While management has been shown to have a greater impact on worker productivity than any environmental factor, environment does matter. In May 2009, a team from CBRE and the University of San Diego's Burnham-Moores Center for Real Estate conducted a survey to examine the impact of green buildings on productivity. All told, 154 buildings containing more than 2,000 tenants -- which were deemed green by virtue of either the Energy Star label or LEED certification at any level -- were surveyed. Forty-four percent of the buildings were located in the central business district, while 56 percent were midtown or suburban. Ninety-four percent of the buildings were multitenant. Most were Class A or A-.
The survey results showed that 12 percent of tenants "strongly agreed" that employees are more productive after the move, 42.5 percent "agreed" that employees are more productive and 45 percent suggested no change in productivity. Forty-five percent agreed that workers are taking fewer sick days since moving, 45 percent found it to be the same as before, while 10 percent of those experienced more sick days. The 10 percent who reported more sick time after moving were in Energy Star-labeled buildings and not LEED-certified. Why they experienced more sick time is not clear. Of those who did find less sick time than before, the answer given most frequently was two days, with an average of 2.88 days less sick time.
If we take only those tenants who claimed an increase in productivity, we observe economic impacts based on salaries that approach the cost of rent using a very conservative square feet per worker assumption. If we use 200 square feet per worker, the results would be closer to or exceed typical rents from this one single impact. While the LEED results were slightly better at 5.24 percent increased productivity, we use the entire sample here.
Productivity impact for tenants who claimed greater productivity
Average productivity increase: 4.88 percent
Average salary: $106,644
Average impact per worker in value add: $5,204
Net impact at 250 square feet per worker using salary as index: $20.82 per square foot, per year
Repeating the same analysis using the average sick day declines and excluding the 10 percent that claimed an increase in sick days, we find potentially another nearly $5 per square foot in economic impact.
Productivity impact of fewer sick days using average survey results
Average fewer sick days: 2.88
Working days per year: 250
Average salary: $106,644
Average impact per worker in value add: $1,228.54
Net impact at 250 square feet per worker: $4.91 per square foot, per year
What is increased productivity and reduced sick time worth in net present value (NPV) terms? A 2003 study by Greg Kats, which had a sample of 33 green building projects, suggested NPV benefits in the range of $37 to $55 per square foot. For an owner-occupied building, we can easily imagine NPVs equal to much more than these figures. For example, discounting $25 per year per square foot for 10 years at 10 percent, based on the rounded sum of the two benefits shown above and assuming a 10-year differential for such benefits and a fairly conservative discount rate, we get a present value of $153.61 per square foot.
It costs much less than this to build a better environment for workers, so the net present value certainly could reach $100 per square foot or more when an owner-occupant captures those benefits. Good environments seem to be good investments, yet more study is needed to verify the green features with the greatest impact.
Miller, Ph.D., is a professor and director of academic programs at the University of San Diego's Burnham-Moores Center for Real Estate. Pogue, LEED AP, is the national sustainability director at CBRE. For the full study, go to usdrealestate.com.