Who invests in green office buildings and why?

The first office building with BREEAM Certificate

Real estate developers say this is a game accessible only to professionals, consultants point to tenants and major financial resources, but on one thing they agree: although the field is new in Romania, building ‘green’ is gaining attention and growing fast, as multinational companies are expected to lead the way to a greener country .

Building Research Establishment Environmental Assessment Method (BREEAM) is the leading and most widely used environmental assessment method for buildings that was established in the UK in 1990 by BRE organization (e.n at that time it was a governmental organization and currently is privately held).

The first and so far the only office building rewarded with BREEAM certification in Romania is located on Barbu Vacarescu Road, Bucharest and was developed by AIG/Lincoln and fund management company Fabian. The Lakeview was awarded with a high BREEAM rating after half-year-long process.

Obtaining such a high rating, may involve higher construction costs, but not necessarily higher rents. Sven Lemmes (photo), country manager of AIG/Lincoln is aware that in Romania, builders don’t focus too much on “green buildings”, but things are about to change in the near future”, Sven Lemmes told Wall-Street.

Real estate market is divided into professionals and small investors or amateurs. “The first will be forced to go green soon, if they want quality tenants. A local builder will never be pressured to build green, at least over the next five years”, said Lemmes.

“If you are running a company that backs the concept of green, then you can only stay in a green building, it is about the image you create, not necessarily about costs. For tenants’ operating costs to be visibly lower, developers should add 30% more investment, costs that would eventually reflect in rents level”, representative of AIG/Lincoln.

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Financial crisis sparked developers' interest for green buildings

Apart from The Lakeview project, another office building in Bucharest is making efforts to obtain BREEAM certification. Euro Tower (photo), erected by Cascade Group has undergone assessment and has been awarded with a very good score. However, the score hasn’t yet been confirmed by the BREEAM team.

The 18,000sqm Euro Tower has 18 stories and represented an investment of around €60mln. The building is 85% leased and the construction works are expected to end in December. This would be the first BREEAM rated finalized building, according to Alex van Breemen, general manager of Cascade Group.

“Builders’ interest for BREEAM certificate has been growing during the financial crisis, as they tried to build projects to lure investors and tenants. Even if a building with BREEAM rating may cost more upfront depending on the rating, on a long term it saves through lower operating costs, on energy, water and waste/recycling”, Richard Colwell, Customer Liaison Manager of BRE.

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Raising capital to build green office spaces

For real estate broker Horatiu Florescu (photo), a green building involves stronger tenants, such as multinational companies identified with the “green concept”. Furthermore, a developer who plans on going green has good chances of attracting the funding he needs.

“If a bank were to choose between financing a number of traditional real estate projects and a green building, it would certainly go for the latter. Tenants’ quality is higher, and this would add value to the project in the event of a sellout”, said Horatiu Florescu, Chairman and CEO of real estate consultant The Advisers/Knight Frank.

Florescu has been the exclusive leasing agent for The Lakeview, jointly developed by AIG Lincoln and Fabian. Developers need to have a closer look on green buildings, he continued, even if this involves higher construction costs.

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