Drinking Water from Toilets, and Other Misconceptions of Green Retail Development

Drinking Water from Toilets, and Other Misconceptions of Green Retail Development

About 15 months ago my real estate development firm, Melaver Inc., was hard at work trying to convince Savannah, Ga., officials that many of their required city ordinances simply did not apply to our latest project. This wasn't the case of a major developer trying to skirt the rules; Abercorn Common really was special -- likely to be one of the first (if not the first) all-retail LEED development projects in the country. LEED, or Leadership in Energy and Environmental Design, is the U.S. Green Building Council's voluntary rating system for healthier, more sustainable buildings. Abercorn Common is a national test-case for the new LEED Core and Shell program, which focuses primarily on sustainable features of a project's exterior (roof, building envelope, windows, paving, landscaping, etc.) and not the interior buildout.

The main sticking point at the time was Abercorn Common's rain catchment system, which has the capacity to capture about five million gallons of rainwater into a cistern. We wanted to use this rainwater to irrigate our indigenous landscaping of mature live oaks, yucca plants, and palm trees. We also wanted to re-direct some of this rainwater as part of a graywater septic system. Absolutely not, was the fiat-like response: What happens if someone's drinking water comes from the toilets? (Graywater, which is essentially residential or commercial wastewater (not sewage water), is not potable. While it is not uncommon to use graywater for irrigation and plumbing systems, it had not been done before in Savannah.)

This anecdote brings home quite poignantly the fact that our business is as much about education and outreach as it is about development work. The necessary bureaucratic framework of city permits, zoning laws, and lease agreements is simply not cut out to address some of the greener approaches to land development. Our work on Abercorn Common taught us some key lessons -- not only in the nuts and bolts of green retail development but also in successfully navigating a system that may not be set up to accommodate or encourage innovation.

The Fallacy of "Integrated Design"

The first take-away from doing Abercorn Common is that "integrated design" (a fancy term for getting all the various professionals from architect to general contractor to work collaboratively on design from the get-go) is a bit of a red herring. Given the disparate needs of a variety of tenants, designing a green building is really a constant, ongoing integrated process and not simply up-front design. Each new lease negotiation entails changes to our green legal documents, which results in adjustments to our civil and landscape design, which causes additional conversations with zoning officials. We refer to this as "helical design," since it involves a continual collaborative process among all of our key stakeholders.

Vicious vs. Virtuous Cycles

Another critical lesson with green retail has to do with "vicious" and "virtuous" cycles. The vicious cycle is probably well-known to most of you: Virtually all large development firms will hold their properties for about four years. Time is money; new projects need to develop fast and sell faster so the capital can get re-deployed in future projects. So there is less inclination to invest time and money in systems that will delay immediate payback. Moreover, these developers are generally dealing with the same big-box retailers and the same brokers who represent these retailers nationwide. Retailers have their prototypes and plans for opening X number of stores per year. The tenant-rep brokers know these expectations backward and forward and simply want to make cookie-cutter deals in rapid succession. In short, when you approach this insidious closed-loop system as we have and try to say "hey, we want to build you a store but we want to do it differently," forget it.

However, if you can somehow get past the tenant-rep broker and talk to a retailer's in-house design/engineering team, they actually get what you are trying to do. Many of these teams are already familiar with the challenges of building according to California's stricter energy codes. Whatever the motivation, the lesson learned is simple but elegant: get to the right person inside the retailer's world and the right things begin to happen. The big question of course is how you find this virtuous insider? Sometimes it’s sheer luck. Sometimes, in the course of doing research on a potential tenant, you discover that they’ve done projects elsewhere that don’t fit the retailer’s typical prototype - and you look for the particular team members responsible for these atypical projects. And in a few cases, the retailer is actually on record as promoting eco-friendly practices. Whatever the case, once you find alignment between your team and that of the tenant’s, instead of a vicious cycle of ongoing resistance to green, you find a virtuous cycle of collaboration.

The Financial Barriers to Green Retail Development

Finally, we’re still a long way in the industry from creating a viable financial model in which the incentives of tenant and landlord/owner are aligned in doing a green development for retail versus other commercial development projects. Since office leases typically are full-service (meaning, the rent includes utilities which the landlord pays), investing in systems that are less wasteful accrue directly to the owner/landlord. But retail leases work quite differently, with the individual tenant typically paying for its utilities. Trying to convince retailers to go in on a cost-saving approach for systems which the owner has ponied up for: the market simply isn’t ready for this yet. Alternatively, trying to charge a retailer above market rent because its operating costs will be lower is equally challenging. I’m hopeful that this will change, as the market becomes accustomed to the value of high-performance systems. In the meantime, creative lease arrangements in which the owner/landlord shares in the tenant’s reduced utility bills is worth attempting.

I’ve focused here on some of the challenges to doing green retail rather than trumpet many of the positives which we’ve seen. And that’s because, as one of the participants in the USGBC’s pilot project for Core and Shell, we feel we need help educating the market on critical changes that need to occur. But the positives are there. To the point where we now prefer to refer to ourselves as Envelopers and not developers: the idea being that we are encompassing our community in a different approach toward using (and not using) resources.

There isn’t a day that passes by that we aren’t stopped by folks in town telling us how beautiful our development is. The city officials that gave us such a hard time with our toilets recently took a tour of our project and came away saying "that’s the way we want all developments to be done." We couldn’t agree more.

Martin Melaver is CEO of Melaver, Inc. More information on Abercorn Common is available online.