The nation’s largest cities are getting greener, according to the fifth annual U.S. Green Building Adoption Index by CBRE and Maastricht University. Researchers found that green certified office space across America’s 30 largest metros has reached 41 percent of market totals – the highest in the index’s history. “Green” office buildings are defined as those that hold either an EPA ENERGY STAR label, USGBC LEED certification or both.

According to the report, 11.5 percent of all buildings surveyed are ENERGY STAR labeled, while 5.2 percent of buildings are LEED certified – both at all-time highs for the five-year study.

Two Florida cities were ranked in the list of top 30 U.S. cities for green buildings. Miami came in as No. 14 with 35.9 percent of its office building space (based on square-feet) green; Tampa came in at No. 20 with 29.12 percent green.

Chicago again claimed the top spot with nearly 70 percent of its space green certified. In addition to defending its title as the nation’s greenest city, Chicago saw a difference of nearly six percent with second-place San Francisco, the largest spread ever recorded in the Green Building Adoption Index.

Atlanta maintained the third spot with more than 58 percent of all space green certified, while a surging Los Angeles claimed fourth – up from sixth last year. Minneapolis rounds out the top five with 55 percent of office space certified.

The U.S. Environmental Protection Agency (EPA) threw a kink into energy-rating studies for commercial buildings this year when it changed the underlying calculations for ENERGY STAR scoring. The change is expected to lower average scores for office buildings by as much as 10 points next year, which could have a significant impact on next year’s Green Building Adoption Index rankings, particularly for markets whose ENERGY STAR certifications comprise the bulk of their green space.

“Green building certifications have become an important proxy for sustainable practices, recognized by all stakeholders. Any significant change to one of these major certification programs can have a significant impact on the buildings affected. We will be closely watching for the results,” says David Pogue, a senior vice president with CBRE.

Capital market influences

CBRE and Maastricht University researchers say that building certification has become a more recognized and important part of a building’s profile. As these programs reach maturity, the capital markets are increasingly incorporating these certificates into loan pricing and alternative financial instruments such as green bonds.

According to additional research by Green Building Adoption Index co-author Rogier Holtermans, buildings certified by ENERGY STAR and/or LEED have been shown to transact for about 10.1 percent more than non-green certified buildings. In fact, for the first time in the four-year history of CBRE’s Investor Intentions Survey, more investors in 2018 said sustainability is an important criteria in asset selection than said it was unimportant. This reflects a gradual trend of increasing investor interest in sustainability.

On the lending side, notable advances have been made to integrate green building certification into financing programs. Some lenders, such as Freddie Mac and Fannie Mae, are adapting their rates based on the presence or absence of a green building certification, and providing pricing breaks in the 10-30 basis-points range to multifamily assets rated by one of eight different green-rating schemes.

“For investors and lenders in the commercial real estate sector, green building certification affects their cost of capital. The rationale is that such buildings have a more attractive risk profile and may be more resilient when economic headwinds arrive,” says Dr. Nils Kok, associate professor at Maastricht University.

This is the fifth release of the annual U.S. Green Building Adoption Index. Based on a rigorous methodology, the index shows the growth of ENERGY STAR- and LEED-certified space for the 30 largest U.S. office markets, both in aggregate and in individual markets, over the previous 10 years.

Source: Florida Realtors