greEntrance – The Gateway to Green Building by Team greEntrance
Pitch
greEntrance – the software helping real estate companies to find the most efficient green building rating system for their individual needs.
Description
Summary
In the real estate sector there is a huge and still growing amount of certificates and rating tools for green buildings. Asking real estate companies, you quickly notice a sincere intent to rate the buildings in their portfolio and indeed the number of buildings with green certification is increasing supported by the climate protection goals of the German federal government and the European Union. However, two main aspects hinder the propagation of green ratings: Firstly, real estate companies are discouraged by the uncertainty regarding costs and benefits of green ratings. Secondly – even if real estate companies have come through with the decision to certify their buildings – the huge number of different rating tools and agencies can confuse them and render them paralyzed and unable to take a decision for one specific rating system.
greEntrance will address both of the identified inhibitors directly. The main idea is to develop a tool that allows real estate companies to compare and evaluate a specified range of different green ratings/certifications in terms of costs and benefits by simply entering the basic parameters of their buildings such as location, size, use, age, as well as the documentation status (e.g. plans and technical data) of said buildings in an easy to use user frontend.
Since buildings vary regarding to relevant factors, there cannot be the one best certificate but we think there is a certificate for each building generating the most benefit per invested capital.
Our software will help investors and real estate companies to identify the ideal certificate for every single real estate property. End-users will only have to enter the already available data of their building and the tool calculates the financial effort/expenditures necessary for each certificate and which benefit will be generated regarding the individual preferences of the real estate companies.
The roll-out of the tool should be web-based to ensure easy accessibility.
Category of the action
Building efficiency: Physical Action
What actions do you propose?
For a successful implementation of greEntrance following steps are required:
- Phase 1a: Connecting with main actors in politics, green building organizations, and the real estate industry
- Phase 1b: Tool development (selection of ratings to be considered, data analysis, assessment of the different benefit factors, programming, testing)
- Phase 2: Roll-out/marketing/communication
- Phase 3a: Maintenance of the tool and continuous improvement
- Phase 3b: Expansion to other countries, building types and ratings
In phase 1a we would connect with green building organizations (like LEED, BREEAM, DGNB e. V.) to gather information about existing certifications for the German real estate market. Co-working with organizations which have developed their own certificates, we want to generally identify all possible expenses for different rating systems as well as the benefits generated by the rating.
Expenses can for example be auditing fees, structural survey, time expenditure, user surveys, on-site inspections, and implementation costs. Benefits on the other hand can be divided into three aspects: owner benefits, user benefits, and societal responsibility. Those can include but are not limited to a better marketing strategy for the building, an improved prestige value, higher level of comfort for tenants, increasing rental revenues, decreasing operating costs, and positive environmental effects.
The European Union proposed a climate mitigation target of 20% until 2020; the German federal government committed itself to cut back CO2 emissions of residential real estate by 80% by 2050. Against this background, politics must have a major interest in proposals to enhance the reduction of greenhouse gases. Our team would connect with federal and European politicians to seek support for the implementation of our idea.
The requirements and interests of potential customers such as institutional or public real estate investors (e.g. the Federal Authority for Real Property Administration – Bundesanstalt für Immobilienaufgaben) in our tool will be identified in focus group discussions.
In phase 1b our intent is to develop a tool which can help real estate companies to decide which green building rating system is the most efficient tool for their special situation (referring to all relevant data and documentation) of the building to be rated. The goal is to develop a software where the real estate companies can fill in the data of their building and get a recommendation which certificate or rating system is the most effective and efficient for their needs.
Combining cost-benefit and value-benefit analyses, the method of our choice will be the cost-effectiveness analysis. The cost-benefit analysis sums up all relevant expenses to capital values. The value-benefit analysis weights the relevant benefits and multiplies them by their effectivities. Finally, overall effectivities will be divided by the related capital values, whereby the cost-effectiveness of each alternative is determined. The weights of benefits are determined conducting a survey amongst the users of the software enabling them to prioritize individually.
With such a tool, which is easy to access and user-friendly, it can be shown that rating buildings not only generates macro-economic benefit, but also commercial benefits for the investors. It will set incentives to rate buildings because it offers an easy way to get information about the different rating systems. The existing entrance barrier to the rating of buildings will be lowered since all information and data about potential rating or certification systems is already incorporated in our tool. This leads to a revised design or at least to an optimized use of the building.
Phase 2 is the roll-out phase of the tool. Before the go-live of the tool several test runs with different buildings will be necessary to ensure objectivity and user acceptance. Test runs can be either performed in a test environment with fictional scenarios and/or in close cooperation with real estate companies.
For easy accessibility the tool will be web-based and have similar functionalities as for example insurance.com for the comparison of car insurance plans. In the beginning the distribution of the tool could be facilitated through websites of participating organizations. We also want to offer our tool to auditing companies as a software to support customer advisory services. First interviews and expertise from working at an auditing company have shown that there is a demand for such a software especially when it comes to the consulting of customers from the real estate industry.
Phase 3a covers all required maintenance and revision activities for greEntrance. This also includes the potential reevaluation of cost and benefit factors of the embedded rating systems. Therefore a constant dialogue with the certification organizations is mandatory.
In phase 3b greEntrance can reach its full potential by expanding in one or several of its dimensions. The tool can be enhanced to further countries, building categories and rating systems. Additionally, greEntrance can act as an integrator between the various stakeholders in the green building sector. Certification organizations can use it as platform for discourse and exchange of best practices, real estate investors and local auditing companies can use it as a match-making device. Last but not least greEntrance can become the green link between federal administration and the real estate business. As acceptance of the tool and market needs are difficult to predict, the description of phase 3b is kept rather vague. Based on market requirements and changes in the political framework conditions the required actions and tool developments will be initiated by the project team.
Who will take these actions?
Key actors are
- Certificate/Rating developing organizations such as DGNB e. V., BREEAM or LEED which shall feed the tool with information. We also want to integrate rating systems without certificates, like Green Rating Alliance. There should be an interest in working with us, because our tool will spread the popularity of each system. As the benefit for users of the tool is highly dependent on the quality and comparability of data a close cooperation with the organizations is mandatory.
- Politics supporting our tool and delivering information about the legal framework conditions as well as facilitating focus group discussions and workshops.
- Our Team doing the research and development of greEntrance.
Where will these actions be taken?
With Germany having an appropriate fertile political and societal soil, the project is targeted to the German real estate industry in the beginning. Our wish is to act as international as possible and integrate international rating systems from the beginning since the real estate industry is internationally oriented: a lot of real estate companies own a portfolio of buildings all over Europe or the whole world, and the demand for international certificates (e.g. BREEAM and LEED) in Germany is increasing. Especially in regard to legal framework conditions our expertise is focused on the German and European market, nevertheless we are willing to continue our studies to further countries to customize the software to local benefits or regional distinctions (e.g. given permitting priority in some US cities).
In the first step the tool will be focused on existing office and administrative buildings but it should and will be expanded to retail and residential buildings as well.
The European Union with an aligned political framework is a good starting point for the expansion whereas for the global roll-out a more in depth analysis is required in regard to the legal, economical and societal framework conditions.
How much will emissions be reduced or sequestered vs. business as usual levels?
Our tool will set incentives to invest in improved technologies and building use, which will lead to reduced emissions. Regarding the modernization of Deutsche Bank headquarters in Frankfurt/Main, Germany a reduction of CO2 emissions by about 89% was calculated beforehand. Due to the nature of this project (modernization instead of change of usage) the scale of possible emission reduction is not universally valid, but an indication of our proposals potential.
As detailed data for the German market is available, the following estimate is limited to Germany but applicable to other countries.
GHG emissions in 2010 for commercial real estates: 14% of total GHG emissions (133 Gt CO2 equivalents)
Assumptions:
- GHG emissions reduction: 20%;
- current rating rate: 1% per year;
- increase to 2% by our tool
Result: additional saving of 266 Mt CO2 equivalents per year.
Our assumptions are very conservative, since residential real estate is not considered yet, and rating processes often come with energetic.
What are other key benefits?
In addition to the energy savings and the reduction of emissions there will be improvements in all dimensions of sustainability (ecological, economical, and social). Saving energy, there will also be a reduction of operating costs. Socially, there will be an increased comfort which could lead to a better working atmosphere and increased output of the tenants’ work. This will increase the tenants’ satisfaction as well.
greEntrance is not impacting CO2 emissions nor energy usage directly, but as a tool facilitating the access to green rating it can become one of the key instruments giving real estate companies a nudge in a green direction and help changing the mindset of potentially the entire real estate industry.
What are the proposal’s costs?
The main cost drivers in the beginning are the development and the coding of the tool. Additional costs will arise for server rental, marketing, and maintenance of the tool. With the attached time line and an estimated go-life in the first half of 2016 the total non-recurring costs are estimated at $50,000 while recurring costs are estimated at $135,600-155,600 per year. Therefore the cost-benefit-ratio is another category in which greEntrance really shines.
- coding/technical investments: $50,000
- project management: $40,000/y
- project team: $65,000-85,000/y (depending on the further development)
- server rental and maintenance: $600/y
- out-of-pocket expenses (workshops, travel expenses, …): $15,000/y (less in the forthcoming years once contacts are established)
- marketing/communication: $15,000/y
Time line
As the corner stones of greEntrance are mostly modular in regards to building size, usage, targeted market, or green building rating system, the tool is easily scalable to different real estate industry sectors and markets. However the tool is primarily aimed to a short term implementation. In the long run it could change the switch on track for a greener real estate industry.
In detail phase 1 will take approximately one year while research, networking, and development of the tool will happen in parallel. A pre-study was already conducted in terms of a Master’s thesis (Karliczek 2014). Phase 2 with testing and roll-out will last about six months. With the beginning of phase 3a the first project cycle is completed after a total of two years. The embedded data in the tool needs to be kept up to date and revised constantly.
Due to the modular setup and scalability of the tool, phase 3b can be adjusted to the political and societal development of the targeted countries. The steps to be undertaken are repetitive to the first implementation of the tool.
The impacts of the proposal will already kick in almost instantly after the implementation. It will catalyze a change process in the wake of German and European climate policy targets for 2050.
Related proposals
References
Amongst others:
- Eichholtz, P.; Kok, N.; Quigley, J. M. (2010): Doing Well by Doing Good? Green Office Buildings. In: The American Economic Review 2010 (Nr. 100 - 5), p. 2492–2509
- Henzelmann, T.; Büchele, R.; Engel, M. (2010): Nachhaltigkeit im Immobilienmanagement. Study by Roland Berger 2010.
- Karliczek, Nina-Maria (2014): Mehrwert und Mehrkosten einer Gebäudebewertung im Bestand, Master’s Thesis unpublished
- Miller, N.; Spivey, J.; Florance, A. (2008): Does Green Pay Off? In: Journal of Real Estate Portfolio Management 2008 (Vol.14, No.4), p. 385-399.
- Rakau, O.; Nelson, A.; Dörrenberg, P. (2010): Nachhaltige Gebäude: Von der Nische zum Standard. In: DB Research (483), p. 1-24
- Statista – Das Statistik-Portal: CO2-Emissionen – Gebäude (2010). Online at http://de.statista.com/statistik/daten/studie/167992/umfrage/anteil-der-co-emissionen-durch-gebaeude/, 20.07.2014
- Umweltbundesamt: Treibhausgas-Emissionen in Deutschland (2014) Online at http://www.umweltbundesamt.de/daten/klimawandel/treibhausgas-emissionen-in-deutschland, 10.03.2014
By:
Team greEntrance
