In the last issue of NSIDE, we began our look at the mostly uncharted territory of commercial green building for business decision-makers. Often called smart or sustainable building, green building significantly reduces material waste and energy costs. So it makes sense that green building and the retrofitting of commercial and public structures is on the rise in Central Texas and across the country.
While this upward trend is due in part to increasing government mandates, business decision-makers are also recognizing that energy-efficient workplaces can benefit a company's top and bottom lines. High-profile projects like the $550 million retrofitting of the Empire State Building in New York are popping up everywhere, driven by calculable financial gains.
Let's turn our focus now to Central Texas and a recent commercial retrofit in downtown Austin. Looking for a way to leverage a tight budget into a smart business investment, three local business owners saw an opportunity to reposition a neglected 1960s-era structure located at 1300 Guadalupe into a modern, sustainable office building to appeal to the needs of today's urban workforce and meet the requirements of the Austin Energy Green Building process.
When Austin-based NoackLittle Architecture and Interiors evaluated the site, the existing structure was unlivable. "It consisted of a couple of two-story buildings glued together, with a partial basement, no elevator, substandard stairs and roof, " recalls Clay Little, AIA, founding partner of the firm and lead architect on this project. "From both design and investment perspectives, this building had the word 'opportunity' written all over it." The question of how to realize immediate value and plan for long-term gains for the owners and tenants guided the retrofit process.
Sustainable Objectives and ROI
The owners began the retrofit process with clear objectives:
• Provide a high-quality work environment
• Obtain LEED certification
• Reduce energy costs over traditional office spaces by at least 25 percent
• Improve operational efficiencies through smart maintenance systems
• Predict and measure savings month-over-month – for owners and tenants
In terms of design, NoackLittle retained most of the structure (building reuse is a big plus in green retrofits) and added an elevator, one-and-a-half floors and roof deck. The major sustainable elements were HVAC; lighting and water strategies; and greatly improved energy and maintenance costs throughout the building. In a traditional structure, these three elements alone represent the bulk of a building's operating costs. "So the decision to use sustainable systems was a given for us," Little says. "In fact, our original intention was to be sustainable and LEED1 certified for better positioning in the marketplace."
Budget realities required the owners to weigh the opportunity cost of different systems. For instance, what kind of month-to-month return would a mid-priced HVAC system give over a high-end system that costs 30 to 50 percent more upfront? The diagram to the right outlines which sustainable strategies translate into cost savings for the owners and tenants. From an investment standpoint, a sustainable retrofit (as opposed to a traditional remodel) of 1300 Guadalupe is providing a recession-proof benefit for the building owners. This reflects new trends in the marketplace: The predictable, measurable and guaranteed savings on monthly operating costs is a differentiator for tenants wanting competitive leasing alternatives and better-performing spaces.
"Today's commercial tenant is value-driven and appreciates the tangible benefits associated with lower operating expenses and improved work environments," says Ben Tolson, Aquila Commercial broker for 1300 Guadalupe. The workforce today is looking for environments with better air quality, better lighting and more predictable HVAC levels. Perhaps the most interesting trend is an increase in companies looking for eco-friendly offices. "By nature, Austinites have a strong social conscience," says Gary Morris, LEED AP at NoackLittle. "We find this relates to an eco-consciousness toward recycling waste and using renewable materials. This is translating into client expectations on projects."
Tradeoffs Between Features and Costs
One of the first tradeoffs considered on this project was the affordability of the LEED certification process, which can add 10 to 20 percent to a project's documentation costs alone. The LEED process also adds a layer of fees to construction costs, which can vary widely depending on the systems used. Often confused with sustainability itself, LEED is actually a rating system that has become the national standard guiding most of the commercial retrofits and green building we see today. While not a mandate, local governing bodies that approve commercial green building tend to use LEED as the measurement standard.
"A big advantage in taking the LEED route is in the added marketability of the project to more eco-conscious tenants," Little explains. At the same time, creating a truly sustainable structure does not actually require LEED certification. In the tradeoff process here, the cost of LEED became a non-essential budget variable. The owners reallocated the savings into actual sustainable systems.
Top Strategies Implemented
Next, the owners prioritized the design approach based upon rapid ROI. The elements below represent investments with a full payback realized in as little as a few months to no more than two years.
• High-efficiency lighting systems with occupancy sensors
• Sub-metering of tenant spaces, allowing for individual control
• Low-flow plumbing fixtures
• Reflective roof membrane
• Pre-treatment of outside air In addition, the owners invested in construction-waste recycling. While this provides no real financial payback, they wanted to contribute to eco-conservation.
Biggest Sacrifices Made
The toughest tradeoff decisions involved HVAC and insulation system options and the opportunity cost of sun shading. In each case, the payback for high-grade systems would be five years or more. Using a mid-grade HVAC system, however, would save 10 to 20 percent in monthly usage costs by improving flexibility and control for occupants, while adding only 5 percent in upfront costs over a standard system. In the case of sunshades, the owners chose to forgo this added expense in lieu of a high-grade insulated window system. The insulated window glazing alone reduced energy consumption by 10 percent.
After only six months of building occupancy, the design decisions and tradeoffs made are proving powerful in terms of short- and long-term ROI. Electrical consumption for some offices within the building is surpassing savings estimates, tracking at less than 40 percent of previous traditional office spaces. Today, the building is 85 percent occupied, with continuous leasing interest by good-credit-quality tenants. This comes at a time when the Austin commercial vacancy rate overall sits at 20.72 percent2. It appears that the project owners' recession-proof objective is structurally sound.
In the next issue of NSIDE, we will look at what a sustainable building can look like if budget is not a factor. For more information, contact Clay Little at NoackLittle Architecture and Interiors at 512-851-1900 or visit www.noacklittle.com.
1 LEED – Leadership in Energy and Environmental Design, a voluntary rating system that applies to any building type, at any point its lifecycle (www.usgbc.org)
2 Austin Business Journal, Oct. 6, 2010
