Sustainable Architecture

I took a walk around the new Federal building with my friend Jim, an architectural critic. If you walk around San Francisco, you can't miss the enormity of the City's most recent edifice.

However, you might miss some of the environmental features of the building. Most prominent of the features: no air conditioning. What may be most notable about the absence of air conditioning at the new Federal Building is that it took so long to build a modern office building without air conditioning in a city known for its natural air conditioning system: fog.

To replace air conditioning, the building employees several emerging technologies. Many windows open automatically to cool off the building, especially at night. On the north side of the building (see photo), the decorative fins act as chimneys to vent hot air up the side of the building. The delicate building skirt on the south side provides a sunblock that reduces radiation absorption on the building's sunniest surface.

Removing the air conditioning also frees up space inside the building. Gone are the air conditioning machines, electrical panels, and ducts needed to cool most modern office buildings. Building maintenance costs change, too, with automatic window maintenance replacing air conditioning maintenance. Removing the air conditioning also requires more attention to building orientation, with as narrow a building as possible for natural air flow and lighting, and as little eastern and western exposure as possible for sun utilization.

Some of the energy saving features involve behavior modification of the building's occupants. The elevators, for instance, stop at every third floor rather than at every floor. In theory, these elevators deliver you to your desired floor more quickly when you take an elevator that goes to your desired floor because that elevator makes fewer stops on the way. Fewer elevator stops translates into more efficient use of elevator energy. It also gives occupants an incentive to use stairs to travel to floors only one or two levels away.

All-in-all, the building's designers estimate the building will use 50% less energy than a standard U.S. office building. Here's a comprehensive video on how the EPA built a sustainable building. It examines everything from site utilization to construction techniques to energy use.

It's difficult to pinpoint the start of modern architecture, but William LeBaron Jenney's innovate use of steel framing made possible the first skyscraper in 1885. By today's standards, the 10-story Home Insurance Building appears minuscule.

When it was introduced, the clear advantage of skyscraper design was building more office space on a given plot of land. Since 1885, improvements in design, construction, material, and building technologies have provided the ability to build practically any office building imaginable. While architects cram more and more usable space onto a property with all these new technologies, they have not created particularly efficient buildings.

Given the economic advantages of building sustainable buildings, how did the commercial real estate market arrive at a point where sustainability is so rarely incorporated in building design? An emerging idea is that financial markets under-value total cost of ownership for a structure. Three factors cause the market to discount ongoing operating costs.

First, since buildings are easily razed and replaced, investors sometimes value a property for its potential cash flow rather than its current cash flow. As the expected life time for a building shrinks, so does the value of reducing a building's energy use.

Second, the risk of introducing a new sustainable technology may outweigh its potential cost savings. For example, if you build a commercial building with elevators that stop at every third floor, do you decrease the building's yield because fewer companies want to rent in the building? Give an investor a choice between a known design that creates a predictable cash flow and a new design that may save money, and the investor will chose the predictable cash flow every time.

Third, the increased liquidity of commercial real estate in today's capital markets gives builders an incentive to complete a building quickly with technology that its subcontractors have deployed rather than new technology that may slow down a project. Faster construction translates into quicker sales and lower construction financing costs. Liquidity increases with commoditization, too, and so an innovative building may take longer to sell.

What pushes the commercial real estate market towards sustainable building? Many of the sustainable buildings in the U.S. are government buildings. Since the government, a very large owner of office space, maintains buildings for long periods of time, it discounts sustainability differently than the commercial market and places a higher value lower operating costs. The good news is that taxpayers will be rewarded for the government's rational risk-taking. The better news is that the commercial markets will be able to model innovative sustainability technology accurately, thus reducing the risk of these technologies in the commercial market.

Other emerging ideas include better sustainability standards and different finance instruments. One simple sustainability standard would be a measure of energy use per usable area, analogous to the government's MPG mileage standards for cars. If buildings were rated for typical energy use in, say, BTUs per square meter, a tenant could compare office space with some idea how much of rent goes to pay the power company instead of building amenities. Such an energy use standard might have all the same problems as the MPG used for cars, but it has the potential to improve significantly the information flow in the real estate market.

Building financing could be split between short-, medium-, and long-term owners. Short-term owners would assume "start-up" risk, including design approval, project management of the construction, and commodity prices for materials. Long-term owners would assume "market" risks, including changes in local business activity, interest rates, and energy and labor costs. By segregating the risks, rewards could be tailored for categories of investors. As importantly, long-term owners would weigh-in on sustainability.

Unfortunately, plenty of inefficient buildings will stand with us for decades. That should give government and commercial building owners who care about sustainable architecture more incentive to fix the market soon.


Update: Jim's take on the new San Francisco Federal Building.