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Shopping Centers Today -> September 2007
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DEVELOPERS SEE SHADES OF GREEN, REAL ESTATE AGENTS SHUTTER OFFICES, AND BIG BIDS PROVE THEIR WORTH
DEVELOPERS TO POOL ‘GREEN’ IDEAS
“Green” building practices are taking root in the U.S. shopping center industry, but price concerns, a lack of awareness of government incentives, and the need for industry benchmarks are hurdles developers face as they seek environmental sustainability, says a March ICSC survey of about 200 executives.
Just over half the respondents said they have instituted energy-efficient best practices, including energy-saving light bulbs and reflective roofs. Roughly four out of 10 said they have set up recycling procedures, 36 percent cited systems-maintenance best practices, and 29.4 percent said they use sustainable techniques for janitorial maintenance. Only 40 percent of the respondents had measured the impact of such initiatives by formally auditing energy consumption at their properties.
Developers seem largely unmotivated by government pressure. Only 38 percent of the firms had availed themselves of energy-efficiency incentives. About 14 percent made use of some green technique to obtain a permit, 13 percent used one to expedite a plan’s approval, and 15 percent implemented green design to offset other governmental requirements. Cost remains an issue for developers, who fear losing tenants to rivals with lower initial shopping center costs. About 43 percent of the respondents said they had rejected a design with superior environmental qualities because of the cost. Performance was the most important factor cited in building materials selection (55.7 percent said so), while sustainability was dramatically less important (3.4 percent).
To encourage retail developers to take advantage of the government incentives available and help disseminate the industry’s shared green knowledge, ICSC has created the Sustainable Energy & Environmental Design, or SEED, program. The SEED program conducted the survey as an aid to determining how best to further sustainability among shopping center developers. Benchmarking is likely to be a big part of the program. One in five of the survey respondents said they already had a good idea how well their facilities stack up against industry best practices for energy efficiency; roughly 80 percent said they want such information.
A GREEN RETAIL BENCHMARK
Regency Centers and the U.S. Green Building Council have teamed up to find ways to make it easier for shopping centers to achieve Leadership in Energy and Environmental Design (LEED) designation. The goal is to establish a system in which the sustainable practices of all the parties involved in building a center, including the developer and the tenants, are treated as building blocks toward LEED certification.
The Green Building Council bestows LEED designation based on a point system, but it can be difficult for the developer and the tenants to keep track of a property’s cumulative points, sources say. “There are many players involved in the development of a shopping center, including the project developer, major and sub-major anchors, in-line shops and outparcels, to name a few,” said Brian Smith, Regency’s chief investment officer, in a press release. “No one entity controls all of the components or determines to what degree they may or may not be constructed as green. As a result, it is difficult for one entity to achieve LEED certification on its own.”
The first stage of the pilot program will revolve around the development of Regency’s Shops of Santa Barbara (Calif.), a 67,226-square-foot center. A scorecard will be in place on the construction site, and each entity involved in the development will earn points for using green methods and materials. The total points accumulated will determine whether the center will achieve a LEED rating. If it does, all the participants would receive LEED certification. Partners in the Santa Barbara project include the city of Santa Barbara and anchors Whole Foods and Circuit City, among others. Once the model has been perfected, Regency and the Green Building Council plan to share the formula with other companies.
SMALL AND SMART
Nanotechnology, the manipulation of matter at a scale of one-billionth of a meter, will have a big impact on shopping center design and construction in the future, architects and scientists say.
The technology, which allows an object’s color, shape and state of matter to be engineered at the level of quantum physics, has already spawned self-cleaning windows, pollution-eating concrete and toxin-sensing building materials. Renowned architect Richard Meier used nanocoatings in the construction of a Roman church, allowing its concrete panels to clean themselves by trapping airborne pollutants, then decomposing and shedding them. Swedish construction firm Skanska is spending about $1.7 million to develop more-affordable cement and concrete products with such pollution-fighting nanocoatings.
And architectural applications of the technology are just dawning, says George Elvin, an associate professor in the architecture school at Ball State University, in Muncie, Ind., and the director of the Green Technology Forum, an Indianapolis-based research firm. In a column for Architecture magazine, Elvin speculates that carbon nanotubes, sheets of graphite the thickness of an atom and rolled into a cylinder, may be able to support entire buildings. Such tubes would be transparent and electrically conductive as well, allowing the creation of light-sensitive windows and user-aware appliances. Elvin says tiny nanosensors in building materials will soon be able to monitor motion and changes in temperature, humidity, toxins and weapons.
AGENTS AWAY
The U.S. housing slowdown has many landlords monitoring their home furnishings and home improvement tenants for signs of distress, but another tenant category is even more vulnerable to the downturn.
Residential real estate brokers, many with offices in open-air shopping centers across the country, could be forced to relocate or close offices, leaving landlords with space to fill. At Tustin, Calif.-based Coreland Cos., which owns 12 million square feet of retail space, mostly in Southern California, about 20 percent of the firm’s centers include residential real estate offices. The company anticipates nonrenewals of those leases in the near future if the downturn worsens, says Steven Hogberg, senior vice president of leasing and sales. “We have experienced this a couple times so far, of residential real estate offices leaving,” he said. “The offices in well-located centers want to renew, but the franchise or field offices that expanded back when there was a market boom — three, five, seven years ago — we have concern about renewing them.” The larger offices (5,000 to 10,000 square feet) will most likely remain in the centers in Southern California, but small, newer offices or those in lower-grade centers give cause for concern, says Hogberg. According to the U.S. Department of Commerce, single-family home sales dropped 21.6 percent in July, versus a year ago. Though the trend is more disturbing for regional landlords with more exposure to such offices, even the big REITs have noticed a pattern. “As a direct result of the housing downturn, we’ve seen some move-outs in some categories we quite frankly hadn’t seen before, like the residential real estate offices,” said Mary Lou Fiala, president of Regency Centers, in a second-quarter earnings call. Fiala pointed out, however, that such tenants make up a minuscule percentage of the firm’s tenant base.
BIDDING UP
Large, well-financed business improvement districts boost the value of commercial property within their boundaries by up to 15 percentage points over comparable properties outside the BID, says a study by the Furman Center for Real Estate and Urban Policy, at New York University. But smaller BIDs with annual budgets of $263,000 or less have little impact on property values, the study found.
BIDs are financed with fees from local property owners, and they use the funds to provide such services as sanitation and security and neighborhood amenities such as unified signage and street lighting.
The Furman Center used New York City, home to 56 BIDs servicing 70,000 businesses, as the model for its study. The city’s eight largest BIDs, each with annual revenues exceeding $1.2 million, are in high-traffic, high-density zones with a concentration of office properties. In these BIDs “the significant increase in property values suggests that, on average, BIDs are successful in improving the level and quality of local amenities in their neighborhoods,” the report said.
The city’s 22 small BIDs, which are dominated by retail properties in the lower-traffic, lower-density outer boroughs of the Bronx, Brooklyn, Queens and Staten Island, showed no discernible impact on property values. Even so, commercial properties in these smaller BIDs saw no decline in property values, so “they may still be delivering some benefits; our results simply suggest that such benefits are no larger (or smaller) than the corresponding costs that the property owners have to pay to participate in the BID.”
ENTREPRENEUR PLANS AN EMERALD CITY
California is set to see a development that would redefine the idea of ‘green living.’ Quay Hays, a Los Angeles entrepreneur who has dabbled in filmmaking, publishing and restaurants, created development firm Kings County Ventures to build Quay Valley, a $10 billion, green, master-planned community containing 2 million square feet of retail space. The project will spring from a relatively untouched, 13,000-acre site midway between San Francisco and Los Angeles, in the heart of the San Joaquin Valley. “Quay’s vision, as he calls it, is a model town for the 21st century,” said Roy Higgs, CEO and principal of Baltimore-based Development Design Group, the firm in charge of the project’s building design. “It will take a traditional farm and town idea and blend it with a city of the future … a mix of New Urbanism, New Ruralism and emerging sustainable technologies.”
The development will be built from scratch and would serve the 26 million people living within a three-hour drive. The development would abut a well-traveled interstate and be home to 150,000 people. Permit applications have been submitted. The construction could take as long as 10 years. The plans include 50,000 houses and condominiums surrounded by parks, offices and four town centers. Residents will not have to pay electric bills, because the development would use three 100-acre solar arrays to produce power for the town; any unused power would be exported to Pacific Gas & Electric Co. Buildings are to be constructed using energy-efficient materials. Hays has acquired water rights; he plans to float some of the solar collectors and to create rivers and lakes. An agricultural zone for crops that could be a food supply for the community is also in the works.
“Will it be able to run only on solar power? We’re not sure,” Higgs said. “But it’s a wonderful undertaking. Hays has never done anything like this before. He’s not burdened by conventional ideas. The commercial development alone at Quay [Valley] will represent a departure from the formulaic repetition and the fundamental limitations of the current retail landscape.”
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