The 22-story apartment tower in Portland, Oregon, has a roof garden that funnels rainwater to its public toilets. Because the water isn’t treated, state law requires “Do Not Drink” warning signs.
“Just in case your dog can read,” said Dennis Wilde, chief sustainability officer for Gerding Edlen, the Portland-based builder of the development called Indigo@Twelve West.
Green features, such as reusing rainwater and generating about 1 percent of the tower’s electricity with four rooftop windmills, help the Indigo’s bottom line by saving energy and attracting tenants who pay a premium to live an eco-friendly urban lifestyle, said Mark Edlen, CEO of the company that has developed US$5 billion of residential and commercial real estate since 1996.
Photo: Reuters
As Gerding Edlen takes its Portland experiments to other cities, some of the largest US multi-unit building developers are stepping up green development, deciding that the extra construction costs will save money on operations and give them a competitive edge. AvalonBay Communities Inc, Equity Residential, UDR Inc and Related Cos are among companies building projects with energy-saving insulation, solar-heated water and ventilation to improve indoor air quality as a growing number of people opt to rent rather than own homes.
Last year, the developers of 23,000 US multi-unit buildings applied for Leadership in Energy and Environmental Design (LEED) certification, according to the US Green Building Council, which developed the standards. That’s about 14 percent of the new apartments and condos that began construction last year and double the 11,825 multi-unit buildings certified between 2008 and last year.
LEED certification awards points for energy and water efficiency, recycled construction materials, transportation access, preservation of outdoor space and indoor light and air quality.
“This is apartments’ moment and it’s a moment that’s not likely to go away quickly,” Susan Wachter, professor of real estate and finance at the University of Pennsylvania’s Wharton School, said in a telephone interview. “The green label is attractive to investors. But it’s also attractive to high-end apartment renters who are increasingly looking to quality of life and to green investments as a statement.”
The construction of multi-unit buildings climbed to an annual pace of 233,000 last month, more than double the 112,000 rate a year earlier, the US Commerce Department reported on Tuesday.
Construction of buildings with at least five dwellings is expected to increase by 61 percent to 270,000 units this year, according to a March 6 report by Paul Diggle and Paul Dales, analysts at Capital Economics Ltd in London. Rents will rise 3 percent both this year and next, while single-family home prices are expected to be little changed for the two-year period, the analysts said.
In Manhattan — the US market with the highest rents, according to Reis Inc — LEED-certified buildings can command about 5 percent more on monthly leases in good times and fill vacancies with fewer concessions to tenants in bad times, said Martin Dettling, senior vice president for design and construction of Albanese Organization Inc, which developed three LEED-certified towers with 798 condos and apartments in the Battery Park City neighborhood.
“I think we’re getting to that stage where it’s identified as something you need to have to be in competition,” Dettling said in a telephone interview from the company’s Garden City, New York, offices. “If you don’t, you’re a thing of the past.”
For investors such as pension funds and university endowments, LEED certification increases a property’s potential resale value, said Nate Kredich, the Green Building Council’s vice president of residential market development.
“They’re thinking about an exit strategy,” he said in a telephone interview from his office in Del Mar, California. “They see a premium.”
Research demonstrating the financial benefits of LEED construction is limited because the program is recent and there’s been little information on whether completed buildings met their design goals, said Matthew Kwatinetz, managing partner at QBL Partners, a New York-based consulting firm.
Gerding Edlen closed its Green Cities Fund I to investors on Dec. 31 after raising US$183 million. It’s preparing to start a second fund as soon as next month.
So far, the fund has financed seven mixed-use projects with 760 apartment units worth about US$350 million in Seattle, San Francisco, Los Angeles and Boston, Bordonaro said.
The company plans to expand to New York and Washington, cities with low vacancy rates where landlords can charge higher rents to tenants who want to live near their jobs, Edlen said.
LEED Platinum certification, the highest level, adds about 2 percent to construction costs, while reducing operating expenses by about 20 percent when lower energy or water use are factored in, he said.
At the Indigo, a LEED Platinum building, rents average US$2.40 to US$2.45 a month per square foot, about 10 percent more than nearby apartments, Edlen said. It opened in October 2009, when the US unemployment rate rose to 10 percent. Enough of its 273 units were leased within 10 months to cover operating and other costs, he said.
Gerding Edlen markets to renters who like to shop at Whole Foods — there’s one across the street from the Indigo — and want to commute by bicycle or light-rail train, he said. Across the Willamette River, tenants in a 50-unit Southeast Portland building, also developed by Gerding Edlen, leased only 27 of the garage’s 30 parking spaces. The building’s bicycle locker has run out of space and its biggest maintenance problem is wet bicycle tracks on the hallway carpet, Edlen said.
The efforts to go green, such as reusing untreated so-called gray water in toilets, may veer toward the earnestness lampooned in Portlandia, the Independent Film Channel television show about the Pacific Northwest city’s artsy, eco-conscious hipsters, Portland Mayor Sam Adams said.
“We in Portland know not to drink out of the toilet,” Adams, who has acted in the cable television series as an assistant mayor, said in an interview at City Hall. “And why yes, our dogs can read.”
At the Indigo, amenities such as a roof garden, movie screening room and in-house gym with a personal trainer attracted Joe Vaughn, who lives with his cockapoo, Penny, in a 14th-floor, US$1,525-a-month studio apartment.
Vaughn, 40, runs a business consulting company from his apartment. He drives his Jeep Wrangler about 6,400km a year, moving it so rarely that the battery once died from lack of use.
Before moving to the apartment in June last year, Vaughn owned a 300m2 suburban Portland house with a US$4,000 monthly mortgage.
“I have 700 square feet [65m2) now, but I have the amenities of a mansion,” he said. “I have fewer things, but I have nicer things.”
Penny had no comment about the water in the toilet.
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