By Matt Valley

While apartment developers are making a big push to construct LEED-certified buildings and gain a competitive edge in the marketplace, most renters are unfamiliar with the highly coveted green seal of approval and they’re unwilling to pay more for it.

So says Jonathan Bartlett, vice president of Robert Charles Lesser & Co. (RCLCO), a real estate consulting firm based in Washington, D.C. that has conducted extensive research on apartment demand. Renters are familiar with the Energy Star program, however, and are willing to pay a premium to use products or reside in buildings that carry that label, adds Bartlett.

Energy Star is a voluntary labeling program established by the federal government that identifies both products and buildings that exceed minimum federal standards for energy consumption. But the gold standard in the eyes of the commercial real estate development community is the Leadership in Energy and Environmental Design program, or LEED, run by the U.S. Green Building Council.

“They really don’t know what [LEED] is,” says Bartlett, referring to apartment renters. “They may come to know what it is, and you may educate them about what it is, but until that time comes we’re finding that LEED is not really paying off from a branding standpoint to the consumer as much as Energy Star.” Still, he acknowledges that LEED may be a significant factor when underwriting commercial mortgage loans.

Bartlett’s remarks came during a keynote address delivered at the 2009 MPF Research Southeast Apartment Markets Conference last Wednesday, Sept. 16 at the W Hotel in Midtown Atlanta. The event attracted more than 200 apartment owners, managers and investors from throughout the region.

“When it comes down to it, whether the apartment is green is actually not a number one priority for [prospective tenants], and not even necessarily a number two priority,” says Bartlett. “The most important factor for people choosing an apartment among those we surveyed is the rent. But a strong number three is green environmental features and amenities.”

Differing attitudes about green initiatives have emerged between age groups. Young adults 20 to 24 years of age — the so-called Generation Y crowd — place a high value on companies that embrace green practices and they acknowledge it’s a factor in their renting decision. Yet, they are less likely to pay a premium for green than persons age 45 to 49 (see chart).

“It seems somewhat inconsistent with the level of passion that they have as a group for doing the right thing by the environment. When we probed this issue a little further, we came to understand that the Generation Y group really sees green as a baseline expectation,” explains Bartlett. “They don’t see why they would have to pay extra for something you ought to be doing anyway.”

The researcher separated the importance of green benefits into two categories: “me green” and “we green”. Efforts to slow global warming, promote cleaner soil and avoid the consumption of nuclear energy sources were grouped as “we green” benefits. Saving money on utility bills, reducing the number of automobile trips by walking and minimizing personal exposure to harmful chemicals were among the “me green” benefits.

In short, “me-green” benefits affect individuals directly versus the “we-green” benefits that focus on doing what’s right for society, according to Bartlett. “The ‘me-green’ benefits are very important, and that’s where we think you should be focusing your energy.”

But whether it’s possible for apartment owners to offer me-green benefits without having to raise rents remains a challenging question.