Given the economic uncertainty of the last nine months, many tenants are electing to renew their leases rather than pick-up and move to new spaces. One of the results of this trend is any tenant improvement (TI) dollars associated with the lease renewal must be used to upgrade the existing space without vacating the work force.


This renewal trend, combined with greater pressure for companies to reduce operating expenditures, leads to a question frequently asked: “What is the payback on operational savings associated with upgrading to a LEED certified space?”


The answer may surprise. LEED first-costs range from 2 percent to 8 percent of the construction value depending on the certification level (e.g. silver, gold, or platinum). And although this first-cost may buy good marketing, it will not go far towards reducing operating expenditures. A recent case study on a LEED silver, 40,000 square-foot fit-out, yielded a payback of almost 11 years, and the payback was longer for higher levels of LEED certification, such as gold and platinum.


The reason that performing a LEED retrofit has such an elongated pay-back on operating expenditures is that the LEED system requires a number of first-costs that have little or no operational savings. For example, a tenant in a 10,000 square-foot office wanting to achieve the LEED credit for commissioning and enhanced commissioning, can expect to pay around $15,000 in consulting fees. Even if the commissioning exercise led to a 3 percent energy savings, the energy avoidance payback would take approximately 11 years. A second example of the LEED first cost is the new requirement for the tenant to use at least 50 percent Energy Star Rated equipment. This requirement may cause the tenant to replace existing computers with Energy Star rated computers. Energy Star computers may save some energy, but that savings is only a fraction of the purchase price.





Why Do It?


So if LEED is not the best return-on-investment, then what types of tenant improvements will provide a decent payback and not require the office to be vacated? 


Lighting modifications and adaptable design elements are both tenant improvements that have decent paybacks and can be performed without vacating the office.


Adaptable design elements allow for reconfiguration of the work space to meet the dynamic needs of the work force. They include demountable walls, modular systems furniture, and shared/flex space for employees who are infrequently in the office. With the average lease rolling every five years and the potential for work force contraction and expansion between lease renewals, an adaptable design system can save time and money when re-configuring the office layout.

Levi Reilly, PE, LEED AP, is a project manager at Leggat McCall Properties in Boston.