Does LEED certification make financial sense for your projects?

LEED certification is good. But does it always make financial sense?

We all agree that building green is a good move. But what about seeking LEED certification? Is that always the smart financial move?

Not necessarily.

Minnesota Real Estate Journal — part of the family — is running a column in its next issue by Tom Gump, president of Neighborhood Development Partners in Hopkins, Minn. In his column, Gump lays out a convincing argument for why it might make sense for some developers to forgo LEED certification on some projects.

I have to be clear, though: Gump believes in sustainable building. He believes that developers should add green features to their projects, should strive to build commercial buildings that consume as little energy as possible. But Gump also believes that developers shouldn’t always spend the money and time it takes to earn LEED certification on their projects.

In his column, Gump cites studies that show that developers can spend up to 5 percent more to finish their projects if they seek the lowest level of LEED certification. Those seeking the highest level, LEED Platinum, can expect to spend up to 30 percent more.

That’s a lot of extra money to spend in a commercial real estate market that’s still a challenging one. And with capital still so hard to come buy, developers often need to keep their project costs as low as possible.

Gump suggests that it often makes sense for developers to design green features in their projects without seeking full-blown LEED certification. As Gump writes, this is known as “going green without the plaque.”

The Minneapolis StarTribune, as Gump points out, earlier this year wrote an interesting feature story about a growing number of municipalities in the Twin Cities area that are taking this green-without-LEED approach.

These are tough times. Municipalities and developers often simply can’t afford LEED certification. This doesn’t mean, though, that they can’t go green anyway.

— Dan Rafter

This entry was posted in Finance, Minneapolis commercial real estate, Minnesota real estate and tagged , , , . Bookmark the permalink.

One Response to Does LEED certification make financial sense for your projects?

  1. The costs for LEED discussed in this article are surprisingly high. For instance on a $10 million project, it would be very unusual for LEED to cost $3 million, even for a LEED Platinum project, unless someone decided to put in a $2.5 million photovoltaic system. Even $500,000 would be high for a typical LEED project (Silver), including consultant fees and upgrades, assuming that the owner/design team designs and builds the project using sustainable principles and plans on LEED certification from the outset. Owners who focus on energy efficiency and who hire a good commissioning authority can expect a reasonably quick payback. LEED is a great way to make sure that the sustainable goals that are agreed to by the owner and design team at the outset of the project are actually implemented. I agree that LEED can be expensive for very small projects.

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