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Asset & Property Management
Developing Sustainable Healthcare Facilities with a Value-Based Approach
Posted September 07, 2014
Increasing the environmental sustainability of healthcare facilities is a trend that will continue inexorably, pushed forward by social, political, and technological forces. The healthcare delivery industry is experiencing an accelerating pace of change in environmental sustainability and health care reform. As a steward of the environment and of real estate investment funds, NexCore Group strives to be both a good environmental citizen and a reliable development partner for all stakeholders.
Balancing sustainable development with market-driven occupancy costs and health care reform objectives.
NexCore understands that the entire healthcare industry will be pressed to go further with sustainable design and still maintain first-cost budget discipline. Fortunately, the cost of building “green” is becoming easier to justify, not only when viewed from a perspective of reduced building operating expenses but also when green buildings support health care reform objectives. We see sustainable design as good for the environment and good for business. NexCore works from the premise that all healthcare real estate projects have a market-based ceiling on occupancy costs, which consist of net rent plus building operating expenses. If building operating expenses can be reduced then the market can absorb higher net rents that support the higher development costs for LEED (Leadership in Energy and Environmental Design) design elements and full-service occupancy costs can remain within market parameters.
We approach each of our healthcare real estate projects with the goal of achieving the trifecta of healthcare real estate development: sustainability, market-driven occupancy costs, and healthcare reform. As we work with our architect and construction partners to craft LEED solutions, the NexCore development team is also conceiving a design solution that supports the objectives of healthcare reform, including improving population health, enhancing the patient experience, and reducing cost-per-capita.
A range of sustainable solutions.
A broad range of sustainable solutions is available to NexCore’s clients, from a minimal approach to extreme investments. At a minimum, selecting “green” building materials is easy to accomplish within the tightest budgets. At the extreme end of the range (and outside the range of most of current market-driven facility development budgets) is a facility design that exceeds neutrality when measuring energy, carbon, water, waste, and materials, resulting in a building that actually produces energy and water while consuming waste and carbon. As political support increases over time for bolder actions to reduce the causes of man-made climate change, we can expect that attention will be placed on promoting development solutions that exceed neutrality, and what was once considered extreme will become the new normal.
LEED green building rating system.
LEED is the nationally recognized benchmark for green buildings developed by the U.S. Green Building Council (USGBC), whereby projects earn certification at one of four levels: Certified (40-49 points), Silver (50-59 points), Gold (60-79 points), and Platinum (80-110 points). Projects can earn points in five major categories: sustainable sites, water efficiency, energy and atmosphere, materials and resources, and indoor environmental quality. Projects can also earn points in two bonus categories: innovation and design process and regional priority credits.
The proliferation of LEED mandates by local governments.
According to the U.S. Department of Energy’s 2011 Building Energy Data Book, residential and commercial buildings account for approximately 41 percent of total U.S. energy consumption and 40 percent of U.S. carbon dioxide (CO2) emissions. (The top three end uses in the commercial sector are space heating, lighting, and space cooling, which represent close to half of commercial site energy consumption.) Given these statistics, the proliferation of LEED mandates by local governments over the last several years is not surprising. While an increasing number of planning jurisdictions mandate a minimum level of environmental sustainability as a prerequisite to approving and permitting healthcare facility developments, NexCore continues to press the question of whether we can exceed that mandate and still hit market-driven rents and economic objectives.
Achieving the trifecta of healthcare real estate development in Montgomery County, MD.
NexCore is currently developing an 80,000 SF medical office building (MOB) on the new Holy Cross Germantown Hospital campus, located in the Washington, D.C. suburb of Germantown in Montgomery County, Maryland. Projected for completion in July 2015, the MOB will be directly connected to the 237,000 SF hospital that opens on October 1, 2014. NexCore is providing development, ownership, leasing, and long-term management services for the MOB.
In September 2008, Montgomery County made it mandatory for all new non-residential construction of 10,000 GSF or more to be LEED Certified (40-49 points). In response, development on the Holy Cross Germantown campus will meet or exceed the required certification, with the hospital meeting LEED Gold standards (60-79 points) and the MOB meeting LEED Silver standards (50-59 points).
John Lasell, Executive Vice President of Development & Construction at NexCore and Project Manager of the Holy Cross Germantown MOB, points out that a collaborative design process was the key to achieving LEED objectives on the project. “Getting the entire design and construction team onboard early to discuss how all building systems were involved in coming up with a solution that met our LEED targets and still conformed to our budget parameters was crucial,” says Lasell.
NexCore worked closely with its architect partner, Hord Coplan Macht (HCM) in Baltimore, and its general contractor, Whiting-Turner in Baltimore, to achieve the trifecta of healthcare real estate development whenever possible and to meet the objectives of all stakeholders. For example, the team was able to reduce interior and exterior lighting levels in and around the building to 1) increase LEED rating points for energy efficiency, 2) reduce energy costs, and 3) improve the patient experience. This effort included maximizing the use of natural exterior light to help light interior zones of the building and optimizing the location of a parking lot and driveway light poles and fixtures to decrease the amount of light pollution to the surrounding areas and neighborhoods. Both measures will enhance the human experience of the built environment.
David Stokes with CBRE Healthcare, the Program Manager for the Holy Cross Germantown Hospital, explains that the development team’s analysis of the question of “how far to go with LEED is no longer exclusively a first-cost versus life-cycle analysis of energy consumption, but is also a value-based exercise balancing cost and the patient experience.”
NexCore Group’s green initiatives.
NexCore has put into place the following three initiatives to increase the sustainability of the medical facilities it owns and manages:
Sustainable Building Practices
— Sustainable green building practices are transforming the design process for healthcare facilities. NexCore’s process for selecting architects, contractors, and consultants includes consideration of their experience pursuing certification of buildings and accreditation of individuals under the LEED Green Building Rating System, as well as other sustainable practices related to the design, construction, and operation of healthcare buildings such as the ENERGY STAR rating system. We work with our clients to analyze appropriate LEED targets, designing and constructing buildings to achieve targeted results.
Energy Design Assistance (EDA) Program
— NexCore investigates programs with local utility companies to enhance the energy efficiency of our buildings. For example, NexCore has participated in Xcel Energy’s EDA Program on recent projects, which pays for energy consulting and energy modeling, reimbursement to the design/construction team for the time they spend on the program and a one-time cash incentive to the building owner after occupancy based on the energy efficiency that the project achieves.
In-House HVAC Expertise/Remote HVAC Management
— NexCore is progressive in its use of online systems that allow for remote HVAC management 24/7 and in staffing a full-time Mechanical Operations Manager. Given the importance of heating/cooling issues in facilities and the associated cost, NexCore brought this service in-house and now has access to HVAC stats remotely. Our Mechanical Operations Manager logs in daily to view the environmental statistics of all the buildings in our portfolio and to ensure that the HVAC systems are operating within set parameters. The use of this online system has lowered operating costs and significantly reduced the number of HVAC complaint calls from tenants.
In addition to implementing these green initiatives for the development and management of its medical facilities, NexCore practices sustainability at its corporate headquarters (Denver) and regional offices (Chicago, Bethesda, Portland, Dallas, and Orlando) by using office supplies and products with post-consumer waste content, participating in a single-stream recycling program for office waste, encouraging double-sided printing and digital sharing of files, and eliminating the use of bottled water service.
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