As published in The San Diego Daily Transcript, October 30, 2007
By ADAM MOLNAR, Coldwell Banker Commercial Almar Real Estate Group

In California, it has been said that green is the new black. Politicians, lobbyists, celebrities and consumers focus on the environmental benefits of "going green" while buildings, households and businesses respond at lightening speed. To meet consumer expectations that the corporate world engage in environmentally conscientious behavior, today's business owners consider going green not only in response to environmental demands, but also as a symbol of socially responsible behavior.

The environmental benefits of going green -- pollution reduction, conservation of natural resources and protecting the earth for future generations -- are well known and almost entirely undisputed. But what are the costs for a commercial real estate owner to upgrade a building in accordance with green standards? And do these costs outweigh the benefits? Let's examine the costs and benefits of going green from a business perspective.

With energy ranking among the highest operating expenses in commercial property, building owners who go green through energy-efficient upgrades can positively affect their bottom line. The initial financial investment needed to transition to an energy-efficient building depends, of course, on the size and level of each particular building.

Upgrade options can be as simple (and cost conservative) as installing energy-efficient light bulbs, automated light sensors and solar shade screens. On the other hand, replacing heating and cooling systems and installing solar panels entail a greater time and financial commitment.

The benefit? Not only will the building's energy bills decrease, a savings that will pay for the upgrades over time, every dollar invested in upgrading a building can produce between $2 and $3 in increased value, according to Energy Star (a joint effort of the Environmental Protection Agency and the U.S. Department of Energy to protect the environment and save money through energy-efficient practices and products). Visit www.energystar.gov to learn more about systematic upgrades that allow business owners to maximize energy efficiencies.

Due to increasing consumer pressure, Congress and state legislatures have approved significant financial incentives for businesses to go green by upgrading to solar energy.

The California Solar Initiative, part of Gov. Arnold Schwarzenegger's Million Solar Roofs program, promises to pay performance-based incentives to businesses that engage in solar projects. Businesses that install solar projects will receive monthly incentive payments based on the amount of energy (in watts) their solar projects create, as well as a 30 percent federal tax credit and a five-year accelerated depreciation. Businesses can eliminate their energy bills by matching the size of a solar energy producing system to their usage. Currently, with these incentives in place, going solar makes financial sense. To learn more about the California Solar Initiative, as well as additional financial rebates such as cash back incentives, reduced installation costs and federal tax credits, visit www.gosolarcalifornia.ca.gov.

Aside from rebate incentives, an estimated 30 percent reduction in energy costs and substantial future energy savings, going green provides businesses with an opportunity to build brand equity and improve their reputation.

According to Phoebe Hamann, an expert in energy-efficient upgrades with Hamann Construction, the demand for energy awareness can make the difference between leasing a building (or landing a new customer) and not.

According to a qualitative research study by Research International, six out of 10 Americans would buy first from a company that backs a cause they support. A quarter of the advertisements in architectural magazines are focused on the green phenomenon, Hamann said. Why? Smart advertisers know that consumers of all types consider green buildings and businesses to be richer in assets. By accepting the financial burden of going green, commercial real estate owners can expect to see the value of their businesses increase because of the public demand for environmentally responsible practices.

Molnar is senior vice president with Coldwell Banker Commercial Almar Real Estate Group in San Diego.