180 Brisbane

Japanese developer Daisho Group has recently broken ground on a $300 million office tower in Brisbane, the capital and most populous city in the Australian state of Queensland.

According to Architecture & Design, the 34-story commercial project will bring the first speculative high-rise on the city’s skyline since the start of the global financial crisis. Colliers International and Knight Frank are the project’s leasing agents.

“As Watpac begins principal construction works, local and interstate companies are showing keen interest in becoming tenants of 180 Brisbane when it is completed in late 2015. These include mining and resource companies, professional service firms and others looking to establish or expand their presence in the Brisbane CBD,” said Yasuo Iwasaki, Daisho Group’s general manager.

Designed by Crone Partners, the new building at 180 Ann St. will offer approximately 630,000 square feet of space, including large floor plans, ground floor retail, a food court, an on-site management office and basement parking. Amenities also include direct escalator access off Ann Street, extensive landscaping, generous lounge and meeting spaces, secured bicycle storage, along with jogger and cyclist changing rooms, showers and lockers.

One of the most notable architectural features of the 180 Brisbane tower will consist of a distinctive river-shaped graphic wrapped around the building’s façade.

The project aims to achieve a 6 Star Green Star and 5.5 Star NABERS rating. Environmentally sustainable design features include reduced water and energy consumption, increased levels of fresh air, as well as a creative use of glass that maximizes natural lighting inside the building.

“Daisho has owned 192 Ann St. since 2001 and 180 Brisbane will be another high-quality addition to the city and Daisho’s long-term investment here. It will also rejuvenate the CBD by forming a new hub. which links key parts of the city’s center,” Iwasaki added.

Headquartered in Japan, Daisho Group is an international property developer with offices in Malaysia and Brisbane. Since it was founded in 1986, the company has amassed a portfolio currently valued at more than $1.5 billion.

In fact, noted Tom Poser, vice president with Jones Lang LaSalle Inc. in San Francisco, benchmarking details generally tend to be of far greater interest to tenants considering older and smaller properties, compared to those with immediate needs for modern Class A space.

Most owners of institutional-grade properties are already benchmarking with Portfolio Manager—and predictably specify energy efficiency and related characteristics in initial lease proposals even before addressing contract rents and related particulars, Poser noted. “These owners use the sustainability performance of their properties as a marketing tool.”

(Interestingly, as the New York City program’s initial disclosure report from last October illustrates, even some institutional-grade properties might not be as efficient as expected. For instance, the landmark MetLife building posted an Energy Star rating of 39 —far below the citywide median of 64. And even the relatively new 7 World Trade Center tower came up a point shy of the 75 required to boast the Energy Star label.)

On the other hand, in a softer market, tenants evaluating space in lesser-quality, smallish buildings in particular will value the more transparent energy data as they factor utility bills into occupancy cost projections.

Hence, while these ratings-challenged landlords “tend to not bring up that topic” in discussions with prospects and have expressed the strongest objections to being covered by the new and proposed mandates, Poser has little doubt that most owners of smaller commercial properties struggling to attract tenants are conversing with consultants and contractors specializing in energy upgrades.

Of course, smaller properties tend to post lower efficiency scores, and their owners often lack the financial resources for any needed retrofits. And programs that require periodic energy audits—San Francisco every five years, New York once per decade—are arguably disproportionately burdensome to smaller owners, as they might cost $20,000 or more even for a small property.

City officials, however, want to make sure compliance is broad enough to spawn competition-driven efficiency efforts but also want to avoid undue burdens on small-property owners in particular, noted Jessica Lawrence, program manager for building energy performance policy with the Institute for Market Transformation.

Indeed, after listening to feedback from smaller owners, representatives from the local BOMA chapter and others, administrators of Seattle’s benchmarking program last September re-set the minimum building size threshold from the initially planned 10,000 square feet up to 20,000. They also granted a six-month extension of the initial Oct. 1 reporting deadline for commercial and multi-family properties of 20,000 to 50,000 square feet.

New York, D.C., Philadelphia and Minneapolis all opted for the 50,000-square-foot minimum threshold, with the D.C. and New York mandates also covering residential properties. Boston’s proposal sets the threshold at 25,000 square feet, along with residential properties of 25 units or more.

Read more on the cities requiring benchmarking of energy efficiency in “Mandatory Benchmarking” in the June 2013 issue of CPE.

Conergy, the Hamburg-based energy company, is expanding its footprint in Romania with the development of a 2- megawatt solar power plant in the Slobozia region. Currently under construction on a 10-acre site, the facility will include over 8,000 Conergy modules fabricated in Germany.

Upon completion, the plant is expected to generate more than 2,700 megawatt hours of electricity annually, enough energy to power about 770 households. Furthermore, the project will reduce carbon dioxide emissions by 1,400 tons annually.

The Slobozia solar project is the second announced in Romania this year by Conergy. In January, the company announced a 2.2-megawatt solar plant in Bobiceşti near the town of Craiova (pictured). The company is teaming up with Solanna Investment S.r.l. to develop the plant, which is expected to generate about 2,840 megawatt-hours annually.

“Currently, Romania is covering around two thirds of its electricity demand by power generated in the country itself,” said Alexander Gorski, a member of Conergy’s board. “Large-scale solar power plants will be playing an increasingly important role in helping to enable the country to also satisfy the rapidly rising demand for electricity in the future. We intend to expand our business in this segment further in the years to come.”

Conergy’s solar park will become profitable thanks to a quota model that employs so-called green certificates and power purchase agreements, the company said. Unlike other European countries, Romania does not offer feed-in tariffs as subsidies for solar power projects. Instead, the state requires energy providers and energy-intensive businesses to obtain 14 percent of their electricity from renewable sources. That share will rise by 1 percent annually through the decade and reach 19.5 percent by 2019. For this purpose, energy providers need a certain number of green certificates.

Providers that fall short of the threshold must purchase the emission certificates for 110 euros each to make up the difference. Power plants with a total capacity of 10 megawatts currently earn six certificates for each renewable megawatt-hour generated over the subsequent 15 years. Starting next year, plants will receive only three certificates per renewable megawatt-hour. Conergy’s plant will receive an estimated 16,200 green certificates annually for producing 2,700 megawatt-hours, or about 243,000 over 15 years.

Until 2025, prices for certificates traded on the market will remain in a fixed range between 27 and 55 euros. Any certificates that remain unsold in a given year will be purchased at the fixed minimum price by the national energy regulation authority, known by the acronym ANRE.  Power plant operators earn revenue from sales of both electricity and green certificates. For the Conergy plant, the sale of green certificates could yield 6.6 million to 13.4 million euros over 15 years.

The temporary halt in development of Boston Properties’ 1 million-square-foot office project at 250 W. 55th St. in Midtown Manhattan grows smaller and smaller in the rearview mirror as building activity moves closer toward completion, and Arup is the latest participant in the endeavor to achieve a major goal. The engineering and consulting firm just reached substantial completion of the structure and envelope of the $1 billion building.

It was back in 2009 when Boston Properties suspended construction of 250 W. 55^th, but since 2011, when law firm Morrison & Foerster L.L.P’s pre-lease of 180,000 kick-started the project again, work has been moving forward at a steady clip.

Arup, which is teamed with the architectural firm of Skidmore Owings and Merrill L.L.P. on the design of the LEED-certified tower, has been quite crafty in realizing its objectives. The firm’s design integrates a creative viscous damping system that allowed for the reduction of steel tonnage by 10 percent and provided unanticipated additional elbowroom in the 40-story high-rise. “The firm’s engineering innovations helped us save $5 million and gave us more usable space per floor,” Robert Schubert, senior vice president of construction at Boston Properties, said in a prepared statement.

Indeed, 250 W. 55th is well on its way to completion. In May 2012, general contractor Turner Construction Co. topped out the structure, which, before year’s end, became 46 percent pre-leased with the 20-year lease comment to 246,000 square feet by another law firm. The building is on track to open its doors in early 2014.

A new breed of high-rise architecture is in the process of being born, thanks to the collaborative efforts of modern design pioneers. Envisioned as the best sustainable option for meeting world housing demands and decreasing global carbon emissions, wooden mega-structures are now one step closer to becoming a reality.

Photo credit: eVolo

“Big Wood,” a conceptual project submitted by architect Michael Charters to the eVolo 2013 Skyscraper Competition, builds on the premise that wood, when harvested responsibly, is one of the best tools architects and engineers have for reducing greenhouse gas emissions and creating healthy communities. Aspiring to become one of the greenest skyscrapers in the world, Big Wood challenges the way we build our cities and promotes timber as a reliable platform to support tomorrow’s office and residential towers.

Whereas the building industry accounts for 39 percent of man-made carbon emissions, according to the eVolo architecture and design journal’s announcement of Charters’ honorable mention win, timber emerges as a greener alternative to standard structural systems. In addition to its eco-friendly properties, timber is technically and economically competitive compared to steel and concrete, and can be employed in a broad range of building structures. “Recent studies have proved the success of 20- to 30-story mass timber structures,” according to eVolo,  while the use of hybrid systems would enable developers to go even higher with their projects.

Combining technological advances with conservation and sustainability features, Big Wood stands out as a masterpiece of modern engineering. It is a prototype on mass timber construction that offers the possibility to build more responsibly while actively sequestering pollutants from our cities.

To be developed along the Chicago River in the Windy City‘s South Loop neighborhood, the mixed-use university complex is built on a mass timber system. In yet a further sustainable step, the lumber used is not just locally grown and milled but the South Chicago tree farm from which it was obtained is on a remediated brownfield site that once sheltered the South Works steel mill and now bvenefits the entire area by extracting toxins from the soil as well as carbon dioxide from the air.

The astounding high-rise features three different housing types, retail, a library, a media hub, a sports complex, parking, as well as a community park and garden.

“Known as the birthplace of the skyscraper, Chicago is an optimal location for a prototype in mass timber construction,” writes Carlos Arzate in his description of the project in eVolo. “Similar to the rapid innovation in building technology that occurred in the early 1900s, ‘Big Wood’ is positioned to be a catalyst for a new renaissance in high-rise construction, forever changing the shape of our cities.”

Widely recognized thanks to the architectural efforts of Michael Green, a progressive architect who plans to erect a 30-story wooden skyscraper in Vancouver, the groundbreaking concept strives to address the major challenges of climate change, urbanization and sustainable development. In collaboration with structural engineer Eric Karsh, Green developed a mass timber panel approach solution for tall buildings called FFTT (Finding the Forest Through the Trees), which is adaptable to various architectural forms, including office and residential uses.

Tom Paladino founded Paladino and Co. in 1994 as a consultant on green building and sustainability. He helped develop the U.S. Green Building Council’s LEED green building rating system, directed its pilot program and has been technical editor and author of the version 4 reference guides. The company has provided both design and technical advice to a wide range of clients globally, including some of the biggest developers of green buildings, at the single-building and portfolio/enterprise levels. Paladino spoke with CPE editorial director Suzann D. Silverman about the commercial real estate industry’s progress in achieving sustainable design and what still needs to be addressed

Q. How do you see approaches among U.S. commercial real estate developers and owners changing toward sustainable design?

A. The definition of sustainable design is expanding to include planning, operations and asset management. The green building and sustainable design conversation really came out of the service providers, in many ways—first, the engineers and architects, and to some extent a few owners. But why there’s a new building, where there’s a new building, who’s going to sit in the new building, who’s going to run it afterwards and how do we know how to manage it, especially if it has new design features, is really the expanded conversation that seems to be happening among the leading commercial real estate groups. And by leading I mean those that are busy.
Some of the ones that are busy, which surprised us a little bit—but maybe not if you think about it—are the industrial facilities that might be involved in food production or food service. Everyone continues to eat, so we have a lot of industrial facilities that are getting on the green bandwagon but have really different characteristics than, say, knowledge-based, workforce office. …

And then, the service providers—architects and engineers and green building consultants—are pretty interested in this idea of net-zero, which is a building that can stand on its own from an energy or water point of view. But the commercial real estate sector, particularly in this economic climate, is pretty lukewarm toward that because it just doesn’t have a strong business case right now. 

Q. Do you think that’s just a temporary situation because of the economic climate, and as the economy improves that will change again?

A.The thing we’ve observed around some of the net-zero projects—and we’ve worked on a couple—is that it requires such a fundamental translation on the basics, like a useable floor area-to-systems floor area, or area of window wall-to-floor area served. It really challenges the comparables that other buildings are budgeted and designed around in such a transformative way that until the business climate gets better, it’s too big a reach for most commercial real estate projects.

Q. What are developers focused on?

A. We are seeing a growing interest in portfolio programs … particularly in the retail environment. That’s the end result of design expanding to include planning, operations and asset management. It’s just a larger span inside commercial real estate that’s beginning to address sustainability.

What’s interesting about the portfolio programs is that there are two sub-trends. One is that we’re seeing increased executive sponsorship around those initiatives: The sustainability thrust is coming from a real estate executive, a director or VP. High in the food chain, not the grassroots uptick we saw in the previous five years, which was really about the building and how we make it and how it performs on its own. This is an executive thing: There’s some proof of concept around that idea with one building; let’s apply it to our many in a way that lines up to the second sub-trend, which is, how can it improve business results for the enterprise around real estate?

Certainly in the last six months, it’s been a noticeable change. So something is thawing out there. Either the (corporations) are realizing this is the new reality and we’ve got to keep moving with our expansion, which requires real estate activity, or they’re making a market move, which is, we’ve acquired our No. 3 (competitor), or we’ve merged with another company to gain size and now we’ve got two disparate real estate portfolios that we have to somehow put together. And sustainability is a driver for the enterprise, so how are we going to embed that in real estate, especially as we consolidate people and processes? …

If we think about the industry meeting objectives generally, it seems like commercial real estate is a little bit stalled on “what do we do next with sustainability?” … (But) there is a lot of, I think, innovation or experimentation or examination of “how does sustainability help our enterprise win? And how does real estate contribute to that?” … There was a great vocabulary established with LEED and a lot of green building professionals created through the USGBC’s continuing ed program, more than any other sector. There’s nothing like that for product design. There’s nothing like that for workforce innovation. And there’s not that much around supply chain that’s as big as green building and LEED within the commercial real estate industry. So in a way, real estate can lead (corporate America) toward “here’s what works.”

Q. Do you feel that the commercial real estate industry has the right objectives?

A. It seems like LEED’s been a great proxy, but it’s somewhat become table stakes for a lot of commercial real estate. And now the question being asked is, How beyond just certification does it create business results? An example of that would be, there have been hundreds of buildings created under the LEED program that have attempted to accomplish—or have accomplished—the daylight credit. You know, daylight the floor areas so you can turn the electric lights off. You get more productivity out of the workforce if you do that. But where is the data around it? Has it worked or not? And if it does work, shouldn’t we be hitting that out of the park? I mean, commercial real estate knows how to measure a leasable area. Everyone kind of agrees on the formula, so there’s some way to move forward on optimizing that. But there isn’t a lot of agreement around what’s the right shape and block-and-stack and floor-area ratios to create a daylit building that really responds to the productivity gain that we all think is happening but nobody’s really measuring yet.

Q. So there really hasn’t been much focus on achieving some basic standards for what works best?

A. Right. And any feedback on what is working best. I think that’s one of the crazy anomalies of the real estate industry: that it’s a huge industry that builds projects or products, if you think about it, with a revised process every time. Every building’s a custom build. I know the industry strives for standardization, but putting the parts together—the different site, the different owner needs, the different design team combinations—it’s highly customized. And there are industry standards on what’s the formula for optimization … (but) that’s about measuring what got put in place, not what happens after it’s there and how it performs. That’s less studied. When you make a car, when you design a new car—like a new hybrid, where you change the engine out and put in batteries—it’s a pretty big custom job. And then the auto industry knows how to innovate and then measure and refine and release and refine and release, whereas with commercial real estate, it’s like, “Well, that was an interesting project. We flipped it and made money. Let’s go do another one.” There’s not a lot of introspection or formal feedback.

Q. Where do you still see the biggest need for improvement? And what concerns you the most?
A. There is some missing capability in the field. There are 200,000 LEED APs out in the market right now, and they are the predominant green real estate experts because there aren’t any others, so they dominate. But they’re somewhat focused on LEED, which is an energy and environmental performance play—it’s not particularly lined up to business results, nor is it lined up to the way commercial real estate is developed, say, inside the Fortune 1000 space.

So a lot of experience around one-off buildings, but it’s not yet easily transferrable to the real estate pipeline, particularly one that’s growing year over year, one that’s dynamic. So you have a miss in terms of the professional service or the talent on commercial real estate in that we’ve got the environment and energy performance part figured out. There’s a new real estate executive on the job coming out of the C-suite, someone who’s trying to line up real estate to corporate social responsibility and global reporting and carbon. But there’s nobody who knows how to really link it all up; there is no professional that’s tasked with that.

The biggest need for improvement I see is that next generation of professionals really has to learn how to work closer than ever—design plus development, and that would include, under development, enterprise driving the program, facilities management driving the operations of the project, and construction building

it the way that is most flexible for the future.
There’s a lack of an overall strategy when sustainable real estate portfolio programs get out of the gate these days. Mostly what’s happening, or what we see, is a notion of, well, if it worked great on one or two or 10, let’s do it on all. And then the spend to do that gets significant and nobody’s really measuring, well, are we spending effectively from a business results point of view—beyond that we’re good guys and we’re building buildings in line with our core values around corporate social responsibility?

Q. Do you think that’s the next phase? Do you think people are starting to realize they need to do that?
A. What’s happening is that the enterprise and product development and market share initiatives that most Fortune 1000s have learned to do quite well around their core competency is showing up at the real estate executive team level in a way they haven’t seen before. I think that’s the significant change or the readiness question for commercial real estate execs: Can I line up to that process? Do I understand enough about sustainable design and how the building can affect enterprise and produce results well enough to put it into that business case format? …

There’s a higher hurdle for real estate to get over than in the past, when their view was, “Well, you know, we have a certain amount of dollars on our balance sheet in real estate and we’re kind of trending along and everybody’s fat and happy with business as usual.” I think that’s the change we’re seeing.

Q. And with a multi-tenant building you’d have to find ways to measure performance that can apply to all the different types of tenants, as well as the property owner.
A. We could look at that a couple of ways. One is, what is the purpose of the owner? For a real estate investment trust or a developer of build and hold, it’s probably something around, “How do I maximize my building performance with a disparate set of users that are all over the map in terms of energy use or hours of occupancy or modes of transportation to and from the building—where I have an old-school company where maybe everyone needs to drive and then I have a young upstart company where everyone wants to ride their bike.”

How do you handle cars and bikes, because parking spaces are really expensive to build and bike racks are not, but then you need showers, which are also expensive to build.

How does the product change to accommodate the dynamic and the shifting workforce would be the question that the developer would need to answer. … What if growth was not about the old world model, where growth equals more square footage? You’d have a small tenant you’d hope to move from suite A to A plus B, and then A plus B plus C. What if it was, “Well, I really need to accommodate their growth in terms of can we densify rather than get more square footage?” Is there a way to provide amenities that will have more workstations that are touchdown points that maybe are in a common area rather than the leased area? Is there a way for me to allow them to grow one per seat versus doubling up on desks until it’s completely unworkable and then they finally take some more space? Or what often happens is they change buildings.

As a developer with office space, do I need to become more versatile around IT, because if I can locate them in buildings I already own and you add expansion space through an IT connection, is that another way to grow a tenant? As a tenant, do I let people work from home but beef up the amenities at the office so I attract them to the office, where the collaboration happens, and yet not have to pay for the real estate that I typically would in the old model?

Q. Where has the commercial real estate industry made the greatest progress?

A. You can’t go to any commercial real estate conference where there isn’t either a sustainability track or it’s actually the theme of the entire conference. It seems to be very well established as a core element, not a fad or a trend. I think most people think it’s here to stay. And I think that’s true because the drivers for sustainability at the meta level, at the industry or even at the societal level, are real.

Climate change, regardless of the source, seems to be here. It’s not predictable the way it used to be. The introduction of technology in the workplace and the changing age shift in the mean worker are creating demand for a lot more mobility. Employees view themselves as self branded, and they move their talent around to where the best opportunity is. It’s not like you go and work for someone for a long time and retire out of there. That model’s gone. And energy and water demand issues are acute, and our population continues to grow, and we continue to put demand on energy use for information technology, which takes it away from other sectors. So that pressure’s not going away. That’s why we’re seeing so many renewable energy projects around the country: is the growing awareness that we need new energy sources.

The Programs

Following are updates on the certification activities of existing rating systems, including counts of ratings issued in 2012. First are details on the general commercial programs, and then those of some of the more targeted systems.

LEED

The USGBC and the affiliated Green Building Certification Institute had certified just under 15,000 U.S. commercial projects as of mid-March, with total floorspace fast approaching 2 billion square feet. The count grew by more than 3,660 projects totaling nearly 400 million feet last year alone.

Assuming a membership green-light this summer, anyone wishing to adopt LEED v4 under its pilot program will probably be able to do so by the end of the year. But USGBC higher-ups have confirmed that projects can still be registered under the prevailing LEED 2009 version through mid-2015.

LEED v4, in addition to substantial and wide-varying updates of credit scoring, is set to introduce versions of the LEED for Existing Buildings: Operations and Maintenance (EBOM) rating system devised specifically for schools, retail centers, data centers, hospitality properties and warehouses. It further advances environmental footprint issues such as climate change, while more intensely encouraging efficient consumption of energy and water.

As for whether the GSA will diversify by tapping Green Globes and/or LBC in addition to LEED, Diana Fischetti, commercial program manager with the Earth Advantage Institute,  thinks taxpayers would be best served by a strategy embracing any of several viable ratings systems that proves most beneficial for any given situation—for instance, depending on a project’s size, function, configuration and location.

“Blanket mandates (to use just one or two) just aren’t going to be cost effective over the longer term,” she suggested.

GREEN GLOBES

Green Globes administrator Green Building Initiative bills the system as a “streamlined and affordable” Web-based alternative to LEED. And as has been widely reported, sponsors of the U.S. version of Green Globes intended to make its lumber sustainability requirements less stringent than USGBC has continually required with LEED.

The GBI now administers three commercial modules: Green Globes for New Construction, Continual Improvement of Existing Buildings (CIEB), and a separate CIEB for healthcare properties. Federal agencies, and the Department of Veterans Affairs in particular, account for a huge portion of the CIEB-certified properties.

The GBI since 2006 had certified a bit more than 750 projects—with about 225 coming last year. Another 15 or so had been certified through March, with about 125 more applications pending. While LEED certification requires various mandatory “prerequisite” sustainability-related characteristics in multiple scoring categories, the Green Globes system does not.

SERF

The Society of Environmentally Responsible Facilities (SERF) team likewise sought a less time-consuming and costly rating system than LEED—but unlike Earth Advantage and EarthCraft Light (updates below) did not necessarily tailor it toward smaller properties.

Project sponsors handle much of the required assessment activities, then make the property eligible for SERF certification by having a licensed architect or engineer sign off on their work. The system strives for flexibility in accommodating multiple property categories: office, multi-family, retail, industrial, healthcare and institutional.

Since operations commenced in 2010, SERF has certified 66 properties, more than half of which (37) took place as the system caught on better last year. Another nine certifications were in processing at press time. Much of SERF’s activity to date has been in the Midwest and Southeast.

LIVING BUILDING CHALLENGE

Administrator International Living Future Institute bills the Living Building Challenge system as “the most advanced measure of sustainability possible in the built environment.”

While it can apply to renovations and virtually all structure types and sizes, the program primarily guides sustainable characteristics of new development projects, which must achieve prerequisites focused on seven specific performance areas. Reflecting the stringent requirements, only seven projects have achieved certification since ILFI began rating projects under LBC in 2010.

EARTH ADVANTAGE

According to Fischetti, recent analyses have concluded that buildings featuring 50,000 or fewer square feet of floor area account for nearly half of the commercial property sector’s energy consumption—and in fact represent the vast majority of all commercial buildings. But given prohibitive costs of LEED certification, a lot of small projects end up developed to LEED specifications but without going through the formal certification process, she noted.

Accordingly, EAI is now forging relationships beyond its Northwest roots—with an initial eye on the Midwest—working with a growing network of affiliated service firms and individual professionals that will help owners and managers pursue certifications under Earth Advantage Commercial’s new 2.0 version. At costs far below LEED, EAI has certified more than 50 commercial buildings during its early efforts.

And EAI’s active residential operation offers the Earth Advantage Multifamily program, which has likewise certified more than 50 properties totaling well over 2,000 units. Projects including several hundred more apartments are currently under application.

EARTHCRAFT

EAI has something of an affordability-minded Southeast regional counterpart in the Southface organization, which has likewise launched rating programs for both small commercial properties and multi-family projects.

The newer EarthCraft Light Commercial program, which is targeted primarily toward development ventures under 15,000 square feet, is up to 21 certified projects. EarthCraft Multifamily, operational for nearly a decade, certified projects totaling more than 5,900 apartments last year—bringing its total well beyond the 17,000 mark.

Designed with the hot and humid Southeast climate in mind, EarthCraft Light Commercial has been active in Georgia, Tennessee, the Carolinas, Alabama and Virginia—with a partner organization providing multi-family certification activities in Virginia and Maryland.

NGBS

Various stakeholders including the National Association of Home Builders have already been fine-tuning an apartment development and renovation rating system for several years, with the resulting National Green Building Standard administered by Home Innovation Research Labs, until recently known as the NAHB Research Center.

Like their EarthCraft counterparts, the NGBS multi-family team has been quite busy of late, certifying 313 properties totaling just under 5,800 units last year alone. The total tally as of late March came to about 11,150 units within 525 properties, with more than 28,000 additional units in nearly 700 communities in processing.

Compiled by Brad Berton. You’ll find more on rating systems’ advancements in “Color Me Greener” in the May 2013 issue of CPE.

In Manhattan, the South Tower high-rise at Hudson Yards, the 13 million-square-foot mixed-use project being developed by Related Cos. and Oxford Properties Group, has just reached a total of 80 percent in occupancy commitments with two new lease agreements. Cosmetics giant L’Oréal USA and software concern SAP have signed on for a combined 517,000 square feet at the 1.7 million-square-foot building where they will share the tenant roster with luxury leather goods provider Coach Inc. 

L’Oréal has inked a lease for 402,000 square feet at the South Tower, paving the way for the company to relocate its U.S. corporate headquarters from 526 W. 34th St. to the LEED Gold-certified skyscraper at the corner of 10th Ave. and 30th St. SAP, which leased 115,000 square feet, will hold the distinction of occupying the top four floors of the 47-story building.

The new lease agreements come roughly 18 months after news emerged that Coach had acquired 740,000 square feet in the South Tower for its global corporate headquarters, taking on the role of anchor of the Kohn Pedersen Fox Associates-designed building. 

Where leading businesses go, others follow. “We are seeing a lot of diversity in companies that are interested in both purchasing and leasing space at Hudson Yards,” Jay Cross, president, Related Hudson Yards, told Commercial Property Executive.

There’s ample time for Related and Oxford to find new neighbors for L’Oréal, SAP and Coach at the South Tower, which will also feature ground level retail. There are more than a few selling points. “Hudson Yards offers best-in-class office space, dynamic retail and restaurants, cultural programming and over 12 acres of open space, all in one environment,” Cross said. “It’s an unprecedented opportunity for domestic and international brands, and there has been a very strong demand from large user for the office space.”

Tutor Perini Building Corp. is onboard the project as construction manager and is on schedule to complete activity in time for the South Tower to swing open its doors to tenants in 2015. 

It takes more than chump change to develop a premier office building in New York City, let alone a 6 million-square-foot mixed-use destination. However, it appears the lending community is more than willing to get behind the endeavor, which is expected to revitalize the Hudson Yards neighborhood and bring new life to Manhattan’s West Side.

Yesterday, Related and Oxford revealed that they had closed on approximately $1.4 billion in equity investments and debt financing for Hudson Yards. A group that Related and Oxford described in a press release as “prestigious consortium of investors and lenders” will finance the South Tower, the first tower in the first phase of the sprawling development. In addition to Related, Oxford and Coach, equity investors in phase one of Hudson Yards include institutional investors advised by J.P. Morgan Asset Management and a prominent sovereign wealth fund. Construction financing to the tune of $475 million is being provided by a group spearheaded by Starwood Property. Starwood will contribute $350 million and the remaining $125 million will come from the other partners, the United Brotherhood of Carpenters and Joiners and Oxford.

A mere 18 months after Liberty Property Trust and Synterra Partners broke ground on GlaxoSmithKline’s new 208,000-square-foot office building, located in the Navy Yard Corporate Center at the Philadelphia Navy Yard, the pharmaceutical giant has settled into its new digs. The $150 million project is serving as an additional tenant magnet for the Navy Yard, as well as an example of a progressive new work environment. 

“[The GSK development] has had and will continue to have a very large impact on continuing the building up of momentum at the Philadelphia Navy Yard,” John Gattuso, senior vice president & regional director of Liberty’s Urban and National Development team, told Commercial Property Executive. “That project has seen now over a half-dozen office buildings completed and several more are scheduled to start in the next year or two.” 

Liberty and Synterra invested $80 million and GSK contributed $70 to realize the four-story facility at Five Crescent Dr., which GSK will occupy under a 15.5-year lease. The property, designed by Robert A.M. Stern Architects, is a model for the 21st century workplace. The building features a café, fitness facility, meeting centers and a multi-purpose room, but it’s the workspace that takes the concept of modern office accommodations to a new level.  Architectural firm Francis Cauffman was aboard the project as workplace strategist and brought to life the concept of an office space designed to foster collaboration and creativity by eliminating the walls and accenting the open floor plan with a four-story central staircase–encased in glass, no less.

“It sets such a new standard for the work environment so I think it will be very impactful not just at the Navy Yard and not just in Philadelphia, but nationally,” said Gattuso. “And I think more and more companies are looking at that work environment as something they need to at least think about and take into consideration as they plan for how they will work for the next several decades.” 

Five Crescent also holds the distinction of being the first double LEED Platinum-certified building in Philadelphia, with Core & Shell and Commercial Interiors certifications from the U.S. Green Building Council.

Setting up shop at the Navy Yard marks a relocation for GSK, a longtime resident of the City of Brotherly Love. The 2011 announcement of the pharmaceutical company’s impending move to the Navy Yard was accompanied by the realization that a large chunk of empty space would be added to the market with the company’s departure from its offices at One and Three Franklin Plaza in the Center City submarket. However, local industry experts are undaunted by the notable vacancy. “Center City Philadelphia is very vibrant, it actually has one of the lower vacancies in the country and I think those buildings will be absorbed in either office or new uses,” Gattuso said.

Indeed, the numbers in Philadelphia’s central business district are enviable. The vacancy rate at the close of 2012 was 9 percent, compared to 15.5 percent in Los Angeles, 12.1 percent in Houston, 10.6 percent in San Francisco and the national average of 15.1 percent, according to a report by commercial real estate advisory firm Integra Realty Resources Inc.  The Class A segment is the source of the market’s strength.

“The key to the Class A market is that there is a flight to quality, which often takes place during periods immediately following an economic downturn, like the one we just encountered during the Great Recession,” Joseph D. Pasquarella, a senior managing director with Integra, told CPE. “Tenants are attracted not only to the location, age and quality differences of Class A properties, but also to stronger and more professional management of the ownership that typically owns Class A property compared to Class B and C.”

Investors are paying attention; dollar signs are calling. “Philadelphia does not have an over-supplied Class A market, so prices are increasing especially for the higher floors in premium buildings owned and operated by the larger institutional investors,” Pasquarella noted. “It is also a good real estate investment long term as rents would have to rise considerably in order to support the construction cost of a new Class A property.”

And who says it’s all about the apartment sector in the current commercial real estate environment? “By comparison to the red hot multi-family investment market, Class A office investment in Center City Philadelphia offers better long term yield than other income producing property investments.”

Construction activity is underway for Jefferson Apartment Group’s latest project, Azul Baldwin Park in Orlando, Fla.’s thriving, 1,100-acre Baldwin Park neighborhood. JAG is developing the 178-unit luxury apartment property with investment partner Pacolet Milliken Enterprises Inc.

Azul is just one piece of JAG’s portfolio expansion plan for 2013. “JAG expects to develop close to $250 million and acquire another $100 million in multi-family assets this year,” James Duncan, a senior vice president and partner with JAG, told Commercial Property Executive.

JAG is not divulging Azul’s development cost; however, Wells Fargo is providing financing. Winter Park Construction is onboard the project as general contractor and is on schedule to complete construction of the apartment community’s four- and five-story LEED-certified buildings in the first quarter of 2014.

Designed to provide accommodations and an atmosphere resembling those of an upscale boutique hotel, Azul will cater to renters with higher-end tastes in a city where a growing jobs market has resulted in an increasingly loud cry for apartments. Sources of demand are within close proximity to Azul. The property, which neighbors the affluent town of Winter Park, sits three miles from thriving downtown Orlando and a dozen miles from the 650-acre Medical City health and life sciences park and its mushrooming employee roster.

“The established community of Baldwin Park has proven to be a premium residential location,” Mike Mulhall, a senior vice president and managing partner with JAG, said in a prepared statement. “Coupled with the exceptional medical-related growth on the horizon for the area, Jefferson Apartment Group anticipates Azul to deliver marked and enduring results.”

The apartment market is on the upswing across Orlando, where the average vacancy rate is on track to continue its decline, dropping to an anticipated 5.2 percent in 2013, according to a report by Marcus & Millichap Real Estate Investment Services.

JAG has an active year of building activity planned–and not just in Florida, where the company currently has four other apartment projects in the works.

“JAG is interested in major markets on the East Coast, particularly those with high barriers to entry,” Duncan told CPE. “We are currently working in metropolitan Boston, Philadelphia and Washington, D.C., as well as several Florida markets including Tampa, Orlando, Ft. Lauderdale and Palm Beach.” The company is also in the process of expanding its presence in Baltimore, where it recently broke ground on the 304-unit Jefferson Square at Washington Hill. JAG also hopes to open an office in suburban New York City this year.