PAE Engineers enjoys a unique symbol of its brand identity – the company’s Portland headquarters office, which is the world’s first developer-driven Living Building. In this edition of The Friedman File, we look at how 375-person PAE Engineers achieved the multiple benefits of creating a sustainable, resilient and cost-effective speculative mixed-use building that serves as its main office, as well as an investment property, marketing jewel and beacon of the firm’s vision, mission, principles and values.
PAE’s Living Building Challenge
The PAE Living Building is a five-story, 58,000-square-foot mixed-use building located in a historic neighborhood in Portland. Designed to last 500 years, the comfortable, modern and functional structure uses far less energy, water, and material than comparable buildings of its size. The largest commercial urban Living Building in the world, it “demonstrates how the built environment can achieve the deep and immediate carbon emission reductions required to mitigate the most severe impacts of climate change,” the company says.
The Living Building Challenge, which was created in 2006 by the non-profit International Living Future Institute, is the most stringent green building certification process in existence today. So why would a midsized subconsultant engineering firm take on this monumental task?
PAE’s portfolio includes over a dozen LBC-certified projects, including 2013’s Bullitt Center in Seattle and 2015’s RMI Innovation Center in Colorado. By 2016, the firm had outgrown its Portland space and after exploring a variety of options, the firm’s leadership decided to try something that had never been done.
“We saw it as a great opportunity to really demonstrate thought leadership,” says Christian Agulles, PAE’s President and CEO. “To do something special and different; to live our values.”
PAE’s values are represented partly in its status as a Certified B Corporation, which celebrates a company’s commitment to meeting the highest standards of verified social and environmental performance, public transparency and legal accountability. PAE is also a JUST organization, which is a program designed to discover, dissect and deploy practices that eliminate oppression and maximize the potential of a diverse workforce. This is a firm with a conscience.
“Our philosophy is, ‘if it exists, it’s possible,’ and a developer-led speculative commercial Living Building had never been done,” says Agulles. “We wanted to prove it could be. So we were the impetus for the project. We hired ZGF, which is the only time we’ve ever had the opportunity to hire an architect.”
PAE assembled an investment team – 38% of the cost of the $40.2 million building came from these equity investors. The group includes PAE, architecture firm ZGF, developer Edlen & Co. and Apex Real Estate Partners, all of which invested their professional fees; Downtown Development Group, which invested the value of the land; and Walsh Construction, which invested a portion of its fees and cash.
“We’d never developed anything before; we’re engineers who are usually subs to architects,” says President Emeritus Paul Schwer, who served as PAE’s president and CEO from 2004 to 2022. “Mark (Edlen) is a brilliant developer, and I asked him if this was possible. He said, ‘maybe.’ I got him all the numbers. He spent 90 minutes with me, explaining how it works. I only understood about a quarter of it then, but having gone through it, I understand much more now. We went through the process like an owner, which is not something an engineering subconsultant does. It’s a very interesting perspective.”
Marketing & PR Benefits
The details of the PAE Living Building are fascinating – from the top-floor, 1,500-square-foot “deckony” that offers a year-round open-air lounge area, to the five-story vacuum flush composting system that produces liquid fertilizer and agriculture-grade compost onsite. You can read about these and the building’s other amazing features just about anywhere. The project is featured in Fast Company, ENR, The New York Times, Metropolis, Smart Buildings and many other industry-focused and mainstream publications.
In fact, the PAE Building’s notoriety is so widespread that as of last month, 3,537 people had toured the building since it opened in 2021. “We’ve had a couple of billionaires come through, as well as a number of groups from Japan, and we have multiple tours every week,” says Schwer. “We had 200 people here from the International Mass Timber Conference when it was in Portland. That’s the type of exposure we’re getting.”
The impact of the publicity surrounding the building can be difficult to measure; in some cases it simply increases PAE’s brand awareness. However, the reputation that PAE has built as a firm with sustainable building expertise has led to project opportunities as well. “Our offices are all on the West Coast, but we’ve gotten exposure across the country, and now we have projects up and down the East Coast. The work is primarily around building types that are highly sustainable, living buildings,” says Schwer.
PAE isn’t the only beneficiary among the project team. In naming ZGF one of the 10 most innovative architecture firms in the country, Fast Company cited its work on the PAE Living Building. The magazine wrote, “It’s a building that’s designed to last, and a model for financially viable green buildings.”
PAE is often a subconsultant to ZGF – on the RMI Innovation Center, for example – and was invited by the architect to attend the Fast Company awards ceremony. “As a subconsultant engineering firm, to be able to help one of your biggest clients win an innovation award is a great way to reciprocate and deepen the relationship,” says Agulles.
Recruiting & Retention Benefits
PAE’s Living Building is also helping the firm win the recruitment and retention battle. “The year before we started the project, our internship program was mostly local engineers that worked for us for a summer,” says Schwer. “Now, we’re getting 600 applications for 12 positions. They come from all over the country, including international students. The building is used as a case study in many engineering programs including – Virginia Tech, Texas A&M and Stanford. They’re learning about our building in class, and they want to come work here. It’s built-in recruitment, and we get to pick from the best that’s out there.”
Schwer tells the story of a talented young engineer who had been with PAE for six years, then received an offer from a competitor. The day after the engineer submitted his notice, he gave a friend a tour of the building. The friend was blown away and said, “I can’t believe you get to work here.” The young engineer reconsidered and stayed with PAE. “Not everyone gets to show off their office the way everyone in our building does, from the newest engineer to me. It’s unique,” says Schwer.
The story is even more relevant when considering that the PAE investment group determined that it could cover the 10% rent premium that the Living Building would cost by increasing productivity among staff by 1% or by offsetting the cost of recruiting four engineers per year. Although the return on investment for brand awareness can be nebulous, these concrete performance indicators are more easily measured.
While few A/E/C firms are likely to follow in PAE’s Living Building footsteps, Schwer believes that the industry can learn from their experience. “I think our industry needs to take more chances if we’re really going to have an impact on the climate crisis,” he says. “We could do a better job of showing building owners what’s possible. You can design a carbon neutral building right now; you don’t have to wait for 2030. You can do it on a developer’s budget; we proved that. People are dissuaded too quickly when clients push back. ‘Okay, we’ll be LEED Silver. That’s good enough.’ But they should push through and say, ‘We can do this.’”
Agulles adds, “Something that Paul offers as advice to the rest of us is to be aware of self-limiting beliefs. Don’t assume you can’t do it because it’s hard or because it hasn’t been done. Try to do the hard things. If you fail, you’re better for it and you have something to share for next time. We talk about the highlights of this project, but we talk as much about what went wrong and how we fixed it. People love to share their successes, but they’re too reticent to share their failures.”
I’d love to hear what you think about PAE’s Living Building experience. Do you agree that our industry should take more chances? Share your thoughts with me at email@example.com or 508-397-9213.