Palo Alto Mandates Green Building for Commercial Construction

June 30th, 2008

Palo Alto has announced that any commercial construction greater than 25,000 square feet will require Green Building Council verification. That move makes it the first south bay city to codify green building. While many new projects coming out of the ground today seek LEED certification, the fact is that ultimately the increased expense of LEED building, at least for the first few years, will be something which will affect the land costs a developer can afford to build. Ultimately, it is the tenants which much demand LEED buildings, otherwise the only difference to a developer is that they are delivering a building at a higher cost. If tenant’s do not demand LEED space and are prepared to pay for it, then mandating LEED does nothing more than reduce the land cost a developer can pay.

The mandate however is not something that will bring commercial construction to a halt. It will simply take a few years to work out as ultimately the tenant demand for LEED space will materialize one way or another; whether voluntary or driven by market forces. Until then, developers will continue to build but it will just take more to make a deal to pencil.

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