The cost of building green - perception vs. reality
One of the hottest issues in the green building world is whether there is a significant premium to building “green” as opposed to the use of standard building products and practices. It is not uncommon for some members of the construction industry to say that the cost of building “green” can add 10 percent or more to the cost of construction even though there are studies that indicate that this is not the case.
The chasm between perception and reality was highlighted in a recent study conducted by the Northeast Ohio Chapter of the United States Green Building Council and Sustainable Rhythm, a consulting organization that works within the commercial, office, residential, green-space and senior-housing markets.
The 24-page study titled “Opening the Door to Green Building” was issued June 18 and is based on the responses of 200 participations (90 percent in Ohio) to an online survey given in March and April to four groups:
- Owners, facility managers and real estate executives, developers and tenant leasing agents (17 percent)
- Service firms including architects, engineers, interior designers, general contractors and trades, LEED consultants, commissioning agents, and legal/accounting and insurance professionals (59 percent)
- Government/advocacy including code officials, government agencies and nonprofit advocacy groups (7 percent)
The study focused on how the implementation of green building principles has transformed from a specialty market sector to one that is being considered across every building market. In doing so, participants were asked “if there is a significant cost difference between green building and standard building products and practices?” The results were:
- 62 percent “Yes”
- 26 percent “No”
- 12 percent “Unsure”
However, according to the study, “those who have analyzed the market have found that in reality, there is a negligible premium or as low as a 1-2 percent premium dependent on level of green building design solutions and/or the LEED certification level pursued (see the Cost of Green Revisited, 2007, Davis Langdon and The Cost of Green, 2009, Urban Green Council).” According to the study, the perception of a high premium predominates at the highest level with participants identified as owners, facility managers, corporate real estate and real estate developers, and those involved in tenant leasing and finance.
Regardless whether based in fact, it is noteworthy that when asked about perceptions relating to the cost premium for “green” building, participants provided the following responses:
- 1-2 percent more cost, 5 percent of participants
- 3-5 percent more cost, 19 percent of participants
- 5-10 percent more cost, 24 percent of participants
- 10-25 percent more cost, 37 percent of participants
- More than 25 percent more cost, 9 percent of participants
Views on the cost of building “green” are also reflected in the responses of participants regarding factors motivating the industry to build green. According to the study, reducing overhead costs of energy and increasing energy efficiency seem to be “the strongest resonating arguments in the market.” When asked “what kind of information would you like to see more of on green building from your vendors,” the study states that 75 percent of respondents identified “return-on-investment” as the most desirable content information for enabling decision-making.
Interestingly, the issue of climate change is perceived by a fair number of participants as a negative to promoting green building, which may reflect controversy in the industry as to whether the alleged environmental and climate change impacts are currently a widely accepted basis for building green and motivating others to do so.
Harvey Berman, a LEED® Accredited Professional, is a partner at the law firm of Bodman LLP practicing in its Ann Arbor office. He is chair of the firm's Construction Practice Group and represents clients in construction, real estate, and business matters. Contact him at (734) 930-2493 or at hberman@bodmanllp.com.
Comments
JAMES CARLINI
Fri, Jul 9, 2010 : 4:27 p.m.
Depending on what you buy, there can be a significant premium. I just spoke at ENGINEERED SYSTEMS' Sustainable Solutions Conference in Illinois on Intelligent Infrastructure: Securing Regional Sustainability last month and in listening to some of the speakers there talk about power consumption and energy savings, some of the dimming switches and other energy-saving devices can run into long years for payback. You have to ask what is the payback if I add this device in? In some cases, energy saving devices have a 25 - 40 year payback. In the real world, few if any, building developers are going to add those in. There are products that you should integrate into a building to make it more energy efficient, but you have to be realistic on what has some immediate paybacks and what does not make economic sense. One of the most cost-efficient items you can put in is a simple light switch. The payback is almost immediate compared to the sophisticated sensors and all someone has to do is switch off the lights when they walk out of the room. That sounds so simplistic but one of the speakers there had a study as well and said that you must still give local control for the lighting. A room switch is a lot cheaper than several sensors to determine if someone is in the room or not. Another is to have the ability to have variable lighting intensity (0% 50% and 100%). Sometimes people can work with 50% lighting if they are adjacent to windows (natural light)
Sheldon Wolfe
Wed, Jul 7, 2010 : 9:41 p.m.
"It is not uncommon for some members of the construction industry to say that the cost of building green can add 10 percent or more to the cost of construction even though there are studies that indicate that this is not the case." And there are other studies that indicate green building does cost more. The title is misleading, as "...perception vs. reality" suggests something that is not supported in the article.
Eric A. Murrell
Wed, Jul 7, 2010 : 12:35 p.m.
Its no surprise that a USGBC affiliate would come to the same tired conclusion. There is no question my mind that given a fixed budget, a client who builds a green building will get a smaller building than a client who follows traditional building practice. Maybe that's not a bad thing. Maybe all that greenness will "pay for itself in time" but lets not sugar-coat it. Green costs more up front.
Doug Selby
Sat, Jul 3, 2010 : 9:09 p.m.
As a "deep-green" contractor in my work with Meadowlark Builders, I can tell you that green building generally does cost more, as a whole. How much more? That is highly dependent on the project. There are some good practices that actually cost less, like recycling materials or using recycled materials. I would hesitate to call a building green if recycled materials were the only thing that was sustainable, however. Each existing building also comes with its own challenges and opportunities. Some have all the pieces in place, just waiting for someone to connect the dots, and others will fight you all the way. Most are somewhere in the middle. Most items that truly save energy or other resources do have a higher up-front cost to them, some more than others. I would always counsel a homeowner to focus on the envelope of the building before considering alternative energy sources, for instance. The payback is much faster, and the impact is much larger overall. Furthermore, the home will be ready to make those alternative energy sources work a lot better as well. Planning and building modeling are very important to understand the order of upgrades that will yield the best results. As Kurt Brandle below says, the payback is not only in terms of money over the years, but the owner will live in a healthier, more comfortable house that requires less maintenance over the years. And it's hard to put a price on that!
MI-expatriate
Fri, Jul 2, 2010 : 11:37 p.m.
When my husband and I married in the late 70's, we were idealistic. I subscribed to Mother Earth News and we had plans for what type of house we would live in. We were cost and energy conscious. He was military then, for tuition benefits regarding the education he could not afford. We had little choice in housing. We thought earth-bermed made the most sense - lots of natural light and "normal" on the inside if done right on the land. The problem was that it did not conform, societally. That is not why we abandoned the plan - we just took the easy way out and bought existing homes and made them efficient as best we could. Virtually every property that has a walkout basement can be an earth-bermed house in reverse. (I am no architect, just a realtor.) We need to retrain the population to new housing alternatives. My opinion? The typical subdivision needs to die - houses are too large, inefficient, and don't foster interaction between people. It's a bigger issue than energy.
Jeffrey Anderle
Fri, Jul 2, 2010 : 5:56 a.m.
The point of the study was to measure the perception in the marketplace. While there are numerous studies and data to support the reality that the premium can be negligible, those studies and data are not reaching the customers in the green building industry. By taking the initiative to undertake this analysis, the Chapter, advocacy groups and providers have been given a road map highlighting areas that need to be communicated more effectively. Jeff Anderle Author, Opening the Door to Green Building
Elaine
Thu, Jul 1, 2010 : 7:44 p.m.
I served as the Green Schools Program Manager for the Ohio School Facilities Commission (OSFC) from January 2008 through April 2010. It is interesting that the Northeast Ohio Chapter of the U.S. Green Building Council didn't contact the OSFC to obtain data about budget/bid/actual costs of projects undergoing LEED Certification. In Sept. 2007, OSFC adopted one of the most aggressive Green Building Initiatives in the country, planning to provide $4.1B in state money (tobacco settlement securitization) to construct 250 new schools across the state of Ohio. When OSFC moved forward with the Green Schools Initiative, they increased construction hard cost budgets by 3%. In addition, my role was to facilitate the rapid development of the Whole Systems Integration Process required for integrated design. Our construction projects or major renovations had a goal of achieving LEED-Silver with emphasis in energy optimization (matching Architecture 2030's goals of 35% energy reduction from ASHRAE 90.1-2004). Our most comprehensive data set came from 2009, when approximately 100 construction or major renovation projects that were undergoing LEED Certification went to bid. In 2009, we saw record low bids due to the economy. We had projects that year that were funded prior to the Green Schools Initiative was mandated, but were delayed in going to bid. As compared to the projects during the same year that were not undergoing LEED Certification and did not have the 3% increase, the projects that were designed under the LEED mandate showed greater budget savings. It must be noted that these are bid savings and not construction savings. It will be interesting as many of these projects approach close out to see how the construction costs compare to bids. It will be something to watch. To date, OSFC has over 260 schools in the LEED Certification process. It is a source of pride for Ohio and Ohio's designers. Ohio now has one of the biggest individual portfolios of buildings undergoing certification in a building sector. Since September 2007, many states have followed suit. There will be a tremendous amount of data available within the year. Elaine Lipman Barnes, LEED AP, BD+C Principal, Three, LLC: Building for Mind Body & Earth Founder, Three: Center for Mind Body & Earth elbarneshouse@gmail.com
BobbyJohn
Thu, Jul 1, 2010 : 12:35 p.m.
Building green can be incredibly cost efficient OR very cost ineffective. Solar pool water heatinf at Vet's and Fuller Pools, and I believe Buhr Pool also, Pays for itself in less than 3 years. Highly efficient lighting on new construction pays for itself in months. On the other hand, the facilities director at Veterans Hospital here in Ann Arbor says it will take a hundred years for the wind turbine on top of the hospital to pay for itself. Probably the same for the wind turbine that our tax dollars paid for that is atop Skyline HS. (We don't have sufficient wind speed in Washtenaw county to have wind power make sense, especially since wind turbines break down so often - like at the VA hospital.) One of the large problems with LEEDS certification is that it doesn't do a good job of taking into account cost effectiveness. LEEDS needs to be replaced with a more common sense approach. In a time of limited financial resources, there are so many cost effective ways to go green. And let's not forget the simplest and most cost effective, just using less energy.
Kurt Brandle
Thu, Jul 1, 2010 : 9:43 a.m.
With additional costs for green building it is similar as with most improvements in the quality of a product: it usually costs more. But this is, as we know, not always so. It may not cost more at all and save money for the life time of a building, if it is designed so that most windows are south oriented to absorb solar radiation, whenever desired, and have good shading devices, preferably external, to keep sunshine off, when not wanted. Cost effectiveness must be evaluated for particular measures and related to particular time frames. One building owner may consider 5 years as a desired pay-back period for additional investment; another 10 years. There are many improvements which result in less than 5 years, especially in the retrofitting of existing buildings, and there are measures which do not return the investment over 10 years; some may never over the anticipated lifetime of the building. Important to mention is also that many green measures result in better comfort. Energy efficient, well controlled lighting may provide higher illumination levels at lower cost. One aspect of ultimate efficiency in planning is often overlooked: every square foot of building not needed, not only saves first costs (and in the material embedded energy) but saves operational costs for years to come. Kurt Brandle