How Green Building Is Transforming Real Estate

William Pentland notes a crescendo in the clamor for green buildings in the upscale, commercial market.

As the fascination with green design gains momentum, environmentally minded practices become the standard. Nowhere is that more apparent than in commercial real estate, where in recent years, the market for sustainable products has skyrocketed – driven more by demand than government regulation.

"In 2010, a third of all new commercial construction was green, amounting to a $54 billion market for commercial green buildings," Pentland writes. "By 2015, green buildings in the commercial sector are expected to triple."

But the trend has not been consistent across the board. Commercial buildings are categorized into three classes based on their "ability to attract high-value tenants:" Class A buildings are typically home to high-profile offices, demanding above-average rent; on the other end of the spectrum, Class C buildings are merely functional spaces at below-average rent.

And, quite predictably, "the green paradigm has achieved the deepest penetration" in the Class A market.

As Pentland explains, "Many tenants are willing to pay a premium for space in green buildings because of the lower operating costs, higher worker productivity and reputational benefits associated with the superior environmental performance of green buildings."

Full Story: The Brilliant Economics of Green Buildings

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