In 2000 the City of Seattle became the first city in the country to require that all city buildings over 5,000 square feet achieve LEED silver rating. The City’s goal in doing that was to spur development of LEED buildings by demonstrating their value and increasing the familiarity of the local design professions and contractors with the LEED program and process. To date that has resulted in eight buildings that have achieved LEED gold rating, six that have achieved LEED silver, two that have been LEED certified, three with no rating, and three for which the LEED rating is pending.
Now the City is considering upping the ante and requiring all City buildings over 5,000 square feet to achieve a LEED gold rating and have a 15% energy reduction above Seattle code and a 30% water reduction. That new proposal has provided an occasion to look at what LEED buildings have achieved, and what it has cost to get there. The results – and the City should provide more data because it would help in the general public’s understanding of the costs and benefits of LEED certification – present a microcosm of what can be achieved with a LEED building, and the costs associated with LEED certification.
The first building built under the existing city policy was the City of Seattle’s Justice Center, which houses the City’s police headquarters and municipal courts. According to the City, the green features needed for LEED silver rating increased the cost of the building by $1.7 million. Today those features result in an annual utility saving of approximately $113,000. (The building got initial utility rebates of $423,000. The City has not said whether those should be deducted from or added to the $1.7 million initial cost of the green features.
Assuming a $113,000 annual cost saving in exchange for a $1.7 million investment, that means that the investment is currently yielding a 6.6% annual return. Or put another way, it will take 15 years to pay for the investment. For the City, that is probably an ok deal, as its cost of borrowing the money to build the building is probably less than the return it is getting. Over time, as utility rates increase, the return is likely to improve. On the other hand, for a private developer, a 6.6% return and a 15-year payback period is probably not likely to make any sense.
And, there are other costs that may be associated with LEED certification of buildings. The budget for city buildings has not increased to pay for LEED features. The result is that the additional up front costs were paid for by taking other functionality out of the building – the budget didn’t allow an employee lunch room or there was less storage space or fewer conference rooms. Some LEED credits come easily – the building is close to transit and has bike storage and encourages car pooling. Other LEED credits make the building more comfortable and pleasant to work in, like the credits for getting natural light to all work spaces and insuring that conference rooms have adequate fresh air intake. But some LEED credits may make the building less comfortable, at least some of the time. LEED energy savings depend in substantial part on reducing air conditioning and increasing natural ventilation – which works well when it is not too hot or too cold outside, but may make the building unpleasant at the ends of the weather spectrum.
The “costs” of LEED ratings – both in the dollar investment and in the extent to which the comfort of the building is compromised, also are likely to increase as the LEED rating increases. In designing a LEED building, the first points are easy. As more and more points are needed, the design process necessarily either goes to higher cost items, or to decisions that can reduce the comfort of the building, and sometimes both. Of course there are situations where a fabulous building can achieve LEED gold or LEED platinum with no significant loss of amenity value – although normally at significant additional cost. But imposing a requirement that all buildings achieve LEED gold will mean that significant compromise will sometimes or often be required in the building itself.
How does that translate into the private market? First, the city has seen a significant increase in the number of LEED buildings that the private market is bringing on line. But the City has probably done more to encourage those LEED buildings with zoning incentives than it will ever achieve through its “lead by example” policy. The city’s 2006 amendments to its downtown zoning provided significant height and density bonuses that can only be achieved with a LEED silver rating.
The City would enhance the public’s understanding of green buildings if it were to provide the initial costs and the current utility savings of all the LEED rated buildings that it has built since adopting its policy in 2000. Those include some great buildings. But it is also important for the public to understand what the LEED rating cost in initial costs, and what the savings have turned out to be.