A Green Lining in a Down Market Converting to an Energy-Efficient Building

 The realities of a depressed real estate market have finally settled upon New  York City. We’ve seen a significant drop in sale prices over just the past few months. This  has been coupled with a rapid increase in inventory levels as units stay on the  market longer, further exacerbating this downward spiral in price. While there  are many reasons for the slump in the housing market that can and have filled  many other articles and columns, the real question is what can a building do to  attract new buyers and to keep existing owners in their units in the future.  Green design and energy efficiency improvements provide an opportunity for  buildings to address demand for and price of their units on the market.  

 Over the last decade as demand and prices increased in New York City, luxury  became a more important tool to market a building and attract buyers. Co-ops  were being renovated with expensive appliances and materials with lavish  finishes to provide added value to existing units. The trend in new condo  construction was to add on the amenities. Gyms, concierge and pools were  necessary to set their buildings apart from others on the market and protect  premium pricing. These additions were par for the course with buyers willing to  pay for the sense of luxury bestowed on the property.  

 With fears of a deepening recession, the housing market is changing and many of  these luxuries have become untenable from both a financial and lifestyle  standpoint. There is a reevaluation of what potential buyers are willing to pay  for. Is the increased cost of a gym in the building still an attraction or is  it going to turn off a buyer that can just join the gym down the block? As a  rising expense, common charges are justifiably being scrutinized more by  potential owners and factoring into their decision process. Even those who can  currently afford the costs are worried about their financial future or don’t want to be seen as living a life of excess in these economic times.  

 Measuring Value

 The concept of providing measurable value is increasingly important for  buildings. In searching for value buyers are going to pay more attention to a  building’s financials and look for low carrying charges. Making energy-efficiency  improvements shows buyers that building administrators are paying attention to  finances and managing their building in a responsible way. This forward  thinking helps prove to potential buyers that the building is committed to good  management and controlling costs now and in the future. Reduced utility costs  also provide more incentives for current owners to stay in their units. While  green building may be thought of as a luxury that also might not survive a down  market, it is actually one of the best value-added improvements that a building  can make. These improvements reduce as opposed to raise common charges and  increase value for owners. Energy-efficiency measures can normally cut usage by  upwards of 20 percent, having real impact on a building’s charges. Energy efficiency provides an increased value to buildings that are  more in line with current interest and demands of buyers.  

 In a saturated market it is still important for a building to attempt to  differentiate itself from the other units on the market. This can still be  accomplished through the luxury items that previously were tacked onto  buildings, but we’ve seen that the perceived financial benefits of these amenities are  questionable. What isn’t questionable any more is that green building is definitely growing in  popularity. Awareness has grown to a level that potential buyers now understand  the real benefits that green building can provide to the environment, health  and value. Green building isn’t necessarily replacing historic factors in driving demand, but is an important  addition.  

 According to Emma Hamilton, who is a certified EcoBroker with The Corcoran  Group, “The three most important factors still remain: aesthetics, location and price.  If all of those are in place—then most people would choose the green option over the non-green option.” Green building can grow demand and is one of the qualities buyers are looking  for when considering where they want to live. It provides a clear advantage in  comfort, value and marketability of buildings. While the three factors  mentioned above are still driving purchasing decisions they are not mutually  exclusive from green buildings. While location is something a building can’t change, aesthetics and price (value) are directly impacted by energy  efficiency and green building practice.  

 The aesthetics and comfort level provided by green building absolutely attracts  buyers. Green buildings are less drafty, make better use of natural lighting,  have better indoor air quality and are more comfortably heated and cooled. The  aesthetics of the materials are also unique and of a quality that people want.  While there are still those who look for the new kitchen and park views, there  are new and equally effective ways to market a building as better than the  competition. This comes down to the positive associations people have with  green buildings. Providing amenities like bike racks and filtered air speaks to  buyers in the same way that pools might have in the past. Values are shifting  and buildings should adapt to take the fullest advantage of the market.  

 While upgrading a building with energy-efficient measures provides real  benefits, it does however require a level of investment and commitment. Energy  efficiency improvements, though, are not any different than any other  renovation. They are all done with the intention of increasing value and  require an investment. Unlike other upgrades and renovations, there is free  money available for green building improvements. Energy suppliers, state  authorities and the government all provide rebates and tax credits to help  finance various efficiency improvements. Some good places to start are  www.dsireusa.org, which lists renewable and efficiency incentives by state, and  the New York State Energy Research & Development Authority’s (NYSERDA) website at www.getenergysmart.com. Finally, EnergyStar has some good  information on the federal tax incentives at  http://www.energystar.gov/index.cfm?c=products.pr_tax_credits.  

 No one is going to pay you to redo your lobby in marble, but if you are looking  to improve the efficiency of your lobby lighting, there’s potential financing help available. Green building and energy efficiency  improvements are a new way that buildings can improve value and attract buyers  in a down market and receive the funding help to make it possible when existing  finances are tight.   

 Erik Nevala-Lee is a volunteer with GreenHomeNYC, a non-profit organization that  helps New York City’s buildings go green. He can be reached at elee@greenhomenyc.org.  

 

Related Articles

The Latest in Green Design

Wellness, Sustainability and the Future of Residential Development

Multifamily Energy Conservation

What's on the Horizon?

Lower Energy Bills, Improve Resiliency, Reduce your Carbon Footprint - You Can Have it All

Seminar - The Cooperator Expo New York