Ghost in green building

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By Elisa Wood

January 8, 2010

In midtown Manhattan, home of the nation’s priciest office space, the equivalent of 16 office towers, each 40 stories high, now stand empty. This statistic, from the Wall Street Journal, underscores the vast damage inflicted on commercial real estate by the economic downturn.

Given the ailing market, this hardly seems the time to invest in expensive green upgrades. But a recent report suggests just the opposite.

Issued by sustainability organization Ceres and investment services company Mercer, “Energy Efficiency in Real Estate Portfolios: Opportunities for Investors,” points out several reasons why both property owners and investors may want to consider improving buildings now.

  • Several studies indicate that efficient buildings command a premium in both rent and sales prices, and a shortage of green buildings exists to meet demand.
  • New programs and support are available through private and public sources to finance efficiency retrofits. The federal stimulus package alone earmarks $11.3 billion for energy efficiency.
  • Efficiency upgrades can decrease operating expenses.
  • Inefficiency could mean financial penalty if the US moves forward on pricing carbon dioxide emissions.

We are experiencing an unquestionable increase in the greening of buildings – a good thing since buildings account for 39% of energy use in the United States. But property owners would probably pursue more efficiency if not for the misconception that efficiency upgrades are expensive. Owners often believe energy efficiency upgrades will cost as much as 17% more than they do, according to the report. These “ghost expenditures” are scaring building owners away from making upgrades, the report says.

“Evidence suggests that in many cases, the most effective changes have low upfront costs and result in significant operational cost savings, rental premiums, shorter vacancies and reduced obsolescence, as well as slower depreciation, and therefore higher capital values,” the report says.

Some investors aren’t afraid of the ghosts. Financial services giant TIAA-CREF is well on its way to reducing energy use 10% for its real estate holdings, a goal it hopes to achieve before the year is out. Begun in 2008, the effort already is saving the company $4 million a year in reduced energy costs.

Likewise, the California Public Employees’ Retirement System (CalPERS), the world’s largest pension fund, is on target to meet a 20% cut in energy use for its real estate by the end of this year.

“As fiduciaries, focusing on energy efficiency in our real estate portfolios just makes sense,” said Anne Stausboll,  CalPERS CEO, “CalPERS invests in millions of square feet of real estate so cutting back on energy use and lowering operating costs can only boost the value of the properties in our portfolio, while also contributing to climate change mitigation.”

The report provides advice about how to proceed with green investments for both property owners and those who invest in real estate trusts and other securities.  It can be found at

Visit Elisa Wood at and pick up her free Energy Efficiency Markets podcast and newsletter.

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About Elisa Wood

Elisa Wood is the chief editor of She has been writing about energy for more than three decades for top industry publications. Her work also has been picked up by CNN, the New York Times, Reuters, the Wall Street Journal Online and the Washington Post.


  1. Even the government’s procurement policy is also preventing Green improvements, caused by the cost vs. value repayment scale.

  2. I agree with Derek. There are ways, though, to reduce energy and water consumption using better methodologies for feasibility studies and the likes. E2O fifty provides access to such tools.

    E2O fifty is a community challenge to everyone from the grass roots to community officials and Government leaders to actively reduce energy and water consumption by over 50% within your communities.

    Join the E2O fifty challenge.