In recent history, developers have been changing the designs of their warehouse inventories to line up with new standards in an effort to earn LEED certification. Ten years ago, this was a brand new concept and completely overlooked by tenants and agents alike. No one really knew what it was or what it accomplished, but no one cared enough to make an effort to learn. At the time, the economy was booming, prices seemed to rising monthly, and it really didn’t matter what you paid today, because tomorrow it was practically guaranteed to go up
Times have changed, and these days, LEED isn’t something most people are ignoring.
LEED is an acronym that stands for Leadership in Energy and Environment, an organization that provides design standards for a green building certification program, which recognizes best-in-class building strategies and practices. To earn LEED certification, building projects must satisfy prerequisites, and they can earn points to achieve different levels of certification.
So, what’s the relevance to industrial real estate? Ten years ago, not much, but today, the firms that are still with us are leaner and far more focused on effective fixed-cost management. Now, LEED buildings are far more in demand and LEED certifications are getting much more scrutiny. Here at Miller Industrial Properties, you’ll find a LEED column on our spreadsheet when we recap potential locations for a prospective client to consider – and that column has been there for a while. It’s a well-established aspect of the warehouse search that deserves due consideration. Here’s why.
Prospective tenants tend to take note of LEED certification because of growing corporate attention to sustainability (an idea that applies not only within their own organizations, but to the environment at large). Corporate America is concerned about both its supply chain resource providers and the corporate culture of those entities, and specifically how they dovetail with their own. What we’re seeing, then, is the extension of that thinking as it trickles down to the selections made on their warehouse locations. LEED is a resource that effectively allows these firms to gauge the level of environmental awareness their real estate partner has had in the design of these warehouse products.
And then there’s the no-so-insignificant factor of the actual cost savings associated with a high LEED accreditation. This presents itself in a few ways. First, there’s a savings on taxes that are passed onto the tenant occupant in the form of NNN recovery. Tenants pay the taxes on their space, and a lower tax bill translates to a lower fixed cost to occupy. Another direct fixed cost savings comes from the use of the most efficient lighting and heating systems. The utility costs for heating and lighting are always a significant operating cost, and savings in these areas can be surprisingly substantive. Some developers are also adding insulation to warehouse walls, a benefit that hasn’t traditionally been offered and that translates to savings in the form of reduced utility consumption.
One more element is an intangible, but we believe it still plays into decision making. There’s a pride factor that comes from occupying a greener warehouse, in a facility that’s leaving the smallest carbon footprint and the lightest possible impact on the environment. Taken as a whole, it’s easy to understand why more and more designs are aiming for high LEED certifications, and we applaud the movement.
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