Show me the green!

26/03/2010 at 2:05 pm Leave a comment

Anne JohnsonBy Anne Johnson, LEED AP, Principal and Architect, Anne Johnson, AIA

Real estate and construction markets are experiencing a growing interconnection of green building and our economy. “Show me the money!” now requires a green edge. The United States Green Building Council’s (USGBC) “Green Jobs Study” projects over 7.9 million jobs and $396 billion in labor earnings from green construction for 2009 through 2013. This is encouraging for our national and regional economic recovery. Recent studies and our own hands-on experience identify the following trends for 2010 and beyond:

• Green building growth led by existing building operations and tenant improvements

• Increased renewable energy production and energy conservation retrofits with American Recovery and Reinvestment Act of 2009 (ARRA) funding

• More use of energy savings performance contracting (ESPC) by commercial facility management

• “LEED Lite” economy approach to certification

• Green construction rating systems evolve with proven life-cycle data

• Changes to local government laws & fees, federal incentives & building codes promote green building

• “Integrated Bottom Line” overtakes “Triple Bottom Line”

Two recent studies based on data from 2009 and before, are the “Green Building Market & Impact Report 2009” (GBMIR), by Rob Watson, and USGBC’s “Green Jobs Study” (GJS), prepared by Booz Allen Hamilton. Although limited by its restriction to the LEED rating system standard, GBMIR’s findings are a useful snapshot of current status and projections for the green construction industry. A total green square footage estimate that takes LEED, Green Globes, and other local Green ratings systems into account could more accurately demonstrate the total market share. USGBC’s GJS, evaluates the economic impact of green buildings in terms of the “total number of direct, indirect, and induced jobs created from green building expenditures.”

Highlights from Green Jobs study:

• Green construction is projected to contribute $554 billion, including $396 billion in wages, to U.S. GDP between 2009 and 2013.

• From 2000-’08, the green construction market supported over 2.4 million jobs, and is forecast to support over 7.9 million jobs from 2009 to 2013.

• From 2000-’08, green construction and renovation generated $1.3 billion in energy savings. Of that $1.3 billion, LEED-certified buildings accounted for $281 million.

• Forecasted energy savings from 2009-’13 from the green construction market is $6 billion. Of that $6 billion, LEED-certified buildings may account for as much as $4.8 billion of the total.

Highlights from Green Building Market & Impact report 2009:

• Despite economic flattening, LEED registered and certified floor area in 2009 is estimated to grow by over 40 percent compared to last year’s totals, for a cumulative total of over 7 billion square feet worldwide since the standard was launched in 2000.

• Based on average costs, green building materials represented approximately $7 billion in cumulative spending through 2009, which is expected to reach a cumulative $230 billion by 2030.

• At least 580,000 employees are currently enjoying improved indoor environments in LEED buildings. The “green building workforce” is expected to approach 29 million by 2020 and almost 64 million by 2030. Productivity benefits from LEED buildings to date range from $230 to $450 million.

• In the next three-year LEED certification cycle, Existing Building: Operations & Maintenance (EBOM) is expected to exceed New Construction (NC). LEED for Commercial Interiors (CI) and EBOM registrations will continue to increase relative to NC.

• In 2009, LEED EBOM certifications included almost 15 percent more floor area, over 10 million square feet, than LEED NC, signaling a trend toward green operation of buildings. LEED CI registered floor area almost tripled to over 200 million square feet.

State-administered funding and direct grants distributed from the American Recovery and Reinvestment Act of 2009 (ARRA) will drive increased renewable energy production and energy conservation retrofits. Although these activities will primarily impact institutional and government buildings through 2013 and beyond, a secondary effect will be to shift broader consumer expectations toward green construction. In addition, the construction trades pursuing these projects will improve their delivery of energy efficiency and production products to the commercial sector.

Commercial retrofits are especially relevant to the Las Vegas Valley with industrial inventory up to 103.6 million square feet, as of fourth quarter of 2009, and commercial up to 49.5 million square feet by third quarter of 2009. With these high vacancy rates, the construction industry will move from new construction to renovation. Energy efficient properties will prove attractive to both owners and prospective tenants concerned with operational expenses, employee productivity and the ability to increase property values.

“Energy Efficiency Retrofits for Commercial Buildings Represent a $400 Billion Market Opportunity” is Boulder, Colo., based Pike Research’s recent report evaluating this potential latent in the national public and private commercial market. Research conducted in 2009 by the University of San Diego and CB Richard Ellis Group, Inc (CBRE) found tenants in green buildings experience increased productivity and fewer sick days, and that green buildings have lower vacancy and higher rental rates. Over a year and per employee, the decrease in sick days translated into a net impact of almost $5 per square foot, and the increase in productivity had a net impact of about $20 per square foot occupied. In addition green buildings were found to exceed market standards with 3.5 percent lower vacancy rates and 13 percent higher rental rates.

First legislated for the government sector in the early 1990s, Energy Savings Performance Contracting (ESPC) is likely to see increased use by commercial facility management in response to rising energy costs coupled with increased knowledge of energy efficiency possible with green retrofits, and the need to stand out in a crowded market. A building owner, or facilities manager, may create an Energy Performance Contract with a private energy services company, or ESCO, which guarantees energy savings from a retrofit will pay for all project costs. Up front capital improvement costs of purchasing and installing new equipment are paid by the ESCO, and repaid by the owner during the contract lifetime of 10 to 25 years. ESPC installations are best suited for comprehensive retrofits and may include mechanical and electrical equipment, energy management control systems, or other energy saving measures. These efficiency improvements can combine with LEED EBOM certification to get even more return on investment.

By May 2009, Green Building Certification Institute (GBCI) had over 20,156 LEED registered, and 2,706 LEED certified commercial projects totaling 322 million square feet. Although not a comprehensive solution, the investment in LEED certification is useful for creating long-term value and as a road map to green performance outcomes.

Alternatively, an Energy Star for Buildings & Manufacturing Plants rating is another means of attracting green-savvy tenants and investors. In the current economic climate for the commercial sector, a “LEED Lite” approach of using of LEED guidelines for construction without pursuing immediate certification may be a budget solution. With core efficiencies and rating prerequisites in place, an owner or tenant has the option to pursue a LEED EBOM or LEED CI certification at a later date.

Owners and developers must carefully weigh the value of green construction and LEED certification in terms of immediate financial and public relation returns, as well as long-term risk versus reward. One example of this balance is the LEED v3 requirement to provide performance data for a five-year period following construction, or risk revocation of LEED status. The building team’s commitment to five years post-construction must be sufficient to ensure adequate performance, and may need to be contractually defined to protect the owner’s investment. LEED requirements are useful guidelines for sustainable design and construction whether certification is pursued or not.

Eventually we anticipate a broader, consumer-driven ratings approach to green construction that draws upon proven life-cycle data from constructed buildings. Energy Star’s work with home performance and new homes moves the residential sector in this direction of proven results, while its Building and Manufacturing Plants program addresses the commercial sector. However, Energy Star’s ratings still reflect a thin slice of ecological impact with its energy-centric ratings system.

For Southern Nevada’s real estate and construction markets to fully participate in the green boom, we’ll all need to acquire a green edge.

At minimum, understanding the basic terminology and rating systems for green building and retrofits will assist market entry. To excel and differentiate will require strategic decisions based on upcoming policy changes, long-term energy efficiencies, and anticipation of the market’s new integrated bottom line.


Entry filed under: Green technology, Incentives, Renewable Energy.

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