Stone34

Stone34

Stone34, headquarters of Brooks Sports and a profitable, deep-green development for Skanska.

Photo by Doug Scott via Skanska

Stone34 stairs

Stone34 stairs

Enticing stairways encourage people to skip the elevator, saving energy.

Photo by Doug Scott via Skanska

Bullitt Center

Bullitt Center

This is the world's greenest office building, certified under the Living Building Challenge.

Photo by Nic Lehoux for the Bullitt Center

Bullitt active stairway

Bullitt active stairway

It also has a stairway given prime real estate with great city views, rather than buried in the building's center.

Photo by Nic Lehoux for the Bullitt Center

Bullitt biomimicry

Bullitt biomimicry

Like a tree, the Bullitt Center gathers its own energy from the sun and the earth.

Photo by Nic Lehoux for the Bullitt Center

Bullitt solar roof

Bullitt solar roof

A 240 kilowatt solar array produced more energy than was used in the building in 2014.

Photo by Nic Lehoux for the Bullitt Center

Bullitt interior common area

Bullitt interior common area

Information about the Living Building Challenge, including a list of toxic chemicals avoided in the building's construction.

Photo by Nic Lehoux for the Bullitt Center

Bullitt mechanical room

Bullitt mechanical room

A zero-energy building that produces no waste and filters rainwater for drinking requires lots of extra systems.

Photo by Nic Lehoux for the Bullitt Center

Bullitt solar blinds

Bullitt solar blinds

Controlling how much sunlight enters the building helps maintain comfort while reducing energy usage.

Photo by Nic Lehoux for the Bullitt Center

Bullitt timber framing

Bullitt timber framing

Forest Stewardship Council certified timber was used for construction on upper floors.

Photo by Nic Lehoux for the Bullitt Center

The Bullitt Center earlier this month lived up to its billing as the world’s greenest commercial office building. It earned certification through the Living Building Challenge after a year of operations in which the six-story, timber-framed edifice—and its tenants—consumed less energy than was generated by its rooftop solar array, drew no water from the municipal pipes, and discharged no waste or stormwater runoff to the sewers.

Now, developers of as many as six other commercial projects in Seattle are looking to it and the Stone34 building, which is pursuing a lesser but still ambitious Living Building certification, as models for both building to this new, rigorous standard of efficiency and sustainability (more on that below), and testing whether doing so makes economic sense.

Meanwhile, building officials and city planners from around the world are looking to Seattle as a model for ways to permit and encourage these complex projects with their multiple streams of social, environmental, and economic benefits. Seattle’s Living Building Pilot Program, the only one of its kind in the U.S., offers incentives such as increased heights and floor sizes for buildings that use dramatically less energy and water than the existing standard. The incentives, say real estate watchers, plus the example of two completed projects in the city, are helping encourage more developers to explore high-performance buildings.

The developers behind the Bullitt Center—including Earth Day co-founder Denis Hayes, CEO of the environmental nonprofit Bullitt Foundation—see the Living Building Challenge certification as a milestone worthy of celebration. Because it is indeed a challenge to create a functional, desirable structure that has as close to zero environmental impact as anything of its kind on the planet.

But they won’t consider the Bullitt Center a success until it is emulated by commercial developers who have to answer to market forces and investors—not just by other nonprofit groups aligned with the social and environmental goals embodied by the Living Building Challenge, and property owners positioned to hold a building long enough to receive a full return on investment in systems like on-site waste treatment and automated, operable windows.

That’s why the Stone34 building, which has received less attention than the Bullitt Center, is an equally compelling example—and perhaps more so in a commercial context. Global development and construction giant Skanska built the 130,000-square-foot, five-story structure to achieve a partial Living Building certification, which will still make it one of the most energy-efficient commercial office buildings anywhere. Skanska sold the building—headquarters to Brooks Sports, an active participant in the deep-green development—late last year for a substantial profit.

Can other commercial developers expect a similar financial return? It is difficult to tease apart the various motivations, benefits, and incentives embedded in each of these projects. But the Bullitt Foundation is trying to make as much information available as possible. This month it published a detailed financial breakdown of its experience building the Bullitt Center, and has taken countless meetings with developers, government officials, and the general public.

“As our experience builds, we’re trying to be absolutely transparent in every aspect of the building,” Hayes says.

Hayes

Hayes

Bullitt Financials

The 52,000-square-foot Bullitt Center, built on an odd-shaped, sloping parcel in the dense Capitol Hill neighborhood of Seattle, cost $32.5 million, or $625 per square foot. The Bullitt Center’s analysis says this all-in cost (including $3.4 million for the land) is similar to comparably high-performance buildings, and up to 30 percent more than a standard code-compliant office project with no extra environmental amenities.

The Bullitt Center has an amazing array of green amenities, from geothermal heating and cooling to composting toilets to a third-floor terrace garden that treats and disperses greywater (wastewater not from toilets).

The center’s financial analysis (PDF) also notes the difficulty of making an apples-to-apples comparison, given that reliable financial information on the cost and quality of commercial developments can be hard to find, and the Bullitt Center is the first of its kind, designed to last 250 years.

“The purpose of the Bullitt Center was to help shape future projects by overcoming obstacles and breaking down barriers,” the foundation says in the financial case study. “There is little doubt that the identical project today would cost significantly less.”

For example, builders who want to avoid toxic materials—a Living Building imperative—can draw on a lengthy list of products and suppliers developed by the Bullitt Center team. And, Hayes asserts that developers of the next Living Building in Seattle can follow the trail cut through the thicket of permitting bureaucracy by the Bullitt Center and Stone34.

There is now an ordinance recognizing Living Buildings on the books. City permitting officials are getting comfortable with departures from prescriptive energy codes governing things like window size, if a developer can show that the building will be significantly more efficient through other measures. Another ordinance makes it easier and less costly to install solar arrays that extend beyond the footprint of a building (allowing them to be large enough to supply as much or more energy than the building needs in a year). And there’s a clear—if still difficult—path to establishing what amounts to a small water district for each Living Building, so that rainwater can be collected and treated on site and used for everything including drinking.

“The Bullitt Center proved that it was possible to build a Living Building,” says Matthew Combe, program and operations director with the Seattle 2030 District, an organization of downtown building owners and developers focused on large reductions in energy, water, and greenhouse gas emissions associated with buildings. The Bullitt Center’s example, along with new incentives available to projects that pursue even only a partial Living Building certification, and Skanska’s profit on Stone34, are causing developers to take a closer look at high-performance buildings, he adds.

New Incentives

Developers that go through the city’s Living Building Pilot Program can request a range of departures from usual land-use rules governing things like building height and floor-area-to-lot ratios—essentially allowing them to build a bigger building than otherwise allowed on a given lot.

“We were looking for flexibility and ways that would help attract people to the program, and we are finding particularly that the height and the floor area is seen as an incentive by the development community,” says Aly Pennucci, a senior planner with the Seattle Department of Planning and Development. “It’s a pilot program, so we’re learning.”

The pilot program also focuses on waiving certain existing rules that make it difficult to meet the Living Building Challenge, Pennucci says. For example, higher floor-to-floor heights can accommodate larger windows to let in more daylight and reduce the need for electric lighting.

Buildings in the U.S. consume on the order of an eighth of the country’s water and two-thirds of its electricity. Buildings—and their occupants—account for almost two-fifths of carbon dioxide emissions. Improving their performance is a key part of any attempt to address climate change and urban sustainability.

The Living Building Challenge, administered by the International Living Future Institute, is part of a long chain of efforts dating back nearly three decades to reduce building energy and water consumption, reduce construction waste, and ensure healthy interior spaces. It rates buildings in seven broad categories, or “petals,” including site, water, energy, health, materials, equity, and beauty. A building can earn a partial certification by meeting the imperatives for three or more petals.

As one of the most demanding building-performance standards, the Living Building Challenge seeks not only to reduce negative environmental impacts, but to promote buildings that actually provide benefits such as producing carbon-free electricity and capturing stormwater runoff. The next version of the Living Building Challenge, which will apply to projects that register after May 22, will be tougher still, requiring buildings to produce more energy than they use and treat more waste than they generate.

Stone34 Story

Skanska, a Swedish global development giant known already for its emphasis on energy efficiency and sustainability, wanted to make a mark with its debut commercial building in Seattle.

Skanska executive vice president Lisa Picard says Stone34, at the border of the Fremont and Wallingford neighborhoods, is approximately 10 percent bigger than what would have normally been permitted on the site, thanks to incentives under the city’s pilot program. The building, a mix of office and retail space, also cost about 15 percent more to construct, compared to the standard code, she says.

“We engaged in a heck of a lot more risk on this project, largely because we needed the increased zoning,” she says, adding that “it doesn’t compensate you for the costs that you’re incurring from a construction perspective.”

Picard

Picard

The company had previously done a small classroom addition to the Bertschi School in Seattle that also earned Living Building Challenge certification in 2013—the first in the world to earn the certification under a revised set of criteria. Its U.S. portfolio also includes some 125 projects that have obtained or are pursuing Leadership in Energy and Environmental Design (LEED) certifications—a far more common green building standard.

“We’re committed to pushing innovation in this area,” Picard says. “We believe the way we build matters to the community, it matters to the planet.”

By finding a like-minded tenant for most of Stone34 in Brooks Sports before construction began, the risk of doing a deep-green building was reduced, Picard says.

Another key difference from many other developers: Skanska self-finances its developments, so it didn’t have to convince outside investors or lenders that the investment in a high-performance building was worth it. That said, Skanska underwrote the project with an eye toward achieving a risk-adjusted return, “like any other developer would,” Picard says.

Late last year, Skanska sold the building to a joint venture of Unico Properties and Laird Norton Properties for $70 million. The company expected to spend $51 million to develop it—which translates to about $392 per square foot, compared to the Bullitt Center’s $625—but would not confirm the actual total cost. (The transaction includes the transfer of a 55-year land lease Skanska inked with Fremont Dock Co., meaning the land itself was not sold.)

Picard described the outcome as “awesome,” because the project achieved both Brooks’s goals and the return-on-investment the developer sought.

Combe, of the 2030 District, says Skanska’s success with Stone34 “definitely opened the eyes of a lot of developers out there, who started to realize that this was a way to actually make a profit on a building, rather than just doing things the way they’ve always done it.”

Risk Factors

In addition to the environmental and social benefits of a Living Building—many of which don’t deliver anything tangible to the bottom line, but may be worth tens of millions of dollars over a building’s lifetime—there are substantial risks to this kind of development, which incorporates new technologies, materials, and approaches to just about every aspect of designing, constructing, and operating a commercial building.

“[T]he most significant risk for project teams working on deep green buildings is the possibility that they will not be able to achieve their environmental goals cost-effectively, if at all,” wrote Kathleen O’Brien, Nicole DeNamur, and Elizabeth Powers in a 2013 Washington Journal of Environmental Law & Policy article (PDF). “If they do not, the environmental and financial costs can be significant, resulting in the loss of correspondingly significant societal benefits.”

The Living Building Challenge focuses on actual performance rather than just the features put into a building—an important difference from other green building certifications. That’s why the Bullitt Center only this month earned its certification, despite opening its doors in 2013. Stone34 will pursue certification for certain aspects of the challenge sometime next year.

While the emphasis on performance ensures the environmental and societal benefits of green buildings are real, it also piles on additional risk for building owners and developers—and requires buy-in from building tenants.

If, after two years of occupancy, a building falls short of performance targets, the developer may face a fine of up to 10 percent of construction costs (increased by the City Council last year from up to 5 percent). That’s on top of the lost savings that were embedded into the building’s financial projections.

If a building fails to meet energy and water conservation goals later in its life, it would be subject to the same kind of code enforcement actions as any commercial building that falls out of compliance with its permit requirements, Pennucci says.

She adds that building owners can avoid penalties by making changes to the building and submitting a new report on building performance. “Our goal is to see these projects succeed and perform as planned,” she says.

Skanska’s Picard says this still amounts to a cost increase, because developers have to make provisions for the potential penalty. And Hayes, who advocates for some penalty to prevent developers from gaming the system, says a 10 percent penalty is too high. “It’s stopping people from doing it,” he says.

Penalties aside, Hayes asserts that with a good team of architects, engineers, and contractors “concerned with doing real craftsmanship,” the technology risks impacting building energy performance can be minimized.

But technology only takes you so far.

“You can get 50 percent reduction of what a normal building uses by just throwing a heck of a lot of technology and cost at a building,” Picard says, noting Stone34 features including a salt-filled tank that acts as a heat sink, eliminating the need to run a chiller to cool the building. “But to get the other 25 or 50 percent reduction in a building, you have to actually convince the occupant to change their behavior, and that’s always been the challenge with commercial office buildings.”

She says it’s easy to make the case to a tenant that the slightly higher rent they’re charged for an ultra-energy efficient building will pay off over the course of a seven- to 10-year lease through lower utility bills. She says Skanska expects tenant operating expenses at Stone34 to be roughly $1 per square foot less per year than a standard building, a 20 to 30 percent savings.

But that potential return on investment may lose some luster if the tenant also has to buy new equipment, turn off printers and lights, and configure office layouts to maximize daylight into the center of the building—all measures to help meet building operational goals.

Anchor Tenants

Running-shoe maker Brooks got on board early with Skanska for the Stone34 project. Brooks saw the building’s deep green amenities as a fit with its sustainability goals, and as a way to attract and retain customers and employees. The location, across the street from the busy Burke-Gilman Trail—a popular running and cycling route connecting several Seattle neighborhoods—was also a natural fit.

Brooks committed to the behavior changes necessary for the building to meet its efficiency goals, Picard says, though not without some trepidation: lease negotiations took “probably six months longer” than normal. But so far, “performance-wise, they’re rockin’ it,” Picard says. Since moving into the building last fall, Brooks has been beating its building performance targets by better than 50 percent, Picard says.

In the case of the Bullitt Center, tenants have an annual energy budget, measured through sensors in every wall socket and keycards that monitor use of shared resources such as the elevator—and made public via a real-time dashboard. (The beautiful, glass-enclosed staircase rewards those who eschew the lift with great city views; Stone34 has a similar “active stair.”) If tenants stay within their energy budget, the building management pays the energy bills for them. And so far, they’ve been so frugal that the building could get by with a smaller solar array, pointing the way toward even lower costs for the next Living Building.

“It’s in their economic interest to do this and they’ve performed pretty spectacularly,” Hayes says. “But that requires a degree of engagement in the operations of the building. Overwhelmingly, developers build things on spec and they intend to be out of the building in three to five years.”

Picard argues that more incentives are needed not just for developers, but for businesses—the tenants themselves—to motivate them to move into high-performance buildings. Developers will build these buildings, she says, if there’s a clear demand for them.

Next Steps

But have the Bullitt Center and Stone34 blazed a clear enough trail for other developers to follow?

An office development at 15th and Market in Ballard has started the design review process under the city’s pilot program. Four or five other projects, including commercial offices, a hotel, and a residential development, have expressed interest, but are still assessing the feasibility, Pennucci says.

The pilot program is meant to help refine the permitting process further, identifying areas where it’s working and where it needs improvement. It’s currently set to expire at the end of the year or when 12 projects have enrolled. Pennucci says the city is developing legislation to modify the program further and extend the time horizon. “We do want to see more projects come through the pilot,” she says.

The program was tweaked last year in an effort to tie it more directly to the Living Building Challenge, particularly for projects that aim for something less than the full challenge. Developers can still obtain some of the incentives—all in the form of favorable departures from the city building code—by achieving at least three of the seven petals that make up the Living Building Challenge, while reducing energy usage by at least 25 percent and water usage by 75 percent compared to a normal building, and capturing at least half of stormwater runoff from the site.

Pennucci says other cities are contacting Seattle to learn more about the pilot program. The Bullitt Center and Stone34 were hot topics at the recent American Planning Association national conference held in Seattle. “I think it’s really gaining momentum now that people are seeing projects,” Pennucci says.

“We’re still really at the beginning of the Living Building Challenge,” says Combe, of the 2030 District. “It’s introducing developers who wouldn’t necessarily have thought about this previously to the challenge itself, and as they become more comfortable with it… it will definitely start to ramp up the adoption of the challenge.”