The standard benchmark for certification of a building's efficiency and sustainability in design, construction, and operation is called LEED certification. LEED stands for Leadership in Energy and Environmental Design and is administered by the U.S. Green Building Council. LEED-certified buildings – also called “green buildings” – are popping up and gaining momentum around the country.

Charles Lockwood highlights the burgeoning market surrounding green buildings in a recent Barron's magazine opinion piece. Hint: they aren’t just for environmentalists anymore. Companies like Goldman Sachs, IBM, JPMorgan Chase, Toyota , and Harley-Davidson have moved into LEED-certified buildings. The U.S. Green Building Council estimates that 5% of all new commercial construction in the U.S. was LEED-certified in 2006, and about 10% will be certified by 2010.

As the market shift gathers even greater momentum in coming years, standard buildings will become the real-estate industry’s version of the buggy whip…To prevent their properties from becoming passé, today’s real-estate owners should undertake renovations now…[These sorts of renovations] lower annual operating costs, generate workforce benefits like greater productivity and better employee attractions and retention, and meet the growing demand for green buildings…The marketplace shift to green is gathering force. Massive obsolescence is looming. Profits are there for the taking. It’s time to act.

Five key areas are considered in LEED certification: sustainable site development, water savings, energy efficiency, materials selection, and indoor environmental quality. The higher number of points or “credits” a building earns in each of these categories, the higher the level of certification achieved: basic Certified, Silver, Gold, or Platinum.

Renovations of existing real estate space present significant profit potential and many investors are exploring real estate opportunities that allow for green renovations. The McGraw-Hill 2006 SmartMarket Report shows that green buildings get an average 3.5% higher occupancy rates than traditional buildings, 3% higher rent rates, and an average increase of 7.5% in building value. Costs to build or renovate a LEED-certified building vary by project, but achieving the basic LEED Certified level only increases construction costs a few percentage points. These costs can be recouped quickly with double-digit increases in water, gas, and electricity savings.

As Green as the Grass Outside (subscription required)
U.S Green Building Council
McGraw-Hill 2006 SmartMarket Report