Property Management Trends in 2012: Part 5 – The ROI of Going Green

Property Management Insider is looking back at the multifamily industry trends of 2012 and how they could affect the industry in 2013.

Going green no longer suggests that a property is doing just the environmentally conscious thing by merely planting a tree, bush or shrub. It has taken on a new meaning in the multifamily industry, by evidence of environmentally correct moves that property management firms, developers, and owners made in 2012.

Earning Green by Going Green

Conserving energy and bettering the environment are the window dressings of sustainability, but the back-office story for apartments has become the return on investment to justify capital expenditures for making this old globe a little less stuffy.

Going green costs money, no question. Used to be that owners and investors cringed at how much green it was going to take to be green, with no apparent return. That’s changing.

Residents say the environment is an important issue and are demanding greener living. They’re even willing to pay for it.

Evan Matzen, sustainability manager for HD Supplies Facilities Maintenance and a contributor for the blog Green Blogic, said just that this year when discussing the results of his company’s Green Renter Survey. So did investors and a management firm for an urban Boston apartment community who are now getting higher rents for going green.

Data by the American Council for an Energy-Efficient Economy suggest that energy efficiency improvements of 30 percent for natural gas and 15 percent for electricity in all multifamily buildings would yield an annual savings of $3.37 billion. Serious money.

Property owners are responding, and ROI no longer is a dirty word when going green.

Redefining What it Means to Go Green

The definition of green in apartments has become more than just plugging in a few LED or compact fluorescent light bulbs. Charging stations for electric cars, higher performing HVAC systems, green roofs – even smoke-free living – have weaved their way into the green genre in the last 12 months.

Cigarette smoke browns the environment and presents a health risk to non-smokers. By turning to smoke-free apartments, property owners are improving air quality. The same can be said for apartments that promote the use of electric cars, which help reduce emissions.

The list of options for going green is growing.

Residents Will Pay More Green to Go Green

The basic green apartment looks something like this: LED and Compact Fluorescent Lighting, a programmable thermostat, cracks and gaps filled, weather stripping on exterior doors, high-performance/commercial-grade HVAC filters and complex-wide recycling program. The upgrade cost would be $120-$500 per unit.

Matzen said residents are willing to pay 15 percent more in rent to feel better about the environment and live in a green apartment. Lower utility costs are certainly a benefit.

Also, once- stark white apartment roofs are turning green, and not just because Maintenance is opening buckets of paint. Vegetation on green roofs reduces the amount of energy needed to moderate temperatures of the building and decreases heat islands typical in urban areas. A Boston property recently installed a Sedum roof and now collects a premium on a small cluster of units that have a bird’s eye view. Asset managers say the property value has increased by $2.4 million.

Because the heat island effect is reduced, neighboring units are experiencing a reduction in electricity consumption and residents are enjoying lower electric bills, says Nick Recupero of Samuels & Associates, a development and management firm that manages the property.

The Future Looks Green for Multifamily

A number of green initiatives continue in the industry, and as property owners learn to earn more back on their investment dollar, progress will be interesting – and probably environmentally friendly – to watch.

How green can it get? What can your property do to help the environment and also give residents what they are demanding? The apartment industry will certainly ponder those questions and seek answers in 2013.

Looks like the multifamily industry will be looking at the world through green-colored glasses for years to come.

An image of green colored eye glasses


Contributing Editor, Property Management Insider
President, Ballpark Impressions, LLC

author photo two

Tim Blackwell is a long-time publishing and printing executive in the Dallas/Fort Worth area who writes about the multifamily housing and transportation industries. He has contributed numerous articles to Property Management Insider, and worked as a newspaper reporter in the D/FW area. Blackwell is president of Ballpark Impressions, and publishes the Cowcatcher Magazine. He is a member of the Fort Worth Chapter/Society of Professional Journalists.

  • Thanks for this. It seems to me that charging a green premium is backwards. Make buildings green without the premium and watch the tenants pour in and property values soar.

    Green pays, as your post on Castle Square shows. Using the costs and savings in the article, a back-of-the-envelop sum says that the Castle Square deep retrofit will recover its cost in 3 years. And there’s more evidence every day that green buildings command higher market valuations.

    If on-bill financing were available it would make deep retrofits a no-brainer for owners. Improve the value and profitability of properties at zero net cost.

    Hope you write soon about on-bill retrofit financing! It’s starting to get traction in several states and provinces, yet many still are unaware.

  • Tim Blackwell

    Thanks for your comment, Geoff. And appreciate your mention of on-bill retrofit financing. Sounds like something that deserves a look.

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