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The global green build movement is like a fast-moving locomotive, gathering speed at every clip, hoping to one day reach every corner of the earth. In the United States and arguably the world, green building and sustainable building practices are being led by California. Building green will not only improve the environment � it also may repair it. And it will add value to our lives, not only monetarily, but to our physical and mental health as well, because the moral fulfillment of building green will enrich our existence. GREEN BUILD OVERVIEW: USGBC AND LEED The United States Green Building Council was formed in 1993 to promote and advance environmentally responsible building practices throughout the country. The USGBC formed the Leadership in Energy and Environmental Design (LEED) Green Building Rating System in 1998 to establish standards for evaluating buildings in six general areas: 1) Sustainability; 2) Water Efficiency; 3) Energy Management; 4) Materials and Resources; 5) Indoor Environmental Air Quality; and 6) Innovative Design. The LEED rating system awards a building project points in each of the six categories. There are a total of 69 available points; the more points a project is awarded, the higher the rating, and the more “green” the project is considered to be. The ratings start at Certified (26 to 32 points), Silver (33 to 38 points), Gold (39 to 51 points) and Platinum (52 to 69 points). The higher the rating, the more benefits the project enjoys, such as tax incentives, expedited permit reviews, reduced waste costs and reduced operating costs. The most prominent type of projects that have historically sought LEED certification was new construction. However, the LEED rating system also applies to other types of projects, including existing buildings that undergo “green” renovations, commercial interiors designed for tenant improvement aspects of projects, and core and shell development projects that pertain to Additionally, there are currently a few pilot programs to expand the LEED rating system to residential home and neighborhood development. As described by the USGBC, the LEED for Neighborhood Development pilot program integrates the principles of smart growth, new urbanism and green building into the first national rating system for neighborhood design. COMMERCIAL BUILDINGS IN BIGGEST NEED OF LEED According to the USGBC’s Web site (www.usgbc.org), office buildings are responsible for 70 percent of all electricity consumption in the U.S. They also are responsible for 65 percent of all waste output, 30 percent of all greenhouse gas emissions and 12 percent of all U.S. water use. Fortunately, commercial developers are increasingly utilizing green build materials and designs to reduce these figures. The USGBC provides estimates for the number of square feet built over the last five years under LEED programs. In 2002, more than 80 million square feet of LEED projects were built. There was huge jump from 2004 (more than 180 million square feet) to 2005, when there were 500 million square feet of LEED projects built in the U.S. In 2006, 642 million square feet of LEED projects were built. The types of buildings achieving LEED certification vary. As of September 2006, the overwhelming majority of LEED certification for new construction was in multi-use buildings, with 1,074 multi-use projects under the program. With 391 LEED projects, commercial office buildings represent the second-most common building type. Next are higher education schools (199), K-12 schools (166) and multi-unit residential buildings (148). CALIFORNIA OUT FRONT California is leading the country with its progressive approach to green building. According to the USGBC, as of July 2006 there were nearly 3,000 LEED projects in the U.S., with 480 of those projects in California. The next highest states were Washington (186), New York (174) and Massachusetts (173).
Under the California Solar Initiative, California is also planning to create 3,000 megawatts of new solar-produced electricity by 2017, with a goal to move the state toward a cleaner energy future, as well as assist in lowering the cost of solar systems for consumers.

Californians are in a unique position to shape policy on this ever-important landscape. With a receptive state government in Sacramento, the green building lobby has the opportunity to effect positive change. The Northern California Chapter of the U.S. Green Building Council (www.usgbc-ncc.org) is one resolute group which has advocated for green building practices in the past. For 2007, the Chapter’s Advocacy Committee is taking a more proactive approach than previously. It is currently developing plans for its members to become more involved in such activities as monitoring legislative developments at the state and local level, promoting green building friendly policies, and helping educate the private sector about green building. NEW LAWS ARE ENGENDERING THE GREEN BUILD MOVEMENT At the federal level, the United States has been busy formulating legislation to promote building practices that reduce greenhouse gases and improve energy efficiency. The U.S. Department of Energy offers several tax credits and tax deductions for the use of energy-efficient appliances, systems and buildings pursuant to the passage of the Energy Policy Act on Aug. 8, 2005. For instance, the Commercial Building Tax Deduction establishes a tax deduction to offset the cost of energy-efficient property installed in commercial buildings. The deduction may be as much as $1.80 per square foot in buildings that cut their energy use by half, with allowances for partial deductions for improvements in interior lighting, HVAC and hot-water systems. But buildings can still earn a deduction of 60 cents per square foot if they cut their energy use by one-sixth. Also notable is the DOE’s program of $2 billion in loan guarantees to help spur investment in projects that employ new energy technologies. With these guarantees, the DOE will share some of the financial risks of projects that employ new or improved energy technologies that avoid, reduce or remove air pollutants and greenhouse gases. The federal government also offers tax credits to homeowners. The DOE states that consumers who purchase and install specific products, such as energy-efficient windows, insulation, doors, roofs and heating and cooling equipment, in the home can receive a tax credit of up to $500, effective as of January 2006. The Energy Policy Act also provides a credit up to 30 percent of qualifying expenditures for purchases of qualified photovoltaic and solar water heating equipment (for purposes other than heating swimming pools and hot tubs). This credit shall not exceed $2,000. Throughout the country, state and local governments are enacting new laws every year to further engender the green build movement. In California, Gov. Arnold Schwarzenegger signed Executive Order #S-20-04 on Dec. 14, 2004, requiring the design, construction and operation of all new and renovated state-owned facilities to be LEED Silver or higher. Under the California Solar Initiative, California is also planning to create 3,000 megawatts of new solar-produced electricity by 2017, with a goal to move the state toward a cleaner energy future, as well as assist in lowering the cost of solar systems for consumers. The initiative provides a new rebate structure. CSI offers cash incentives of up to $2.50 per watt of solar-produced energy. When combined with federal tax incentives, the CSI incentives can cover up to 50 percent of the total cost of a solar system. LOCAL GOVERNMENT INCENTIVES Most public entities generally enter the green movement by requiring new governmental buildings to meet LEED standards. Various local governments in California also have a variety of new laws that provide incentives to private developers to build green on private commercial projects. For instance, Marin County’s Building Energy Efficient Structures Today (BEST) program waives the Title 24 energy fees, speeds permit processing and waives some design review for solar aspects of a project. Berkeley’s Green Building Initiative aims to remove barriers for green building projects and endeavors to assist developers and designers in achieving sustainable building goals. Additionally, the East Bay Municipal Utility District offers rebates for the installation of equipment that improves water efficiency. In San Francisco, the Department of Building Inspection, working with the Department of Environment and the Department of Planning, will finalize a policy that gives priority permit review to all new and renovated buildings that achieve LEED Gold certification. THE FUTURE OF REAL ESTATE Imagine entire communities of solar-powered homes with tankless water heaters and recycled building materials, where water and electric bills are nominal, and everyone can live in a community designed to assist the environment and not harm it. This vision will soon be a reality. While it once may have been viewed as eccentric or even quirky, green buildings are here to stay and will dominate design concepts in the future. New office buildings might one day be completely powered by solar energy, built with recycled products, and use only a fraction of the water used in existing buildings. All new buildings soon may have automatic light dimmers that are triggered when natural sunlight shines through windows. Buildings will be less expensive to operate, as energy efficiency will correlate with fiscal rewards. Along with lower operating costs, surveys report that tenant occupancies are more consistent and last longer in green buildings, and peopleworking in environmental-friendly buildings tend to be more productive and lead happier, healthier lives. According to an Feb. 14 article on the USGBC’s Web site entitled “Greener buildings on the rise across U.S.,” by Nick Carey and Ilaina Jonas, consumers will further drive the green build movement. For example, a prospective tenant in a $450 million office building under construction in downtown Chicago required a Gold LEED certification in their lease. The article also quoted the global real estate director for the accounting firm of Ernst & Young as predicting that failure of developments to go green could lower the value of conventional buildings. It stands to reason then that consumer demands will force more green-friendly attributes to be constructed. If a consumer has the option to choose between a green building and non-green building, both of similar size and location, more likely the green building will be chosen, even if it is higher in price. More than likely, consumers will be willing to pay more for a green building or home, not only for the lower operating costs, but for the healthier lifestyle and peace of mind knowing they are part of the solution and not the problem. Additionally, reports state that green and non-green construction prices are coming to equilibrium. The added cost of building green will no longer be an excuse for developers not to build green. THE ADDED GREEN VALUE For existing homeowners, adding eco-friendly elements to a home will increase its value, and various rebates will defray the costs on purchasing and installing items such as solar panels, energy-efficient window systems and water saving equipment. The added benefit is that once these items are installed it will cost less for electricity, gas and water, adding value to the residence and making it more sustainable and desirable in comparison to homes without such features. Overall, it is hard to dispute the value of the green build movement in relation to the environment, financial considerations and harmonious co-existence with others and the planet. California is already leading the green movement. If this movement maintains its momentum, California’s commercial and residential real estate industries will set new standards for quality in real property development. These new standards will promote higher values for properties with green qualities, will drive new projects to employ more green attributes and may spur owners of existing properties to renovate their buildings using green attributes. HISTORY IN THE MAKING The next 10 years may see more advances than any 10-year period in real estate development. California will continue to set the standard for others to emulate. The dawn is breaking on a new era in California real estate, and it will be exciting to watch it rise before our eyes. Todd J. Wenzel is a real estate litigation and transactions partner in the San Francisco office of Ropers, Majeski, Kohn & Bentley. He can be reached at [email protected].

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