CREJ - Multifamily Properties Quarterly - April 2015
The connection residents feel to Colorado and the desire to take care of the state are merging with new development, and the results speak for themselves. The U.S. Green Building Council recently released its 2014 list of the Top 10 States for LEED, the world’s most widely used and recognized green building system. Colorado came in at No. 2. Since 2008, 160 LEED buildings were built or are under construction, according to the Colorado Energy Office. “It’s a testament to the collective consciousness in Colorado,” said Dan Cohen, development manager of D4 Urban. “I think we generally live in a more progressive state, and from a developer perspective, we are trying to build a product to cater to the people living here.” D4 Urban is currently under construction on Denizen, a multifamily project that is pursuing LEED Platinum certification, which would make it the first market-rate multifamily project in the state to achieve the certification. The 275-unit Denizen, located at the Alameda light-rail station, is the first phase of a broader densification of the Denver Design District. The light-rail station is situated next to a rail yard and behind big-box store loading docks, giving it an industrial feel. “The idea is to transform a hidden station into a vibrant and dynamic place,” said Cohen. Because of its open location, which does not border a main street, the site required multiple sides of activation, which, along with pursuing LEED certification, added to the cost. Cost is one of the challenges facing developers pursuing LEED certification for their buildings, but it doesn’t stop there. “Denver’s growth spurt provides both challenges and opportunities,” said Sonrisa Lucero, sustainability strategist, Denver Office of Sustainability. “The city is sprawling out and building up, becoming more dense, so there are some challenges with land costs while preserving neighborhoods at the same time. But this is an exciting time, a time to push innovation and creativity.” LEED certification costs differ depending on if the building is new construction or if upgrades are made to an existing property. Mainly, the costs required when upgrading an existing building are much higher. To help offset the upfront costs associated with efficiency upgrades for current buildings, property owners can get financing through Property Assessed Clean Energy. Colorado enacted PACEenabling legislation and there is a program in development. The program in Colorado could be unique because there is a consideration that financing will be offered for new construction as well, according to the Denver Office of Sustainability. In terms of the cost of LEED for new construction, according to Cohen, LEED certification has to be a priority going into design. “During design you have to establish what the goals are, and it starts with the architects,” said Cohen. Every aspect of a project must be well thought out, which means more time planning ahead. The next piece is finding a quality contractor who understands LEED construction. For Cohen and D4 Urban, that contractor is PCL Construction. Just like in the design phase, there are several factors that need to be considered in the construction phase. “The contractor has to be able to implement an efficient recycling program on site and determine where to source the correct types of materials,” said Cohen. Energy Star appliances, high-efficiency water heaters, proximity to alternative transportation, bike storage and parking space allotment may seem like small details, but all translate toward a building becoming LEED certified. “We have recycled 86 percent of waste material at Denizen,” said Stephen Kovach, senior project manager, PCL Construction. “All lumber we receive is precut to minimize waste, and as an added bonus it increases our efficiency in build time. When it takes 30 seconds to cut a piece of lumber, and there are 5,000 pieces, it saves a lot of man-hours that would otherwise go toward just cutting lumber.” The Denizen project also incorporates several initiatives that are not included in LEED criteria, but do fall under the umbrella of sustainability. Windows and artwork in the stair columns encourage residents to use the stairs instead of elevators. Integration of the open space immediately adjacent to the building with a pocket park and Regional Transportation District transit plaza provide a place for residents to walk dogs and enjoy the outdoors. “People may not realize that these things are contributing to their health on a day-to-day basis,” said Cohen. “But when they feel happy and healthy all the time, it will encourage them to stay in that space. This is about retention of residents, and we feel that a healthy building will help us do that.” Resident retention is great for any multifamily complex, especially when considering the return on investment when a property is sold. Cohen said sustainable and LEEDcertified buildings give renters a more competitive offering because they can save money on utility bills and transportation, which can lead to charging higher rents or having less vacancy. “On sale of assets, institutional investors are definitely paying a premium for LEED Gold or Platinum certified buildings on an exit sale,” said Cohen. “We are seeing that return.” Colorado’s sustainability efforts continue to progress toward the ultimate goal of net zero – creating buildings with zero net energy consumption. This means the total amount of energy used by the building on an annual basis is roughly equal to the amount of renewable energy created on site. Industry professionals have indicated that they are falling in line with the 2030 challenge – becoming carbon-neutral and using no fossil fuel greenhouse-gas-emitting energy to operate by the year 2030. The nonprofit organization Architecture 2030 started the challenge. The USGBC has a prominent presence in Colorado, gathering industry professionals to educate, network and continue the conversation about progression toward sustainability. “We are not a governmental agency, so we cannot mandate anything, and we do not want to do that,” said Sharon Alton, executive director, USGBC Colorado. “We do want people to convene and discuss green building, and that is what we are seeing in Colorado.” Because the real estate industry and especially multifamily are booming in Colorado, it is easy to see why conversations and actions are taking place surrounding sustainability. If the current landscape is any indication, this state will be at the forefront of green building for many years. “It’s about values and trying to create something that has implications for the way people live their lives,” said Cohen. “The Colorado lifestyle is a big part of the motivation for this trend and as a development community, we need to lead the charge.”