LEED certification loses luster for landlords (Sacramento)

Twin Trees Land Co.'s latest investment might take a decade to pay off.

So estimates Jeffrey Lum, a vice president with the Hawaii-based firm, which owns five office buildings in Sacramento.

The latest investment isn’t a new building. It’s the purchase of energy-efficient technology and materials that helped two of Twin Trees’ buildings secure a gold rating this year under the Leadership in Energy and Environmental Design program.

"It’s going to be 10 years before it pays for itself," said Lum, who revised consultants' estimates that LEED upgrades at the company’s buildings on Douglas Boulevard would break even after seven years. "For most investors who won't see a payback right away, that’s not worth it. But we've always had a philosophy of owning our buildings for the long term so we try to keep them to the best standards, renovate and do upgrades."

Landlords like Lum appear to be scarcer these days.

Once the hottest trend in commercial real estate, LEED certification has cooled as office building construction has plummeted. Applications for LEED certification are significantly lower this year, according to the U.S. Green Building Council.

The number of applications rose swiftly for three previous years until there were more than 10,300 applications nationwide last year. Through July of this year, however, there have been about 3,800 applications.

“Construction starts across the U.S. are down this year, and there are fewer building projects under way due to the economic troubles,” said Taryn Holowka, marketing director for the U.S. Green Building Council, which developed LEED standards. “We are also seeing lower employment numbers and reduced occupancy of buildings, which makes it difficult for building owners to justify new construction. We hope to see things shift as we progress through 2010 and into 2011.”

Holowka said that even in a weak economy, LEED works as the premier system to verify buildings are saving energy, conserving water and improving indoor air quality.

Read the full story in the Sacramento Business Journal.