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Real Estate Execs Embrace Sustainability

An encouraging new study finds that corporate real estate executives are doing more than just jawboning about the merits of sustainability. According to the Oct. 29 survey conducted by trade group CoreNet Global and real estate services firm Jones Lang LaSalle (NYSE: JLL), many corporate real estate executives are willing to pay premium rents to occupy “green” office space.

The survey, which drew approximately 400 responses from executives scattered across four continents, found that 79% of respondents see sustainability as a “near term” business issue. Eric Bowles, vice president of research for CoreNet Global, says the results are clear proof that Fortune 500 companies now view sustainability as a priority. Sustainable developments are loosely defined as projects that conserve vital resources such as power and water through advanced green building techniques and recycled building materials.

“[The survey] reinforces what we are hearing from clients every day: More and more companies are recognizing the business case for sustainability and their corporate real estate departments are charged with making it happen to a large extent,” says Ben Breslau, a vice president at JLL.

But making it happen often costs more than these corporate real estate departments expect. The survey did expose a gap between what sustainable real estate solutions actually cost and the perception of what they will cost.

According to CoreNet Global, studies suggest that developing a commercial office building that is LEED certified can cost as much as 5% more than conventional construction. LEED stands for Leadership in Energy and Environmental Design. The LEED standard considers site sustainability, water efficiency, energy efficiency, content of materials and resources, indoor environmental quality and innovative design.

Most survey participants misjudged the cost. Just 38% of respondents expected sustainable buildings to cost between 1% and 5% more than conventional construction. Meanwhile 22% of respondents believe that green buildings cost 10% or more to build.

The survey doesn’t specify which respondents are grossly overestimating the average costs of going green. But more U.S.-based executives appear to perceive the costs to be prohibitive: Among the European respondents, a full 61% recognized sustainability as a critical business now. Slightly fewer, or 53%, of Australian respondents viewed it as such. But just 44% of respondents in the U.S. felt that way, based on the survey.

“We have passed the tipping point for sustainability, and the question is no longer about whether sustainable design should be considered,” says Bowles. “The question will be: How do you explain why you chose not to have sustainable design.”

View more information on sustainable development/design.

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