Genzyme Corp., Cambridge

When we think of leading contributors to global warming, we quickly think of cars, power plants and perhaps even leaf-blowers. But a top offender is right before our eyes. Buildings and their construction account for nearly half of all greenhouse gas emissions and energy consumed in the United States each year, according to the Environmental Protection Agency.

Globally, the numbers are equally alarming. A March 2007 United Nations report focused on the building industry as a major contributor to global warming. The building sector, it said, accounts for up to 40 percent of global energy being used.

In this country, buildings account for:

• Thirty-nine percent of energy use;

• Twelve percent of water consumption;

• Sixty-eight percent of electricity consumption;

• Thirty-eight percent of the carbon dioxide emissions; and

• Thirty percent of both raw materials used and waste output.

U.S. buildings alone are responsible for more CO emissions than that of any other country except China, reported Greg Kats, principal author of one of the most widely referenced studies on the costs and benefits of green building.

Large as they are, buildings represent a huge blind spot in our energy consciousness. Massive amounts of energy, water and materials are involved in the construction, operation and removal of buildings, and they generate huge volumes of pollution. As Kevin Surace, chief executive officer of Serious Materials, told the San Jose, Calif., Mercury News, “The big kahuna in CO production is building.”

The good news is that, with about 5 billion square feet of both new construction and renovation taking place in the U.S. each year, the potential for improved efficiency and lower emissions is enormous. Even better, industry trailblazers have found that in addition to producing energy savings of 20 percent to 50 percent, green buildings are providing impressive paybacks. There is now ample documentation and real-life evidence that green buildings deliver significantly higher rents, occupancy rates and sale prices. At the same time, energy-inefficient buildings are losing value and heading toward obsolescence.

“Green building is fundamentally altering real estate market dynamics Â… The upshot will be a redefinition of what constitutes Class A properties and even institutional-quality real estate,” said a November 2007 study by RREEF, one of the nation’s largest property investors.

According to McGraw-Hill’s 2006 SmartMarket Report, buildings renovated to meet green standards typically generate 3.5 percent higher occupancy rates, 3 percent higher rents and a 7.5 percent increase in value. Return on investment is 6.6 percent higher on average as well, according to “As Green as the Grass Outside.”

A 2007 landmark report from real estate data provider CoStar concurred, stating that office rents in energy-efficient buildings are growing two-thirds faster than rents in less economical buildings. In 2006, Energy Star buildings sold for a 30 percent premium – an average of $352 per square foot versus $270 for non-Energy Star buildings. For comparison’s sake, CoStar only examined Class-A properties of at least 200,000 square feet and 5 stories built after 1970.

Profitable Practice

A look at recent sales of buildings certified by the U.S. Green Building Council’s Leadership in Energy and Environmental Design program backs those findings. When completed in early 2006, Chicago’s LEED-silver-certified One South Dearborn St. was 93 percent leased in a soft market with a 14.3 percent vacancy rate. Developer Hines Interest sold the $200 million, 40-story tower to Olen Properties later that year for $344 million, reaping a $144 million profit and breaking the city’s sales record.

That same year in Chicago, the John Buck Co. sold its just-developed $270 million LEED-gold-certified South Wacker Drive property to a German investment fund for $386 million, earning $116 million on the 51-story tower.

And last year, per-square-foot profit on commercial space in Portland, Ore., hit a new high when JPMorgan Chase & Co. bought three of the Brewery Blocks, composed of two LEED gold and one LEED silver building, bringing the original investors a 43 percent profit.

Greening is also golden for companies that retain their properties. In becoming the first commercial enterprise to earn three platinum (top level) LEED certifications, Adobe Systems has enjoyed a net 148 percent return on investment on its three headquarters towers – and the cost of certification was just 10 percent of one year’s savings, the company reports.

Adobe’s $1.4 million investment since 2001 has included projects large and small. For example, reducing the runtime of garage exhaust fans at a cost of $100 saves $67,000 a year, while retrofitting garage lighting, which costs $158,000, saves $139,000 a year (and provided a $41,000 rebate), according to Randy Knox III, Adobe’s director of real estate.

In all, Adobe says it has reduced:

• Electricity usage by 35 percent;

• Natural gas by 41 percent;

• Domestic water by 22 percent;

• Landscape irrigation by 76 percent;

• CO2 emissions by more than 20 percent; and

• Achieved diversion of solid waste through composting and recycling by nearly 90 percent.

Examples of hefty paybacks abound. USAA’s emphasis on green operations and low-cost improvements cut energy consumption by more than 6 percent across its portfolio in 2006, for a total savings of nearly 23 percent, or $10 million, over the past six years, according to Energy Star. Through its energy-saving measures over the past several years, USAA Executive Managing Partner Brenna Walraven estimates that the company, which owns or manages more than 45 million square feet of commercial property, has increased its asset value by more than $30 million and prevented nearly 90 million pounds of carbon dioxide from entering the atmosphere, according to a CoStar report.

Cambridge-based biotech company Genzyme, which opened its new 12-story LEED platinum-certified headquarters in 2003, estimates that energy costs are 42 percent less than that of a comparable building and water usage is 34 percent less. And through remodeling to LEED specifications, Warner Bros. Studios has reduced electricity, gas and water costs by 38 percent.

Even though green success stories abound, many in the building industry have yet to be convinced that the costs are justified. The green-building tipping point – though now wobbling wildly – has been eluded due to incorrect and outdated assumptions. A 2007 survey of by the World Business Council for Sustainable Development found green costs to be overestimated by 300 percent. Respondents to the 1,400-person global survey of real estate and construction professionals estimated the additional cost of building green at 17 percent above conventional construction, more than triple the true cost difference of about 5 percent (or lower). At the same time, survey respondents put greenhouse gas emissions by buildings at 19 percent of world total, while the actual number of 40 percent is double that.

Whereas the true costs and benefits of green building were previously unknown, major studies – and real projects – have unequivocally demonstrated that green investments cost far less than once imagined and bring results far better than once expected. Furthermore, costs have decreased over the past decade as methods and incentives have been forged and products and technology have been developed. Today, “green premium” no longer means higher cost; it means higher value.

The first major study on sustainable building, conducted in 2003 for California’s Sustainable Building Task Force, found that the average premium was slightly less than 2 percent, or $3-$5 per foot, mostly for increased architectural and engineering design time, modeling costs and the integration of sustainable building practices into projects. Yet, the report concluded that the “financial benefits of green design are between $50 [per square foot] and $70 per square foot in a LEED building, over 10 times the additional cost associated with building green.” The study, led by Gregory H. Kats, compared the cost of 33 green buildings from across the United States to conventional designs for those same buildings.

Another leading study, published in 2004 by Davis Langdon, a global construction and property management consulting firm, found that the cost per square foot for buildings seeking basic LEED certification – not the bronze, silver, gold or platinum levels – were in line with those of conventional buildings. That study compared 45 LEED-registered public facilities with 93 non-LEED buildings. When authors Lisa Fay Matthiessen and Peter Morris updated the study with a larger sampling in 2006, their original findings were confirmed.

Daniel Watch is a science and technology expert at Perkins+Will, a national design firm with offices in Boston.