Beaten by business

Way up in the northern precincts of San Diego, the planned community of Del Sur shimmers in the heat of an unusually warm summer’s day. Solar panels shine on the roofs of the $600,000 houses, recycled water feeds the grass on the emerald-green golf course and shade trees offer shelter from the heat. In the early part of the decade, Fred Maas, president of the company that built Del Sur, knew he wanted to build the most sustainable community his investors would let him.

“Back then, people thought we were crazy for doing all this stuff,” Maas said. “And the buyers didn’t care. We’d say, for $16,000 they could have solar panels or marble countertops. They’d say, ‘What color marble?’”

Naturally, that was in the BAGS Era (Before Al Gore’s Slideshow), when only crazy hippies and knowledgeable scientists understood what greenhouse gases were doing to the planet, before a United Nations committee of scientists from 113 countries elevated to “fact” the idea of human-caused global warming. These days, the words “sustainable” and “green” have entered everyday vocabulary to such a degree that they’re starting to piss people off, even as everyone recognizes the need for changing habits.

Yet even today, Maas says he has to persuade people to go solar, mostly by demonstrating that the money saved by solar panels will, over time, pay for both the panels and marble countertops. Demand for sustainable living remains low, and even during the height of the housing boom, homebuilders didn’t really go for the green. In San Diego, the U.S. Green Building Council has 88 projects registered for their Leadership in Energy and Environmental Design (LEED) certification. Of those, 13 are government structures such as county operations buildings, two high schools, a police station and a fire station. Another 71 are commercial office buildings, which leaves exactly four as residential. Nationally, only 3.5 percent of all registered LEED projects are residential (compared with 4.5 percent in San Diego).

There are many projects with sustainable features that don’t seek LEED certification (the standards are not considered perfect), but the statistics are telling, if only for the ratios they present. Why do executives and taxpayers demand environmentally sensitive buildings, and then go home to their wasteful old houses?

“I think sometimes we don’t look at ourselves. It’s easier to look at everyone else,” said Marco Sessa, an executive with Sudberry Properties. “We build things that are very water-efficient. And I went outside my own house and realized our irrigation system was on. I turned it off. Now my wife is yelling at me because our lawn’s brown. People make those choices.”

Part of the problem lies in economies of scale. Individuals looking for even a large home won’t enjoy the benefits that big businesses reap. And it’s not small businesses trying for sustainable living—it’s really big businesses, companies looking to lease whole buildings and hundreds of thousands of square feet of office space.

“In this regulatory environment, there’s going to be a price on carbon emissions,” said Colleen Haggerty, a Bank of America spokesperson. “It makes economic sense to us as a big company that does construction to start scaling back our own environmental impact.”

Translation: Congress is going to make pollution expensive, so we’re getting ahead of the curve. In fact, the greenhouse-gas legislation Congress took up this year went down to defeat. But there’s a sense of inevitability among big business that some kind of carbon tax is coming, and they need to be ready. For Bank of America, this means creating a $20 billion initiative to improve its own operations and those of its customers, and it means a commitment to only build LEED-certified buildings for its branches and offices.

But big business likes efficiencies for the simple savings they get out of it, as well. Going green costs money up front, and bigger companies can make that money back faster than small business or single-family-home buyers. Say a business can save penny a day per square foot in electricity costs by installing more efficient air conditioning—a company leasing 100,000 square feet of space will save $1,000 a day. At the end of a year, it might have paid off the solar panels and already be saving money.

Sessa said adding green features can raise the cost of construction by as much as 10 percent, and builders have to be confident that they’d be able to pass those costs on to consumers. But, he said, tenants in recent years have begun actively searching for buildings constructed for efficiency. University of San Diego professor of Real Estate Norm Miller recently analyzed buildings that had Energy Star (another green certification program) or LEED certification, and compared them to run-of-the-mill construction. He found that sustainable buildings had higher occupancy rates and were able to charge higher rents.

More recently, a new force has entered the conversation for green building: large investment funds. Armed with vast amounts of cash to invest, these funds, most notably the California Public Employees’ Retirement System, have begun to demand sustainable practices from the companies they invest in. Sometimes they’re even creating real-estate trusts consisting only of the greenest buildings. If there’s been one lesson from the sub-prime mortgage crisis, it may be that when enormously wealthy funds go looking for places to invest, the market aims to please.

“We feel like the institutional marketplace is going to be looking more and more to sustainable projects,” said Rick Stinson, an executive with The Hanover Company.

Stinson’s said company is in the middle of building The Strata, an apartment tower Downtown and one of the four residential projects seeking LEED certification. He said the funds were a major impetus, but so, too, were requirements placed on them by state regulations and the Centre City Development Corporation (whose board is chaired by developer Maas).

“We had to have an eco-roof to get us an extra 30,000 square feet,” Stinson said. “That got us a few points on LEED right there.”

Stinson said that as the state and local governments tighten up energy efficiency and greenhouse-gas emissions requirements, it gets easier and easier to meet LEED or other certification goals. Though the LEED processing requires a mountain of paperwork and can cost $100,000, Stinson said he expects more and more buildings to apply for certification as the costs of making improvements drop.

Meanwhile, there are signs of growing demand among the everyday residential customers. In December, the Green Building Council announced the creation of a new standard, LEED for Homes, to certify single-family and smaller multi-family dwellings. In the past six months, they’ve registered 12,664 new projects, doubling the number of registered projects in just half a year. And a Del Sur resident, Aubree Spear, said she saves $700 a month during the summer thanks to the solar panels on her house.

“I think the rise in energy costs probably contributes” to changing perceptions, Spear said. “I know neighbors who hear that my energy bill is a lot less than theirs are more jealous now than they used to be. Their wallets are pinched.”    

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