He advises landlords to take a long-term view. A study of U.S. office buildings carried out by Maastricht University in the Netherlands found that owners of green buildings could charge a 3.5-per cent rental premium, and that occupancy rates for such buildings were 6 per cent higher than those for non-green buildings.  

“When a tenant is signing a lease for a building like that, they know their operating costs are going to be lower,” said Esposti, who is also a member of BDC’s Corporate Social Responsibility Advisory Council.

“They also know that the air quality is going to be better, so they’re going to have a more productive workforce. They’re prepared to pay the premium.”

As a result, the value of green buildings rises. The same Maastricht University study found that such buildings command a premium of 16 per cent to 17 per cent on sales price per square foot.

If a landlord is convinced that a green retrofit makes long-term financial sense, the next step is togather the facts. Esposti said energy-saving fixtures usually pay for themselves within two to six years, but landlords need four things to ensure retrofits actually deliver those savings:

• baseline data on the building’s energy and water use before the retrofit;
• recommendations on equipment to reduce that use;
• an engineer’s estimate of the projected energy reductions and cost savings; and,
• a monitoring program to collect data on the building’s energy and water use after the retrofit.

Many consulting companies can provide this information, but paying for those services and for the recommended equipment can be tricky.

“Existing buildings tend to be fully leveraged to begin with,” said Esposti. “So something outside of conventional mortgage financing is required.”

He advises landlords to approach their current lenders to discuss their financing options. He suggests using information from the Canada Green Building Council and Natural Resources Canada on the benefits of green buildings to support their loan request. Bankers may be willing to provide financing similar to a loan for the purchase of new office equipment.

Esposti also urges landlords to contact the BDC regarding financing. “We do have money available for doing things aside from mortgage financing.” BDC is currently looking at ways it can specifically help entrepreneurs reduce their companies’ greenhouse gas emissions and increase their energy efficiency.

Alternatively, if the project involves retrofitting a municipally-owned building, such as an arena or museum, it may be eligible for a grant or loan from the Green Municipal Fund, a federal government program run by the Federation of Canadian Municipalities.

Until a national green loans program is available, landlords will need to be creative in finding financing for their retrofit projects. But the prospect of increased rents, occupancy rates and sales prices may be just the incentive they need to go that extra mile.

(This article was provided courtesy of Business Development Bank of Canada)