The Economics of Green Building

By August 19, 2013 Blog No Comments

While studying for my green associate test, I had the opportunity to read: The Cost of Green Revisited by Davis Langdon  (July 2007). Langdon explains that in order to take rational decisions regarding green building, real estate developers must complete a cost-benefit analysis to determine the feasibility and cost impact of sustainable design and construction.

Cost-Benefit Analysis determines whether or not the construction of a project or a particular installation will run if it is expected to produce a higher monetary value to the investment. If, however, the perceived costs outweigh the benefits, the project is abandoned.  Therefore, this study gives managers   the “carte blanche” to “build or not to build”.

Although, this same basic principle applies to the construction green building; one must take into consideration other variables such as the cost of implementation of environmental practices and its value added.

Let’s take a look at the costs and benefits associated to green building.

The traditional approach considers green building as a complement, and from this perspective, the construction of a building incorporating environmental practices is more expensive than a less sustainable construction due to the use of high quality materials, the deployment of cutting edge technology and the development and implementation of a more complex workflow.

According to research conducted by land developers and property owners regarding costs incurred in this type of construction, there is a consensus in the focus given to sustainability. For instance, if environmental practices are included since the initiation of the construction project; owners won’t  see an increase in costs compared to a standard construction; on the contrary, environmental and social benefits are seen in the medium and long term.

For example, in order to optimize light, during the design phase of the property, architects can install windows in a way that solar heat is gained. As a result of this placement, many benefits might arise such as energy consumption savings, a more sustainable construction and the provision of more natural light, which in turn can increase employee productivity without adding any additional construction spending.

In addition, green building may even help the owner to avoid expenses when the project starts.  For example, if the design of a green construction minimizes the waste heat through the use of efficient refrigeration equipment, a reduction in the project budget might be reflected. By installing a coating edifice that uses energy in an efficient manner, the cooling capacity of the building can be substantially reduced because it eliminates the need to purchase additional cooler.

The new integrated design approach to the building of sustainable properties is becoming more and more obvious.  Owners and developers are realizing that green building not only cost the same as a standard construction but it also produces the sufficient benefits to justify the effort of incorporating environmental practices into the construction.

Increased brand awareness and public relations are another of the benefits derived by green buildings. Your prospective customers expect that your environmental stewardship is fully compliant which your offerings. Green buildings are rented or sold at a higher price in comparison to buildings that do not have a LEED Certified label attached.

Green buildings can also help property owners to meet legal responsibilities and fiduciary duties. For instance, the concern about climate change encourages governments to enact laws that require the implementation of emissions control programs aimed at reducing overall operational cost and risk associated with meeting sustainability objectives. If you have some of these programs in place, you can get incentives such as tax breaks, funds and grants.

Although, the tangible and intangible benefits of green buildings contribute to the perceived value of the property, this may not be sufficient to encourage property owners to use green building practices. Like any other business, the return on investment remains paramount. Even though, the adoption of a green building means saving energy, and the potential for significant savings, property owners will cross the green line when the benefits can be quantified in dollar value.

It is obvious that new integrated design approach makes possible that green building costs become negligible. The benefits of implementing environmental practices are clear and measurable. Real estate professionals see it, and as a result, green buildings are emerging in a way that more sustainable cities are built.

Did I miss some costs or benefits one should bear in consideration when adopting green building practices within their projects?  I invite you to post your comments

Post by Diana Esparza