Komercní banka, Vodafone, GlaxoSmithKline and Alpiq,” Lenka Šindelárová adds.

Of course, this does not involve only the image aspect: tenants, and thus employers, are aware of the fact that, thanks to a more pleasant and healthier environment, green buildings offer a form of motivation for workers, who most highly value the comfort of their working environment, temperature and lighting, which is rated as even more important than accessibility. According to a BCO Guide study from 2009, labour productivity rises by 25-30% and the savings connected with this even exceed operating-cost savings.