Did the Greenest Type of Development Just Become an Endangered Species?

You’ve sourced locally, used recycled materials extensively and incorporated the most advanced building operating systems available with an eye on earning a Platinum certification from US Green Building Council and premium pricing from tenants and investors for your latest development project.

You may think your new building is as green as economically and physically possible but it could have been much greener.

Last month, Preservation Green Lab, a Seattle-based think tank, released a study that concluded that “building reuse almost always offers environmental savings over demolition and new construction.”

The groundbreaking study, “The Greenest Building: Quantifying the Environmental Value of Building Reuse,”used life cycle analysis to compare the relative environmental impacts of building reuse and renovation versus new construction over the course of a 75-year life span. Green Lab found that “it can take between 10 and 80 years for a new, energy-efficient building to overcome, through more efficient operations, the negative climate change impacts that were created during the construction process.”

In California, however, this kind of development just took a more than $1 billion hit. That’s the amount of money that will no longer flow in the state’s redevelopment agencies effective Feb. 1 in the aftermath of the passage of ABX1 26 and the successful legal defense of the legislation eliminating the agencies. The law will help plug the state’s multi-billion-dollar budget hole, but it also leaves a “gaping hole in the development community,” according to an analysis by Goodwin Procter, “Real Estate Development and the Demise of California’s RDA.”

“All told, the loss of redevelopment agencies put an immediate halt to de­velopment looking for capital,” according to the law firm’s analysis.

The issue of sustainability has been absent in the scramble to adjust to the new reality of redevelopment in the Golden State. But in many respects it is hard to get much greener. Even if existing structures in a redevelopment area can’t be reused and the site is scraped, these projects are inherently green. Brownfields are cleaned up and contamination remediated. Urban redevelopment sites often are more accessible to mass transit nodes and can better connect high population densities to job and services. Redevelopment projects serve as catalysts for a greener future of more compact, dense cities by helping private interests overcome the financial, technical and market challenges inherent in revitalizing underutilized areas.

Since California is a trendsetter, I asked Patrick Perry, a partner at the Allen Matkins Leck Gamble Mallory & Natsis LLPlaw firm and a redevelopment expert, whether he thought this would spread outside of the state.

Perry said that when the Supreme Court ruled in 2005 that public agencies have the right to take private property for redevelopment in Kelo v. City of New London, it eliminated the constitutional need for redevelopment agencies.  But it did not eliminate the practical need for community redevelopment agencies.

“The question has always been whether the exercise of eminent domain for the purpose of transferring property to a private developer is constitutional or whether it represents a taking of private property for private use.  California got around that issue by establishing a statutory scheme that provided for the elimination of blight, which was determined to be a public purpose,” he said. ” The question is where the cities are going to come up with the money if they want to pursue redevelopment.”

That’s a big question when most public agencies face significant budget shortfalls. It also runs contrary to the trends in green real estate as the square footage of projects certified with LEED for Existing Buildings: Operations and Maintenance now exceeds that of projects certified by LEED for New Construction by 15 million square feet, according to the USGBC. Furthermore, a study by McGraw-HillConstruction found that commercial real estate renovation work is expected to more than triple by 2015.

No, efforts to revitalize the built environment will not disappear but the obstacles to redevelopment in an already challenged construction marketplace just became that much harder to navigate.

So when you are admiring that new LEED plaque proudly displayed in your shiny new building, savor your accomplishment. You and your investors have earned it. But you also should know how much greener your project could have been if you had been able to make better use of what was already built.

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Michael Gottlieb
The Green Report
Van Nuys, CA
Michael Gottlieb is Managing Partner for Advanced Green Solutions, which provides low-cost, high-quality services to help commercial property owners, managers and tenants advance their sustainability objectives and add value to their real estate assets. AGS provides MilliCare Textile and Carpet Care services in Los Angeles, Orange, Riverside, San Bernardino and Ventura counties. Prior to founding AGS, Michael was an award-winning reporter, editor and columnist for Gannett Corp., Times Mirror, Tribute Corp. and the Daily Journal Corp. Most recently Michael was Editor of the California Real Estate Journal, Executive Editor of 8 small business publications located throughout California and an Associate Editor for the Los Angeles Daily Journal, California's leading daily legal newspaper where he oversaw real estate and biotechnology coverage among other areas. Michael also is a noted speaker and writer on real estate matters and is active in the California commercial real estate community.