Financial Feasibility of LEED Certified Buildings for Developers and Investors

This is a case study on a small to mid-size private equity firm that deals with real estate development as well as investment to find out the financial feasibility of LEED certified buildings in today’s building climate. Interviews with two investment analysts at this firm who are versed in LEED certification about how it is looked at in their company as well as the broader industry will give insights into the feasibility of developing or investing in environmentally friendly buildings. This impacts the real estate and construction industries due to the fact that developers and investors are often times a large part of the clientele for contractors. This paper will look to industry professionals to find out some of the conditions that are needed in order to make capital investments in LEED buildings, such as geographic location, tenant motivation, and large institutional sized products. The findings of this study were that for medium to small sized investors and developers focused on maximizing rate of return through short hold periods, there are little incentives to invest in LEED certified buildings, however the analysts acknowledge that there are benefits and could be effectively implemented in long term hold approaches or for very large institutional investments