So-called green buildings generally cost slightly more to build than traditional developments, but they pay off in energy savings and high occupancy, says Nancy Montoya, senior regional community development manager with the Federal Reserve Bank of Atlanta. Montoya, speaking for herself, not the Fed, tried to make an economic case for energy-efficient projects at the 2011 Smart Growth Summit last week. “I don’t like to have Entergy in my pockets, and I don’t want them in my pockets for the next 20 years,” she says. Montoya says lenders often think green building costs 15% to 20% more than stick building. But according to one study of 170 commercial projects, in which the developer was shooting for some level of LEED certification, the premium ranged from 0 to 18%, and the median difference over stick building was 1.5%. The median energy savings was about 34%, the value ranged from $4 to $16 per square foot, and the payback took five to eight years. “It’s a commitment from your full development team, and it starts early,” she says. “It can’t be at the back end.” Buildings in hurricane-prone areas can qualify for lower insurance rates, and office buildings often have less tenant turnover. All these factors can help a project’s cash flow, but most lenders have no way to quantify the advantages in their underwriting criteria, she says. “Local developers and investors are just now beginning to understand the value of building sustainably,” Montoya says. —David Jacobs
Today’s poll question: Would you be willing to pay a premium for a energy-efficient green building?
