On today’s show we’re talking about environmentally sustainable buildings. These are part of a growing trend of buildings globally and in North America as well.

A new report published by CBRE details what’s happening in the multi-family asset class. The buildings that have traditionally been energy hogs have been in the office and industrial asset classes. Most of the work in environmental sustainability started in that asset class.

In fact, much of this work dates back to the 1940’s and 1950’s. My mother was an architect in NYC and she used to design mechanical systems in those buildings that would use the air conditioning to manufacture ice during the night-time hours when the outside air was cooler. During the day, the air conditioning systems would melt the ice and heat the water in huge tanks. These systems used much less energy than the traditional air conditioners that we know and love today. Some of these systems are coming back into fashion.

I recently visited the JC Penny headquarters building in Plano Texas. This 500,000 SF building is LEED certified and uses the same technology that my mom was working with in the 1950’s. The only difference is that they think it’s new technology.

Historically, energy efficiency hasn’t been a big factor in multi-family construction. Increasingly though, while the number of green apartments remains small as a percentage of the total inventory, it is a growing proportion of new construction.

To help the commercial real estate market measure and understand the adoption and prevalence of green buildings across markets, CBRE and a consortium of Maastricht University and the University of Guelph developed the Green Building Adoption Index (GBAI) in 2014. The index tracks the adoption of green building certifications across the largest U.S. office markets since 2005 and this year has been extended to the 30 largest U.S. multifamily markets (measured by number of units) in collaboration with Yardi and supported by the National Multifamily Housing Council.

Three of the main certification programs for multifamily buildings in the U.S. are the EPA’s ENERGY STAR rating, the National Green Building Standard and the U.S. Green Building Council’s LEED certification.

The 2019 Multifamily Green Building Adoption Index shows that green building certification is on the rise in the multifamily market. A total of 251,763 units, representing 3.3% of the 7.7 million multifamily units across 39,071 investment-grade properties (i.e., those with 50 units or more) within the top 30 markets, have already been certified as “green.”

The top 5 markets for green certification are Denver, where 7% of multifamily units are green certified, followed by Washington DC / Suburban Maryland (6.9%) and Seattle (6.5%), Northern Virginia with 6.5% and Chicago at 5.9%. Green building adoption rates vary widely among the 30 largest markets, which could be related to the differing green building mandates and incentives for each of these markets. For example, some cities now require green building certification for all new construction.

Just in case you’re thinking these efforts are in the traditional tree hugger communities, even cities like Austin and Dallas that have a reputation for high energy consumption made the top 10 list for new Green buildings.