Greener rental may be too pricey

A stretch of Glenwood Avenue near Crabtree Valley Mall may be getting even greener.

A Raleigh investment group called Trailwood Building LLC is designing a 47,000-square-foot office building -- The Lynden Centre -- at the corner of Lead Mine Road and North Hills Drive, off Glenwood. The developer hopes to make it the greenest speculative office building in the Triangle by April 2010.

"Hopes" is the operative word.

These days, developers need lots of equity and preleasing to get projects financed. While Trailwood has the 25 percent equity that lenders are asking, it needs more tenants to get off the ground, not to mention approval from city planners.

Fifteen percent of Lynden is reserved. But half needs to be spoken for before lenders will part with cash, says Fred Dickens, a broker at Coldwell Banker Commercial TradeMark Properties, the Raleigh brokerage representing Trailwood.

Getting more commitments could prove challenging, as companies tiptoe cautiously into expansion plans or scale back.

Getting them into a green building could prove more challenging, as companies tighten belts.

Trailwood aims for the ambitious gold certification under the U.S. Green Building Council's Leadership in Energy and Environmental Design, or LEED, system. It's the second-highest rating in the program, which promotes Earth-friendly and energy-efficient construction. Developers earn points toward certification by incorporating features such as systems that conserve water and electricity and reduce dependence on heating and air conditioning.

If successful, the gold distinction would put it ahead of CapTrust Tower at North Hills. Its developers, Duke Realty and Kane Realty, aim for a LEED silver rating, and it's on track to be the Triangle's greenest spec office building.

The hope is that tenants will be willing to pay extra rent to cover the added cost of green construction. There's that word again -- "hope."

Many companies and institutions are requiring leases in LEED-certified buildings. But there hasn't been enough demand to fill an entire building in the Triangle.

Duke Realty ditched LEED efforts at Regency I in Cary after it found few prospects willing to cover the 10 percent added cost. After all, tenants bargain down to the penny per square foot on leases.

Lynden's developers are asking rents of about $32 per square foot -- 39 percent above the average in the Glenwood-Creedmoor corridor, according to data from Grubb & Ellis/Thomas Linderman Graham And these days, there's more available space.

The submarket's office vacancy rate was 13.8 percent at the end of the third quarter, up from 11.8 in the previous quarter, according to Highwoods Properties data.

Perhaps the biggest challenge for Lynden, in the short term at least, will be a nearby, less-green competitor that also costs less: The 32,000-square-foot Navigant building, at U.S. 70 and Creedmoor Road.

An investment group including Tri Properties President Greg Sanchez bought the building, known for its time-and-temperature display, in April. They're planning a LEED-certified renovation -- a tack that gives them an edge over Lynden, which will bear the brunt of new construction costs.

Asking rates at Navigant: $29 per square foot.