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The new LEED For Retail certification: Can it improve the bottom line?

By Katherine Oberle and Monica Sloboda, koberle@mmblaw.com, msloboda@mmblaw.com

On November 18, 2010, the U.S. Green Building Council announced the long-awaited launch of its newest green building rating system, LEED for Retail. There are two distinct certification tracks available, LEED for Retail: New Construction and LEED for Retail: Commercial Interiors. 

The new rating system, which has been in the works for several years, was developed to recognize the unique design and construction needs of the retail market sector. According to Scot Horst, senior VP of LEED (Leadership in Energy and Environmental Design), USGBC, “LEED for Retail builds on the strengths of other commercial LEED rating systems while taking special care to address the distinct needs of retail spaces, from occupancy demands to waste streams, energy and water use.” 

Nearly 100 national and independent retailers and franchisees participated in LEED for Retail pilot projects under the pilot program that began in 2007 and their feedback helped to develop the rating system. Those retailers included Best Buy, Chipotle, Coldwater Creek, Kohl’s, LL Bean, McDonald’s, Starbucks, and Target, to name just a few. 

Now that the new rating system is in effect, LEED for Retail will be required for retailers seeking LEED certification if more than 60% of the square footage of the project is devoted to retail uses. The Retail rating system will not be available for projects with less than 40% of the square footage devoted to retail uses, and for projects in which 40% to 60% of the square footage is devoted to retail uses, the Retail rating system may be used but is not required.

USGBC is expected to launch a related rating system, the LEED Volume Program, sometime this year. The Volume Program is intended to streamline the LEED certification process for high-volume developers of uniform projects. It uses a prototype-based approach that enables companies to submit their prototype to design review and receive LEED certification for multiple locations using that design at a lower total cost than would be possible with individual building reviews. The Volume Program will likely benefit users by facilitating the bulk purchasing of materials and the ordering of materials ahead of schedule, and by allowing for streamlined consultancy and reporting requirements.

Although the retail industry has experienced a slowdown in construction of retail space in the past several years, the number of applications for LEED certification is increasing. As USGBC celebrated its tenth anniversary in 2010, it reported that LEED certification had reached the one billion-sq.-ft. milestone for commercial projects. And there are indications that retail sales may be starting to turn around. MasterCard and the International Council of Shopping Centers both reported that consumers accelerated purchases into the 2010 holiday season. Preliminary figures indicate that retail sales were up industry wide in 2010 by 3% or more over 2009.

But the fact that it is still a difficult and competitive retail climate leads retailers to look for ways to improve customers’ shopping experience and to enhance customer loyalty as ways to increase sales. Taking affirmative steps toward minimizing a retailer’s environmental impact may help them reach those goals. Barbara Farfan reports in her recent article, “Retail Industry Information: Overview of Facts, Research, Data & Trivia,” green facilities and green activism, along with green products and services, are being heavily publicized by U.S. retailers and strongly supported by U.S. consumers. With consumers focused on all things green, both retailers and retail space developers are taking environmental responsibility seriously. They recognize that a company’s retail space can tell consumers a lot about the company’s commitment to environmental sustainability.

Starbucks is one example. With more than 16,000 stores in more than 40 countries, Starbucks has made a commitment to seek LEED certification for its company-owned stores, and to do so within standard store construction budgets. The company intends to significantly reduce its environmental footprint by 2015 and using green design elements in its stores is part of its strategy to achieve that goal. 

Some of the design elements used by Starbucks and other companies pursuing LEED for Retail certification include the use of LED and CFL light bulbs to provide more light while reducing energy usage (on external signage and in parking lots, as well as inside the stores). More light is important because research has shown a direct correlation between increased levels of natural light in retail spaces and time and money spent by customers. More and larger windows and skylights can make a big difference. 

Other design elements include the use of low-flow faucets and dual-flush toilets to significantly reduce water usage and the use of hand dryers to minimize paper towel usage. Some retailers such as Recreational Equipment Inc. (REI) are designating preferred parking spaces for both employees and customers with alternative fuel vehicles.

Consumers are more likely than ever before to recognize and appreciate a retailer’s efforts to achieve LEED certification for its retail stores and what that certification says about the company’s commitment to environmental stewardship and sustainable business practices. 

As retailers cope with today’s difficult retail climate, a commitment to green facilities and green services may improve more than the environment. It just may increase the bottom line by enhancing the customer experience and earning the loyalty of those customers.

For more information about LEED for Retail, visit the USGBC website at usgbc.org.

Katherine Oberle, Esq. is of counsel with the law firm of Morgan Miller Blair in Walnut Creek, Calif., where she represents both national and local companies in all aspects of commercial real estate transactions, including office, retail, and telecommunications leasing, and real estate-secured financing. An LEED-credentialed attorney, Oberle is a member of the Northern California Chapter of the United States Green Building Council and has served on the boards of directors of several community organizations. She can be reach at koberle@mmblaw.com.

Monica Sloboda, Esq. is vice chair of Morgan Miller Blair’s Real Estate Practice Group, and a LEED-credentialed attorney. Sloboda advises local and regional clients on a wide range of commercial and residential development transactions, including retail, office and industrial leases, and real property acquisitions and dispositions. Sloboda is a founding board member of East Bay CREW, a board member of the women’s section for the Contra Costa County Bar Association, and an active member of the International Council of Shopping Centers and the Northern California Chapter of USGBC. She can be reached msloboda@mmblaw.com.

© 2014