CREJ

12 / 32

Page 12 — Multifamily Properties Quarterly — February 2017
Colorado’s multifamily housing
climate is changing. Rental
rates have experienced a 44
percent growth over the last
five years, with the current
average rental price at $1,340 per
month compared to $928 per month
at the end of 2011. In addition to
growth, the demands are changing.
In a cultural climate where “going
green” is as much a savvy marketing
strategy as an altruistic business deci-
sion, multifamily projects are pop-
ping up all over the state touting their
sustainable design features. But the
question remains, is “green” still a fad
or is some form of sustainable design
the new standard for building going
forward?
From what we’re seeing from prop-
erty developers and owners, as well
as the trends we are seeing in leasing,
we’d err on the side of the latter.
• Increased buy-in. What was once
a city known for the brown cloud of
pollution that hung over it, Denver
has worked hard to clean up its act.
Sustainability isn’t just a buzzword
for the city; it’s part of a multiyear
mission to transform how the area is
taking care of its people and environ-
ment.
The city ranked No. 9 on the Envi-
ronmental Protection Agency’s 2016
Energy Star Top Cities list. Denver
is on the map for cutting emissions
through energy efficiency. The city
also established 12 major sustainabil-
ity goals it aims to achieve by 2020,
several of which are important for
developers and owners.
By 2020, the city plans to reduce the
total amount of energy consumed by
buildings, mobility and industrial pro-
cesses to below 2012 levels; increase
citywide recycling
rates to 34 percent
or greater; and
reduce, per capita,
the use of potable
water by 22 percent.
And with the city’s
goal of reducing
trips in single-occu-
pant vehicles to no
more than 60 per-
cent of commutes,
there’s a renewed
focus on improving
public transporta-
tion, making transit-oriented devel-
opments that much more of a focus
moving forward.
Combine that with the fact that the
city is a magnet for millennials, and
it becomes clear that there will be
an increased demand for more sus-
tainable multifamily housing in the
future.
• The millennial factor. With home
prices soaring to record levels, many
of the millennials attracted to Colo-
rado’s lifestyle will need to rent vs.
purchase a home – at least, for the
time being. As a result, multifamily
developers and owners are paying
attention to what they value.
According to Pew Research, millen-
nials are the most sustainable genera-
tion to date. These 20- to 35-year-olds
are more likely to support strict envi-
ronmental policies and regulations,
prefer to work for sustainable employ-
ers, choose sustainable transportation
options when possible, and will pay
more for eco-friendly products.
Multifamily developers and own-
ers are taking notice. Going green
is becoming the standard, not the
exception. Leasing agents are quick to
highlight the green features of their
buildings and community, including
composting programs, bike-sharing
options and the use of eco-friendly
materials in construction. It’s become
a competitive differentiator.
But just what does being sustain-
able or green mean in multifamily
housing? That’s where certification
programs come into play.
Benefits of the Certifiably Sustainable
These days, it’s almost unheard of
to open a new apartment complex
or redevelop an existing one without
being certifiably green by someone’s
standard.
LEED and Energy Star remain two
of the most popular certification bod-
ies. While LEED certification has been
the premium standard for quite some
time, it also can be time consuming
and costly to go through the process.
Many builders are inclined to pursue
Energy Star, which is easier to attain
in both new builds and retrofit proj-
ects.
For those companies for which sus-
tainability is just one part of a total
wellness package, there are new cer-
tification programs such as the one
offered by The International WELL
Building Institute, which outlines a
performance-based system for mea-
suring, certifying and monitoring
features of the built environment that
impact human health and well-being.
Incidentally, Denver is home to the
first community in the state on track
to achieve WELL multifamily building
certification.
While getting certified can be a
headache, it also can come with ben-
efits for the developer/owner. Some
lenders will give a discount on loan
interest rates for using sustainable
practices. For example, for properties
that qualify as “green” under Fannie
Mae and Freddie Mac guidelines, loan
spreads can be 13 to 41 basis points
lower. In today’s yield-driven environ-
ment, the reduced debt payments
equate to increased value in the capi-
tal markets.
Green properties also can be more
marketable to potential residents
who are willing to pay a premium
for things like composting, recycling
and low-flush toilets. There’s anec-
dotal evidence that environmentally
conscious residents are inclined to
take more ownership in a sustainable
property, creating a stronger sense of
community where people take better
care of common spaces.
One such apartment complex
that has experienced these benefits
is Denizen, a 275-unit community
located 20 feet from the Alameda
light-rail station. Denizen was the
first market-rate LEED Platinum rental
building in Denver. It was over 90 per-
cent occupied three months after its
completion and has seen rental rates
increase more than 10 percent in just
over a year.
Given the complexity of these large
developments, it is nearly impossible
for a developer to pinpoint exactly
what the added cost is for going
green. While there is some specula-
tion on how going green impacts
return on investment as more multi-
family communities employ sustain-
able design features, more hard data
will begin rolling in. It’s safe to say in
the meantime that as long as the city
of Denver and residents continue to
demand sustainable practices, they
are here to stay. s
Ray White
Vice president,
multifamily sales,
JLL, Denver
Sustainability