David Zucker’s interest in green building started in a Dumpster.
“Every Friday, I’d see a container full of what I knew was usable stuff being hauled away to the landfill,” he recalls of watching (and paying for) the weekly disposal of construction waste from one of his early multifamily projects. “I just wanted to save some money on building materials by trying to be less wasteful.”
That purely bottom-line goal quickly evolved into a wholesale commitment to green building, one that has resulted in sky-high returns and retention rates, lower operating costs, higher rents, and satisfied tenants and investors—all for a premium of less than 2 percent of overall development costs.
By the end of the year, Zocalo Community Development, co-founded by Zucker and business partner Chris Achenbach, will open 2020 Lawrence, a 231-unit rental property in Denver’s downtown core that will target professional Gen Y renters with smaller units, lower rents, and a higher level of energy savings, indoor air quality, and comfort than any previous Zocalo building. “It’s the next-highest point of our sustainability arc,” says Zucker. “We’re interested in turning toward rentals that are more achievable for more people.”
That direction aligns well with the coming onslaught of Millennials down their career paths and look and pay for communities that share their environmental sensitivities. In fact, 19 percent of Gen Yers are willing to pay significantly more for a green product, according to a recent national Capstrat-Public Policy Polling survey, a muchas they start higher percentage than among any older generation.
Zucker estimates that offering a LEED-certified building and all its benefits to “tree-huggers, dollar-huggers, and health-huggers” netted him a 6 percent to 9 percent premium on rental rates for Solera, a 120-unit, LEED-certified project that opened a block away from 2020 Lawrence about two years ago, in addition to another 3 percent to 5 percent for the project’s enviable location. “The last 30 units we leased were about 15 percent above the competition,” he says, and easily cleared his pro forma projections.
He attributes that success mostly to savvy marketing and the ecumenical attraction to all that a high-performance building delivers. “It doesn’t take a long conversation to find out a tenant’s priorities,” he says, whether they be environmental, financial, or personal health. “Green building has something for everyone.”
Including investors. Zucker turned a 1.5 percent cost premium to build Solera to a LEED Gold level into a record per-unit sale price in the state of Colorado, providing returns that beat the initial pro forma of Principal Real Estate Investors and its Green Property Fund, a money pool earmarked specifically for LEED-certified projects.