The new Rand Corp. headquarters, yards from Santa Monica beach, is positioned to take in more than breathtaking Pacific views it's also designed to catch cool ocean breezes.

Ledges line the top of the building's windows like eyebrows, while thin vertical fins part the glass panes. The features block Southern California's nearly constant sunshine while funneling onshore breezes past the oval-shaped exterior.

The resulting lower temperatures in the building means Rand will spend less on air conditioning and heating. It's also partly why the building was awarded one of the nation's highest environmental certifications.

"We do a lot of research on environmental design, so we wanted to address those issues," said Michael Rich, a Rand executive vice president, who worked on the building's design. "We felt like we had to walk what we talk, so to speak."

Eco-friendly green buildings, like the Rand headquarters, were not long ago almost solely the domain of public agencies constructing libraries, fire stations and the like. But they are steadily being embraced by more and more of the private sector and some non-profits, colleges and such.

Also called sustainable design, such buildings currently account for just 2 percent of the nation's nearly $1 trillion construction industry, according to, a site that tracks green building activity. And while that number is small, it's widely expected to grow rapidly. SustainLane projects green building to rise to 10 percent of total construction spending by 2010.

A similar scenario is unfolding in Los Angeles. While the city is home to only six officially certified, eco-friendly buildings, an additional 46 are in various stages of development. (There are 20 green buildings countywide, including a dozen or so private projects.)

The growing prevalence of privately financed sustainable buildings is somewhat surprising since going green can increase construction costs between 2 percent and 25 percent, according to developers.

Condominium and apartment developers maintain, though, they can get above-market prices for their units because of the desirability of living in green buildings, which have lower energy costs and fewer noxious emissions. And builders of office buildings and shopping centers say they find green buildings allow them to differentiate themselves in a crowded and competitive market for new tenants.

"It's market driven," said Randy Scott, an executive vice president at L.A.-based Thomas Properties Group Inc., which is building a large, sustainable mixed-use complex in El Segundo. "Sometimes it makes sense to do green, sometimes it doesn't."

Few incentives
While some developers set out to achieve a certain level of sustainable design, Rand wanted to build the most environmentally sensitive building it could, while still ensuring its new $100 million headquarters also met the firm's other objectives such as promoting interaction between various departments.

So it was a pleasant surprise, Rich said, when the U.S. Green Building Council, a Washington, D.C. nonprofit that sets standards for environmental design, gave the building its second highest ranking a Gold certification in its LEED, or Leadership in Energy and Environmental Design, program.

"We certainly didn't built it to win awards," Rich said, "but it's always nice when there's recognition."

Rand, however, didn't mind spending the extra money for a more environmental building. The well-heeled defense and security think tank figured it would occupy the structure for more than 50 years, and over that time it would recoup the additional construction costs through energy savings.

Other developers are in a more difficult situation. The upfront cost of building green can outweigh the benefits of an environmentally conscious development.

Even though those costs have come down in recent years as green materials have become more commonly available, the Los Angeles region still has lagged nationally in eco-friendly building. Last month ranked Los Angeles 30th in green building of the nation's 50 most populous cities.

Of course, L.A.'s mild weather means eco-friendly buildings may provide less of a payback than to building owners in say, Duluth, Minn., or New Orleans.

Another reason L.A. may lag is because the city offers few incentives to developers to spend the extra money to build environmentally, said Warren Karlenzig, chief strategy officer of San Francisco-based

"Los Angeles really doesn't have any compelling incentives for commercial or residential green building," he said.

Cities such as Portland and Seattle have set up non-profit funds that give developers cash for meeting the Green Building Council's LEED standards, he said. The higher standards developers meet, the more money they can get.

Then there are cities like Pittsburgh that allow developers to build more on their property so-called density bonuses in exchange for meeting LEED standards.

Los Angeles City Council's Planning and Land Use Management Committee is considering a motion that would allow buildings meeting LEED certification levels to jump to the head of the approvals line.

Even so, Karlenzig believes it won't likely be enough to entice developers. "That helps but it's not as compelling as cash or density bonuses," he said.

L.A. Council President Eric Garcetti has been one of the more vocal supporters of creating incentives for developers to build more sustainable and eco-friendly projects in the city.

Garcetti said 40 percent of all refuse going into the area's landfills comes from construction waste. "What if we can cut that in half or even more?" Garcetti said. "Think of how much landfill space we can save."

Most of the push-back Garcetti said he hears from developers has been about the added cost of using the higher-priced materials and methods required for green buildings. Already, construction costs for both materials and labor have skyrocketed during the last several years.

However, as the cost of green materials has come down in the last couple years and the price of fuel has risen, more developers are considering sustainable practices.

"It's beginning to be market-driven," said Garcetti. "It's seen as more of an economic and marketing benefit for the developer. Developers are finally realizing that there are long-term cost savings."

Golden Green
Employers are also beginning to find benefits of being located in green buildings. According to some studies, absenteeism is lower and worker productivity higher in environmentally designed buildings.

By incorporating technologies that cut down on noxious emissions, promote better air circulation and use more natural lighting, a Carnegie Mellon University study released last year found employees get sick less often and therefore can get more work done.

Labor costs often are a company's greatest expense, and some L.A. developers are betting that employers will begin seeking LEED-certified buildings to capture those savings. As a result, Thomas Properties has set up a fund specifically for green construction both for ground-up projects and remodeling older buildings.

Thomas Properties is building a mixed-use complex in El Segundo that will follow LEED standards. After settling lawsuits related to the project, the company is finishing design work and expects to break ground by the end of the year.

The level of LEED certification that the project, called Campus El Segundo, will meet has yet to be determined. "We're still looking at what makes sense," Scott said. "We have to figure out the cost-benefit analysis for making that benefit."

As a rule of thumb, achieving a Platinum LEED certification the highest level awarded by the Green Building Council can add between 20 to 25 percent extra to a project's cost. Lower levels cost less. Achieving a Gold LEED rating tacks on 10 to 12 percent, while a Silver rating adds on about 2 to 3 percent. The idea is that the more spent upfront means progressively lower total operating costs.

"So even if there is a first-cost premium, you may recover that cost and a return over the life of the building," Scott said. That doesn't mean Thomas Properties will own the building forever. "Whether we hold it or not, we've created value."

In addition to ground-up construction, Thomas Properties wants to buy older properties that can be remodeled to meet LEED standards. Scott believes by upgrading, Thomas Properties will be able to turn around and sell the building for a premium.

"This is value-added investing," he said.

Green marketing
With the growing awareness among the general public of green building practices, the Green Building Council's LEED program has quickly become a marketing tool.

Toyota Motor Sales U.S. Inc. has lately tried to promote itself as the world's most environmentally conscious automobile manufacturer. Toyota has been running full-page advertisements nationally in newspapers and magazines over the last year touting its green office plaza in Torrance.

The building, which has been given a Gold LEED rating by the Green Building Council, conserves water and electricity and sports an expansive roof-top of solar panels that generate enough electricity to power 500 homes.

"The ultimate green building is probably no building at all," said Toyota spokeswoman Denise Morrissey. "But if you can be as efficient as possible and create something that will have a minimal impact on the environment, then that's a pretty good position."

Morrissey said Toyota takes its conservation beyond marketing. The auto maker, the world's second largest, has set goals for sustainability that apply to its global operation.

By employing green building standards, Morrissey said Toyota has saved money and helped improve the company's bottom line. There's less trash and waste to dispose of and that's led to more efficient operations. And the solar panels not only give the office building a source of renewable energy, but helped the company shoulder high electricity prices and rolling blackouts during California's energy crisis five years ago.

"It all goes hand in hand," Morrissey said. "It's completely cost effective, too. That's what people need to understand. This isn't just for our health. This is a cost effective measure."

Condo developers have also figured out that a LEED certification carries marketing potential.

New Pacific Realty Corp. is seeking a Gold rating for a ultra luxury condo project it's proposing at the former Robinsons-May department store site in Beverly Hills. When completed, the project, designed by noted architect Richard Meier, will be one of the highest environmentally designed multi-family residences in the country.

David Margulies, a New Pacific Realty principal, said he was surprised when the building became well known for its green aspects.

"When we launched the project, we figured Richard Meier would be the story," Margulies said. "What's been amazing is that being green has become as much of our story as the architecture."

The concept behind the environmental features of the project, called 9900 Wilshire, was to make them entirely invisible. "Some people believe doing the right thing and being environmental is a sacrifice, like they have to give up hot water or water pressure," Margulies said. "That's not true anymore. You don't have to sacrifice anything and you shouldn't even be aware it's a green building."

Expensive certification
In addition to the higher construction costs for choosing green construction, getting a certification from the Green Building Council isn't cheap.

Depending on the size of the building, the process can cost between $30,000 to $150,000 for the paper work and administration. The process has become so cumbersome that some developers now hire consultants who specialize in getting projects through the LEED certification process.

The Green Building Council has been trying to lower the costs of certification and is beginning to make more and more of the process available through the Internet. Still, the higher costs keep some developers from even applying for certification.

Joan Ling, the executive director of affordable housing builder Community Corp. of Santa Monica, said many of the non-profit's buildings would meet LEED standards.

"We decided not to go after certifications anymore," Ling said. "It costs quite a bit of money. We focus on building buildings that are sustainable. Until there's a more efficient process to get certified, for us it's not that that important."

So far only one of the non-profit's affordable housing buildings is ranked a showcase project the builder did in partnership with the City of Santa Monica and utilities Southern California Edison and Southern California Gas Co.

The building, at 502 Colorado, has been awarded Gold LEED certification for its use of low emission paints and carpets, its drought-resistant landscaping and its low energy use.

Even so, those features didn't come cheaply. Ling said going green tacked on about 12 percent to the project's price. But the experience taught Community Corp. about the number of practices and materials that can be added to a project for a minimal cost.

"A lot of it is like bicycling," Ling said. "Once you learn, you don't think about it, you just do it. Do it a few times and you can anticipate what works and what doesn't."

For now, though, only a handful of developers in L.A. are willing to pay extra to present that image. At Rand, it was important to achieve a recognized level of environmental sustainability at almost any cost.

"It's emblematic of what we set out to do," said Rand's Rich. "We want to not only help others with their environmental programs and polices, but we also wanted to demonstrate our own."

For reprint and licensing requests for this article, CLICK HERE.