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Green Towers: Energy-Saving Buildings Rise As Costs Drop
INVESTOR'S BUSINESS DAILY
BY DANIEL DEL'RE
11/17/2006
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Hearst Corp. recently unveiled a 46-story testament to America's growing interest in environmentally friendly construction. Its midtown Manhattan office building is encased in glass to provide natural lighting throughout the interior. External air provides 75% of cooling and ventilation, cutting energy consumption by almost a quarter. Roof cisterns capture rain for plants and to replace water lost to condensation in the air-conditioning system.
"Green building" focuses on ecologically sensitive design and energy conservation. As it has gained popularity, features such as efficient heaters and wastewater reduction systems have gotten more affordable, spurring the trend.
Firms build green to save utility costs and sometimes to burnish their image as corporate citizens. In an October 2005 speech, Wal-Mart (WMT) Chief Executive Lee Scott said that "being a good steward of the environment and . . . an efficient and profitable business are not mutually exclusive . . . they are one and the same." Wal-Mart aims to cut energy use 25% to 30% in seven years.
Green building extends beyond energy efficiency to health. Chairs and desks in the Hearst building are formaldehyde-free. Concrete sealants are low-toxicity. Ceiling tiles are made from recycled materials.
The U.S. Green Building Council estimates the market for such products has grown from $800 million in 2000 to $8 billion today. It forecasts a $20 billion market by 2010.
Including the Hearst building, the council has certified 624 projects as compliant with its Leadership in Energy and Environmental Design, or LEED, criteria. More than 4,600 projects are under way that aim to meet LEED standards. They include facilities for Johnson & Johnson, (JNJ) Anheuser-Busch, (BUD) Boston Scientific (BSX) and Pfizer (PFE) ; retail locations for Lowe's (LOW) and Whole Foods Market (WFMI) ; and offices for Microsoft, (MSFT) Nike (NKE) and Wells Fargo & Co.. (WFC)
Real estate investment trust Liberty Property Trust (LRY) has several LEED-compliant buildings in development. These include the 1.2 million-square-foot Comcast Center in Philadelphia and a three-story office complex in Scottsdale, Ariz., for mutual fund manager Vanguard Group. Liberty's buildings use recycled materials, fixtures that trim water use, low-toxicity paints and sealants, and high ceilings that reduce artificial lighting needs.
No Green Giveaway
LEED certification can add 10% to 15% to the cost of construction, says Herb Hauser, a green technology consultant with Midtown Technologies in New York. However, the energy savings and falling cost of green materials are helping developers make a business case for planning energy-efficient and environmentally friendly buildings.
"As the demand for these products increases, manufacturers are incorporating green concepts in their next-generation products and technologies and are able to produce them at mainstream prices," said GE Capital analyst Serena Tse.
Also, new technology is allowing architects to design energy-saving devices into structures. For example, solar panel maker MSK, a unit of Suntech Power Holdings Co., (STP) develops semitransparent solar panels that function as windows. In Japan, the 32,000-square-foot Kanazawa bus terminal used 3,000 MSK panels in its ceiling. The 10% transparent panels generate up to 120 kilowatts, typical of commercial installations.
Real estate developer Midtown Equities plans to have an array of solar panels on the roof of a 1.2 million-square-foot retail complex in Bridgeport, Conn. The panels will shift to maintain direct contact with the sun, "squeezing out every drop of energy," said Herb Hauser, a consultant on the project.
The $1.5 billion effort, called Steel Point, covers 52 acres flanking Long Island Sound. In addition to retail, Steel Point will have 13 multistory office complexes, 3,500 residential units and 400 marina slips.
"Steel Point is an interesting site because it has sun, wind and water as resources for renewable power generation," Hauser said.
Midtown Equities expects renewable sources to meet 10% to 15% of Steel Point's energy needs. Hauser is working with the architect to design building facades with channels that direct wind toward the roof and into turbines. Current plans call for floating docks linked with armatures to generate electricity as the tide rises and falls. For cooling, water and air can be routed through pipes deep underwater. That reduces the number of compressors, pumps and conventional water-cooling units needed.
Developer Dan Pfeffer, president of Midtown Equities, says companies ranging from "big-box to lifestyle" retailers have sent letters of intent to lease space at Steel Point. Midtown Equities' 56-acre Midtown Miami development has leased space to Target, (TGT) Linens 'n Things, Circuit City Stores (CC) and clothiers Marshalls and Ross. (ROST)
"I expect Steel Point will be as well received as Midtown Miami," Pfeffer said.
Developers are not the only ones fostering commercial green building. Some investors are pushing companies to marry environmental stewardship with financial results.
Shareholder resolutions for improving energy efficiency and reducing greenhouse gases jumped from six in 2001 to 20 the following year, says Institutional Shareholder Services. The average vote in favor swelled from 9.4% to 18.8%. This year, investors have submitted 33 environmental proposals with 10.2% average support. Not all proposals are pro-green. Some challenge the scientific or financial merits of considering the environmental impact of corporate operations.
Corporate Checkups
The Nathan Cummings Foundation has filed 10 shareholder resolutions this year to push public companies in its stock portfolio to adopt and disclose energy efficiency and greenhouse gas reduction policies. The organization's nonbinding proposal for "energy-efficient green building" on the proxy of residential developer Standard Pacific (SPF) garnered a 39% in-favor vote among that firm's stockholders.
The foundation's shareholder activism prompted shopping center REIT Simon Property Group (SPG) to report energy-efficiency gains and associated reductions in greenhouse gas emissions. Simon Property's last annual report noted a 6.8% reduction in energy usage from 2003 levels.
"As a long-term shareholder, we want to make sure that companies are looking seriously at both the risks and opportunities of many issues, including energy efficiency and climate change," said Laura Shaffer, the foundation's manager of shareholder activities. "Energy efficiency in particular can impact operating costs and the long-term sustainability of earnings."
© Investor's Business Daily, Inc. 2006
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