ON THE - Crain's New York Business
CRAIN’S MARKET ON THE INSIDE Green Commercial Real Estate is Now In Vogue S2 Blame It On My Youth S4 A Special Advertising Supplement to Crain’s New York Business A Special Advertising Supplement to Crain’s New York Business GREEN COMMERCIAL REAL ESTATE IS NOW IN VOGUE Environmentally-friendly construction and Interiors can save money — and the planet. BY CHRISTOPHER HOSFORD There was a time when the green movement and the commercial office space industry were at odds. Green meant doing good for the planet, not embracing economic common sense — and so the movement didn’t catch on with budget-minded building owners, managers and tenants. But those days are long gone. Office buildings and interior spaces today that are certified as the most environmentally-friendly combine Earth stewardship with a powerful return on investment, and define class-A office space. Most prominent in this movement has been the U.S. Green Building Council’s LEED certification (standing for Leadership in Energy and Environmental Design), which is awarded to new and renovated office buildings, interiors and operations, as well as neighborhoods and homes. “LEED today is more associated with lowering the cost of building operations than just about anything else,” said Michael Perna, vice president, marketing and business development with ConEdison Solutions. “It’s about energy savings, of course, but also about waste reduction and worker comfort. It is now part of people’s awareness, and has become part of the overall operating mentality of most any building.” THREE LEVELS OF CERTIFICATION Within the LEED program, an office building must meet prerequisites and earn points to achieve different levels of certification: silver, gold or platinum. The ratings depend on how thoroughly a building has adopted LEED best practices in respect to energy, lighting, air quality, water usage and other categories. S2 Notable LEED platinum-certified buildings in New York include One Bryant Park (Bank of America Tower) at 592 5th Ave., the Hearst Tower at 300 W. 57th St., and the renovation of the JPMorgan Chase headquarters at 270 Park Ave. Among other prominent LEED-certified buildings in New York is the Empire State Building, whose recent $550 million renovation earned it LEED gold-level status. One Bryant Park, opened in 2009, was the first skyscraper actually designed on the architect’s table to adhere to the LEED platinum standard. The 2.1 million-square-foot, 55-story building features insulated energy-efficient glazing, individual worker controls for underfloor conditioned air, and water conservation features that save eight million gallons of water each year. Perhaps most eye-opening is the building’s cooling system, which produces ice during the off-peak — and thus cheapest — energy hours. The system then produces 750 tons of air conditioning during the daytime peak hours, when the load is most expensive. “The one reason LEED is increasingly popular is its impact on the quality of the indoor environment, [or] how people feel in the workplace,” said Bob Fox, partner with Manhattan-based COOKFOX architects, which designed One Bryant Park. In addition to individually-controlled air flow, Mr. Fox cited employees’ “access to nature” via open sightlines to windows as a major LEED-certified perk. THE DEFINITION OF QUALITY LEED certification has become a de facto definition of class-A office space, said Sukanya Paciorek, senior vice president, corporate sustainability at Vornado Realty. “There’s a lot of interest in New York — especially among large tenants and new tenants moving here — who view a LEED certification as a mark of high quality,” Ms. Paciorek said. Vornado owns or manages a U.S.-leading 31 million square feet of LEED-certified office space nationwide, which includes about 12 million square feet in New York City, Ms. Paciorek said. “When new tenants would come to New York, they used to ask only about square footage, location and price,” she said. “But over time, the sustainability metric has become increasingly on their short list, and for some it is a requirement. And for building owners, to not do LEED in a new construction is almost unheard of today.” Mr. Fox acknowledged that working to achieve a LEED certification for an office building can add as much as 2% to 3% to the cost of a building. However, the energy savings payback is only about five years, and in some cases can cut a tenant’s energy bills in half. More impressive, however, is enhanced worker productivity. Mr. Fox estimated that such a work environment within a New York office building could yield a 1% productivity boost a year, or about one less sick day annually per employee. Depending on how many workers are impacted, the annual savings could be in the millions, he said. AMELIORATING THE COST Scot Horst, chief product officer with the U.S. Green Building Council, credits the increasingly stringent LEED process — currently at version 4, with the pending version 5 to bring certification requirements higher — with changing how we think about buildings. “The old process had an architect design a building’s look, and then charge the engineer with making it work,” Horst said. “As a result, the building was almost always over-designed.” “But in new design, you work more closely as a team to properly size systems,” he said. “With efficient illumination, for example, you don’t have to spend so much to cool the heat that lighting puts out. 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Work spaces were often self-contained, teamwork was confined to conference rooms, and to meet with someone meant making an appointment. Enter the millennial generation. This youngest cohort of the professional workforce — loosely defined as adults under 35, and also called Generation Y — is turning the concept of a workplace on its head. “Right now, about 60% of our firm consists of millennials, and we expect that to reach 80% by 2016,” said Anne Donovan, transformation leader for human capital at PricewaterhouseCoopers (PwC). “Our average employee age globally is 29. This is a demographic we need to pay attention to.” To understand the impact of younger workers on its operations and office space, PwC, the University of Southern California, and the London Business School recently conducted a survey gathering a wide amount of data from PwC employees and partners. A MAJOR IMPACT The study, “PwC’s Next Gen: A Global Generational Study,” found that the following elements are having a major impact: t Never having experienced a waking day without computers, millennials insist on the integration of technology into the workplace. They expect to have access to the best tools for collaboration and execution. t Many younger workers feel a flexible work culture is essential. To provide better work-life balance, com- S4 panies need to provide flexibility in office locations and schedules. t t Similarly, millennials do not tie productivity solely to hours spent in the office. An increasingly mobile workforce means that the location and size of headquarters and other offices need to be reconsidered. While less square footage may be required overall, areas should be set aside to maximize millennial teamwork. Ben Rosen, professor of management at the Kenan-Flagler Business School at the University of North Carolina at Chapel Hill, said his own research indicates that a shift toward mobile, off-site work patterns is having an impact on office interiors. “I can see conference rooms being converted into virtual workspace areas with video conferencing setups,” Dr. Rosen said. He acknowledged, however, that these new work preferences among millennials may not always sit well with their bosses, who can be Gen Xers, born from the early 1960s through the early 1990s, and Baby Boomers, born in the years immediately following World War II. collaboration tools to drive decision making, and a handful of cubicles would be provided for those millennials who are more like their Gen X parents. “The thing that companies are missing is that millennials don’t require complete freedom, just a little bit of structure and then choices,” she said. These trends are having an impact on PwC, whose offices today are becoming “much less about closed doors and four walls, and more about open, collaborative space,” Ms. Donavan said. This is including open areas for employees to work together over coffee, or take breaks in game and exercise rooms. PwC’s U.S. offices have implemented a “hoteling” system of workspace, with unassigned workspaces accommodating employees who pop in briefly. At PwC’s offices in New York, at 300 Madison Ave., Ms. Donovan said the company has added yoga and Zumba dance fitness classes — “things you’d never see 10 years ago” — along with the square footage to house such activities. As for work-life balance, some PwC offices are adding treadmill desks so employees can work out while working. “Boomers will say, yes, you can do a lot of work offsite, but you’re missing the opportunity to pick up passive knowledge, hearing and learning things you can’t understand if you’re not there,” he said. “This can create friction in the workplace.” ADJUSTING TO REALITY In some cases, millennials will have to adjust to this, said Crystal Kadakia, founder and principal consultant with Career Indulgence, based in Atlanta. Career Indulgence is a specialist in engaging and retaining millennial employees. “I have an engineering background, and engineers do need to show up in order to do their job,” Ms. Kadakia said. “Millennials are fine with that if they have other perks, such as perhaps a shift schedule encompassing three days on, followed by two days off.” As for the office space itself, Ms. Kadakia suggested the “ideal” of a reduced office footprint combined with a split on-site schedule for half the workforce at one time, and the rest at another. Meeting rooms would be filled with Crain’s on the Market is published by Crain’s Custom Studio. For more information, please contact Trish Henry at (212) 210-0711 or [email protected]. ADVANCE REGISTRATION RATE ENDS DECEMBER 2 December 8 – 9, 2014 Jacob K. Javits Convention Center New York City #NYConf Join more than 8,000 attendees in over 160,000 square feet of exhibit space at this mustattend deal making event. This year’s speaker lineup is bigger and better than ever. KEYNOTE SPEAKER Donald J. Trump Chairman & President The Trump Organization MEET THE INDUSTRY TITANS Moderator: Courtney Reagan, CNBC Retail Reporter l Panelists: Kenneth F. Bernstein, President & CEO, Acadia Realty Trust Daniel B. Hurwitz, CEO, DDR Corp. l David E. Simon, Chairman & CEO, Simon l Donald C. Wood, President & CEO, Federal Realty Investment Trust WHERE THE CAPITAL IS FLOWING Conducted by: Moderator: Etienne Katz, Vice President Global Sales, The Wall Street Journal Panelists: Christopher J. Curry, Senior Executive Vice President, The Howard Hughes Corporation l Marc S. Shapiro, Partner, Mayer Brown LLP l Jill D. Block, Partner, Mayer Brown LLP l Mark Decker, Sr., Vice Chair, BMO Capital Markets l Robert M. White, Jr., CRE, Founder & President, Real Capital Analytics, Inc. REGISTER AT WWW.ICSC.ORG/ 2014EDM
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