Plain Green Shells: Retail Goes Green
GLOBAL REAL ESTATE MONITOR
Late last month, Phoenix-based Vestar Development Co. launched GreenStar, a commitment to
develop millions of square feet of sustainable retail space. GreenStar is one of the most aggressive environmental programs from any of the United States' major retail developers and calls for Vestar to achieve Leadership in Energy and Environmental Design (LEED) certification for the company's new development projects.
LEED is the nationally accepted benchmark for the design, construction and operation of high performance green buildings granted by the U.S. Green Building Council (USGBC). LEED certification provides independent, third-party verification that a building project is environmentally responsible, sustainable and provides a healthy place to live and work.
The first Vestar project to be part of the new initiative will be Oro Valley Marketplace, a 900,000-
square-foot center just north of Tucson, Ariz. It will be developed to reduce water use, cut carbon
emissions, reduce waste and lower electricity consumption.
Vestar, along with a handful of other retail developers and owners including Forest City, Regency
Centers Corp. and Related Urban, are pioneers of the green building movement.
"There is far more momentum for green building retail today than there was even a year ago," says Mark Peternell, vice president of sustainability with Jacksonville, Fla.-based shopping center REIT Regency Centers. "The push is coming from both retailers and real estate owners, but it's certainly not 100 percent of either side. When those two forces come together, there's an opportunity to do great things."
Waiting for LEED
Although the USGBC currently does not have an approved LEED program for retail projects, the
Washington D.C.-based organization is testing LEED guidelines for retail through its pilot program.
LEED for Retail will have two rating systems - New Construction and Commercial Interiors - and is
expected to be adopted later this year.
The lack of guidelines is one of the reasons why the retail sector has lagged the rest of the commercial real estate industry when it comes to green building and sustainability, Peternell contends. And, even the new guidelines have their limitations, he adds.
"LEED for Retail applies at a building level, but it still doesn't allow for an entire shopping center to be certified," Peternell explains. "We need to develop a system where an entire shopping center can be certified."
That's why Regency Centers has taken a proactive approach with the USGBC and has suggested
alternative ways of evaluating retail projects. And, the REIT has tackled sustainability with a three-pronged approach that addresses: new developments; its 59 million-square-foot existing portfolio; and corporate operations at the company's 22 regional offices.
For new developments, it is pursuing LEED certification for 20 percent of 2008 projects. That
percentage jumps to 40 percent in 2009 and 60 percent in 2010, Peternell says. For its existing
centers, Regency Centers plans to minimize it environmental footprint by implementing sustainable
operating and maintenance processes.
Rise of the eco-consumer
A number of retailers have rolled out sustainability initiatives in response to the rise of the so-called "eco-consumer" - the consumer who is increasingly concerned about the environment and is interested in spending money with companies that have sustainable strategies, says Frank Sherman, a vice president with Rockaway, N.J.-based Mackenzie Keck Construction who specializes in green building and sustainability.
A recent survey conducted by global real estate firm Jones Lang LaSalle found that shoppers are eager to embrace sustainability. The survey, which questioned 1,579 shoppers at malls the firm manages, found that a quarter of respondents said sustainability is so important to shoppers that they would choose to shop in a sustainable shopping center over any other centers.
Big box retailers such as Wal-Mart, REI and Staples have been vocal about their "green" efforts,
especially when it comes to development. And big box retailers aren't the only ones that have
embraced sustainability. LL Bean, for example, operates several LEED certified stores - the first two opened in 2006 in Center Valley, Pa. and Burlington, Mass., and last year, the apparel retailer opened four LEED certified stores.
Even mom-and-pop retailers are going green. For example, Crazy for Animals, a family-owned and
operated boutique specializing in upscale pet accessories opened last summer in a newly constructed eco-friendly retail space at The Shops at Atlas Park in New York City. From the millwork to recycled shopping bags, virtually all of the products used in the store's construction and sold in the store are environmentally friendly.
Sherman says retailers are beginning to quiz retail real estate owners about the "greenness" of their developments. "There are retailers who want to have a green agenda and realize they need to work in concert with developers to have greener shells," he notes. "The plain vanilla shell that developers always deliver to retailers is becoming a light green shell."
Yet, retailers aren't going green just to win customers. Those that have implemented a green strategy also are doing so to generate lower operating costs by creating a high-performance store that uses less energy and water. "There's an impact to their bottom line when they go green," says Dustin Watson, a partner with Development Design Group, a Baltimore, Md.-based architecture firm. "They're going to save money in the long run."
Creating green guidelines
For their part, many retail real estate owners are receiving pressure to go green from retailers and from municipalities. Their green building efforts are responses to progressive retailers and communities that are requiring new development to minimize its environmental footprint, Sherman
"We do have a lot of anchor tenants that are announcing they want to go green," says Regency Centers' Peternell. "Our sustainability initiatives help further our relationship with these retailers." Moreover, Peternell acknowledges that a lot of municipalities have planning incentives or requirements in place for green buildings. "Every week a new city is adding a green building ordinance, and our green building gives us a competitive advantage in a lot of those markets," he contends.
Many developers and owners are making strides in sustainability to improve their own operations and
provide an example to retailers that have not yet embraced green building. Related Urban, for
example, has a company-wide policy for sustainability and strives for its mixed-use projects to be LEED certified.
The New York City-based company, which developed one of the first green residential projects in Manhattan called Tribeca Green, has created green guidelines for its retailers at its CityNorth project in Phoenix, according to vice president Najla Kayyem.
At Related Urban's CityNorth, a 144-acre, 5.5-million-square-foot mixed-use project, sustainability efforts include: saving 1.8 million gallons annually; using low e-glass throughout the development to reduce solar gain; and sourcing building materials within 500 miles of the construction site, according to assistant development manager Jacque Bauer.
Bauer says the company's green guidelines show retailers the easiest ways they can be green. But, Related Urban has shied away from requiring retailers to use green building practices when they build-out their space. As a result, some retailers have followed the company's guidelines, while others have not.
Like Related Urban, most retail developers and owners stop short of demanding that retailers go green. They feel that mandating green building would have a negative impact on their ability to lease their projects and might scare away potential retail tenants. But, some developers and owners are taking small steps to move retailers toward sustainability.
Forest City, for example, created the Northfield Stapleton Sustainability Tenant Incentive Program for The Shops at Northfield Stapleton, an open-air, 1.2 million-square-foot town center outside of Denver. The program is a set of green recommendations and requirements with 51 total points. Forest City requires each tenant achieve at least 17 points (tenant participation is enforceable by the lease).
The company felt confident the 17 points would not add any additional costs to its tenant, says Jon Ratner, director of sustainability initiatives for Forest City. And, if the retailers wanted to go beyond the initial 17 points, Forest City offered incentives ranging from window decals and art pieces that feature their names to advertising stipends and cash rewards.
Forest City was able to receive LEED-CS Silver certification for The Shops at Northfield Stapleton. It is the first town center project to do so. Green features include solar panels that generate enough electricity to supply an average home for one year; waterless urinals, low-flow sensor faucets, and high efficiency toilets, which reduce water usage by more than 645,000 gallons per year, enough to fill 180,000 bathtubs; and an evaporative cooling system that uses 75 percent less electricity than conventional air conditioners.
"We've noticed that more retailers are trying to be green, but the overwhelming majority have still not woven green building into their overall strategy," Ratner says. "We're all still figuring it out, but people are increasingly coming to understand that green building is the future. Ten years from now it will be standard in retail and all commercial real estate."