LEED ROI: What is the Return on Investment of LEED Certified Buildings?

What is the return on investment of being LEED certified? And how can you maximize that ROI?

After all, there still exists some ambiguity when it comes to green buildings and their monetary return on investment. Let’s be clear: The ROI isn’t just social and environmental. It’s also financial.

At the same time, this information is crucial for any investment in green buildings.

Want to learn more about LEED ROI? Let’s find out.

What is LEED?

Leadership in Energy and Environmental Design (LEED)¸ granted by GBCI, is the most widely used third-party certification for green buildings. It includes ten different rating systems for the design, construction, and operation of buildings, homes, and neighborhoods.

LEED focuses on resource efficiency, health aspects, reduction in emissions, as well as a sustainable and cost-efficient building life cycle. It’s an open system and because it adapts to technical developments in the industry, every new version of LEED comes with updates and improvements.

Now, LEED is an established green building certification.

But why should you get LEED certified and not just build according to industry best practices when it comes to green buildings?

Simple. Because a third party verification, like LEED, builds trust. A certification proves that your building keeps to LEED standards.

This, again, translates into several advantages. For example: Brand awareness and higher asset value.

But still, deciding to use LEED becomes much easier once you know it does, in fact, mean a higher ROI.

Let’s first take a look at the benefits of LEED.

What are the benefits of LEED?

So, what are the benefits of LEED?

The benefits can be categorized into three different subcategories. 1) Assets, 2) Operations and maintenance, and 3) Work, life, and community.

Let’s look at each of these subcategories.

1. Assets

First:

What is the asset value of green buildings?

Because they are high-quality and high-performance buildings, green buildings are seen as more valuable than conventional buildings.

And because LEED certifications are reputable and give green projects transparency, they improve the value of green buildings.

According to a study by CoStar and US San Diego, which was based on CoStar’s US database of 2.8 million real estate properties, green buildings consistently achieved higher occupancy and rental rates, as well as higher sales prices.

And according to a report by the WorldGBC, green buildings tend to have higher sales prices, higher rental/lease rates, lower operating expenses, higher occupancy rates, and lower yields than other buildings.

Studies have shown that price premiums for certified buildings compared to non-certified buildings are between 0-30%.

However, that same report points out that unique conditions (such as local conditions) make it difficult to determine sales price increases.

But, as more and more companies and investors understand the other benefits of green buildings, their value has continued to increase.

So while sales prices are hard to predict, green buildings are still seen as having a higher value compared to other buildings.

Next:

What is the operations and maintenance ROI?

2. Operations and maintenance

Look:

Green buildings typically use resources more efficiently than other buildings.

And because of this, operations and maintenance costs decrease. For example, water, energy, and waste management costs tend to go down.

In terms of energy, green buildings achieve these savings by using more efficient lighting, heating, and cooling systems, as well as better insulation.

Water savings are achieved by reusing water, using green roofs, rainwater catchments, and more. Plus, in general, green buildings are built with more durable materials and therefore, they don’t require as much maintenance as conventional buildings.

Finally, green buildings tend to lower emissions by reducing the usage of energy and gas. This means a lower impact on the environment, as well as cost savings.

What are some specific savings?

A 2006 Capital E analysis of 30 green US LEED standard schools show that these schools achieved, on average, an energy reduction of 33% compared with conventional buildings. This translated into average savings of $0.38 per square foot per year.

However, while there are examples of successful LEED projects, there has also been criticism of whether LEED does, indeed, lead to energy savings. At the same time, most critics acknowledge some energy savings thanks to LEED.

3. Work, life, and community

Finally:

What is LEED’s impact on health and productivity?

A 2015 study by Harvard University shows that people who work in green buildings (well-ventilated offices with below-average levels of carbon dioxide and indoor pollutants) have significantly higher cognitive functioning scores.

And in terms of LEED, the health and productivity benefits are established.

LEED’s impact on health and productivity include:

  • Reduced absenteeism and sick days.
  • Improved working morale.
  • Better performance.
  • Less employee churn.

How do green buildings achieve these benefits? For example:

  • Better ventilation.
  • Improved air quality and acoustics.
  • Increased natural light.

Together with other studies, research by Carnegie Mellon University backs this up.

14 case studies show that productivity improves by 0.2% to 15% thanks to temperature control. Task air systems have been shown to improve productivity by 11% and 67% to 90% reduced churn costs.

11 case studies show that lighting can improve productivity by 0.7% to 26.1%.

And 17 case studies show that air quality improves health by 13.5% to 87%.

WGBC’s April 2018 report, “Better Place For People”, highlights 11 case studies.

For example, a net-zero carbon office in Australia had 94.5% staff satisfaction and 72% reported better health in LEED certified buildings.

LEED has a big impact on wellbeing, which means direct and indirect savings and improvements to people’s overall health, performance, and output.

What is the investment required to get LEED certified?

What type of investment do LEED certifications require?

After all, this is the top cited obstacle for not pursuing green buildings.

LEED typically comes with a green premium, ie. a cost premium that’s needed to build a green building instead of a conventional building.

What does the cost include? Up-front costs, such as the certification itself, but also more sustainable materials, better mechanical systems, design, and modeling.

In terms of the LEED certification costs, the cost depends on your project. Here is the specific fee structure.

And other costs? We can’t talk about any specific percentage or sum because these costs depend on the level of certification, as well as project-specific strategies.

According to the 2013 green building report by WorldGBC, reported green premiums range between 0% to 12.5% (the majority are between 0%-4%). LEED Silver or Gold green premiums range from 0% to 10% and LEED Platinum premiums fall in the 2% to 12.5% range.

As you can see, some of the green premiums start at 0%.

What this means is that projects can be achieved without any additional expenditure.

For example, a Harvard University analysis of 20 LEED projects in 2007 showed that 40 LEED credits could be achieved without extra costs.

In other words, green premiums aren’t unavoidable in LEED projects.

Plus, with the help of LEED consultants, you can make sure your investment gets you the highest ROI possible. (Want more information on LEED consulting? Here you go.)

Now:

You have a better understanding of LEED costs. So what about LEED ROI?

What is the ROI of LEED?

Now you know the benefits and costs of LEED.

So, does LEED give a return on your investment?

As we’ve seen, a well-managed green building can lower energy, water, and maintenance costs, as well as improve productivity and wellbeing and increase the value of the building.

While there might be a green premium (especially if we talk about higher LEED certifications), these can be paid off in a reasonable time span.

Want more specific examples? Let’s look at a few LEED projects and their results.

Adobe Systems, Inc.

Adobe received three LEED Platinum awards in 2006 for its headquarter towers. This project produced positive publicity and Adobe reported a net present value return on almost 20 to one on the investment.

The following three examples are reported by USGBC.

Orlando Magic’s Amway Center

The first NBA arena to earn LEED Gold certification, the Amway Center, was able to achieve nearly $700,000 in annual energy costs and overall, close to a million in a year.

The Old Globe

The San Diego regional theater The Old Globe was able to save more than 14,000 annual kilowatt hours and reduce overall water usage by 32%.

Shanghai 2010 Expo Center

The Shanghai 2010 Expo Center achieved 82.5% annual water savings and a 93% reduction in stormwater runoff volume.

LEED in the future

What will LEED look like in the future?

According to the World Green Building Trends (2018), green building activity continues to grow.

Green buildings are a smart investment from a cost perspective. But for many businesses, environmental responsibility continues to grow in popularity.

What this means is:

Everything points to the fact that LEED has and continues to produce a return on investments.

Want to get LEED certified?

That’s it. That’s what you need to know about LEED ROI.

At the end of the day, LEED provides mainly upsides. Not only for your bottom line but also for some of your most important assets, like your brand.

It does require investments, yes. But benefits, both in the short and in the long term, outweigh these costs.

Want to learn more about how you can use LEED for your projects? Read more about our LEED services here.