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The Cost of Going Green

While there is no denying that Budapest’s building stock is becoming greener (all new builds have green accreditation nowadays), it isn’t always clear what is driving this, according to tenant representation specialists VLK Cresa.

Péter Takács, Partner, VLK Cresa

“It is partly marketing for the developers, partly sustainability, partly a genuine effort to cut building emissions, and partly company branding; a desire from tenants to keep their talents by offering green workspaces,” says partner Péter Takács. “The truth is that no one factor dominates; it is a complex matrix of interconnected issues.”

That the green trend is well established is an indication of the growing maturity of markets such as Hungary, says Takács, though he admits there is still a way to go.“It started to happen seriously five-ten years ago, and came in with more responsible developers such as Skanska, with its Scandinavian background, who built the first green accredited building, Green House. It is certainly true today that a lot of tenants are sensitive and open to it.” 

But not all. And even for those that are, green certification is almost never the number one priority for a tenant looking for new offices. “I can say that, of the projects we have worked on in the last year, nobody has asked us for a fully sustainable building at the outset. When we share with them our section of property choices, and explain the green certifications, they are interested and want explanations.” Specifically, he says, tenants want to know if the green technology translates into cost savings. 

Recurring Theme

Cost is something of a recurring theme. If you are a developer, there is a balance to be struck between putting in the latest solar panel technology today, say, or waiting two or three years when that same technology will be more widely available and, crucially, cheaper. To a certain extent, that can be accounted for if you are talking about a new build, but such ROI questions are particularly pressing if you are talking about an upgrade to an older building.

But even if a landlord puts in newer equipment, is it really more efficient? (Takács says VLK Cresa has found cases where it was actually worse.) And if it is more efficient, do the tenant’s work processes allow them to get the most out of the potential cost savings? Generally what is required is a genuine partnership between landlord and tenant to find the best results. A growing area of work for VLK Cresa involves educating clients and performing energy cost audits. “You can have the most modern office imaginable, with rainwater collection, thermal heating pipes, solar panels, but it doesn’t mean much if you are throwing away hundreds of plastic bottles a week!” 

The most common green certificates are from BREEAM and LEED. At the lower levels, they really represent little more than a marketing stamp, says Takács. Only at the very top levels does it represent a serious commitment to going green, not least because the technologies required are seriously expensive. But there is a third player gaining a presence on the market, WELL, which looks less at the building, and more at the people inside the structure. “WELL has a very good approach; it is how green certification should have started in the first place, because it considers the well-being of the employee. It is a truer measure of how the building performs because it looks at how the individual is able to perform in that building.” And as we all know by now, happy workers are more productive workers. 

The first buildings to receive the certificate in Budapest are only being built now. Again, tenants are not demanding offices with these credentials, but Takács thinks they will readily understand what the accreditation stands for. “WELL will not solve all sustainability issues by itself, but we think it is easier to understand, for tenants to relate to in business terms.”