Earth Day and Beyond…Green Commercial Building Market on the RiseVicki
Earth Day…What started back in 1970 as a national day to focus on the environment, continues to survive and thrive nearly 50 years later. And nowhere is its impact more prevalent than the commercial building industry. Sustainable buildings are gaining momentum – yet commercial properties in the U.S. continue to account for 35% of electricity consumption in the country, according to U.S. Department of Energy data from 2010.
There are both costs and benefits for going green for various players in the commercial market:
Owners/Developers – Cost may be one of the biggest obstacles for property owners or developers thinking of going green. Designing and building green buildings is reportedly thought to cost roughly 10% to 30% on top of the cost of a building, a perception that could make some owners and developers hesitate. In addition, the cost of receiving the certification itself can also be prohibitive.
The numerous certifications available (LEED, U.S. Green Building Council, Energy Star, PassivHaus) can be costly and time consuming. It can cost from several thousand dollars to over $1 million to receive LEED certification. This initial cost, however, may be offset by the financial benefits posed by environmentally friendly property features.
In fact studies have shown that buildings certified as being environmentally sustainable have higher rental or lease rates than their non-green counterparts, higher occupancy rates, and lower utility and operational costs.
Tenants – If green buildings are more in demand, owners may be able to increase rent and enjoy high occupancy rates, which is good for owners but bad for tenants. Yet the savings in energy and water, as well as environmental and health benefits, could potentially encourage corporate tenants in office buildings as well as individuals or families in multifamily buildings.
Studies of green commercial buildings have shown a significant decrease in water, heating, cooling and electricity bills, with some office buildings reporting savings of $1 million per year in electricity costs alone. The Energy Star program says buildings with its certification use 35% less energy than average.
Lenders/Investors/Financing – Just as buildings with higher rental or lease rates, higher occupancy rates, and lower utility and operational costs than non-green alternatives are attractive to owners and developers, such properties tend to be attractive to lenders as well.
In recent years, more and more financial institutions have turned to green-lending initiatives, to do their part to encourage environmentally aware building. In 2007, Bank of America announced a 10-year, $20 billion business initiative to support clean energy, address climate change and reduce demands on natural resources. And others have noted that sustainable investing has increased in popularity as investors increasingly recognize that there is a business case for doing so.
Property Assessed Clean Energy (PACE) financing is a means of financing energy efficiency upgrades or renewable energy installations for residential, commercial and industrial property owners.
They may have been on to something with Earth day, all those years ago. It seems as though going green can benefit not only the environment but also the commercial real estate industry.
Green Building Materials
The green building and green building materials markets are growing, according to a recent report published by Allied Market Research. The Green Building Materials Market Report forecasts the global market is expected to grow from $171,475 million in 2015 to $377,029 million by 2022, growing at a compound annual growth rate (CAGR) of 11.9% from 2016 to 2022.
As mentioned in the Forbes article, emission reduction potential of green building materials, higher asset value of green buildings, growth in public awareness regarding green materials, and increase in client and market demand are all major factors in driving market growth. In addition, reduced operating costs and enhanced worker productivity due to healthier indoor environment will add to market demand for green building materials.
In green building materials market, the materials used are recyclable products, which enhance the production environment and quality of life. These materials promote conservation of non-renewable resources and reduce environmental impact associated with fabrication, processing, installation, transportation, disposal, and recycling of building materials.
Green building materials are employed in construction industry to address various environment challenges including climate change, natural resource depletion, atmospheric pollution, contamination of fresh water resources, and loss of biodiversity. Eco-friendly nature, durability, and energy efficiency of green building materials make them ideal for use in designing of residential and non-residential buildings.
Low operational & maintenance costs and pressure of environmental regulations pertaining emissions are the major factors that drive the green building materials market across the globe. In addition, government in developed countries has introduced policies and incentives to encourage green construction, which supplements the growth of this market.
Leadership in Energy and Environmental Design (LEED), Building Research Establishment Environmental Assessment Method (BREEAM), and Green Building Evaluation Labeling (GBEL) are some of the rating systems for green buildings in U.S., UK, and China, respectively. Innovation of new advanced technologies and increase in R&D activities to study effective design procedures and construction techniques will boost the green building materials market demand. Cost concerns and market barriers though hinder the market growth, rise in growth of construction industry provides a great potential for market expansion of green building materials.