costs and benefits of greenbuilding
Benefits of Green Buildings
The pursuit of Green ratings is becoming increasingly relevant to both building owners and tenants of commercial buildings. This is primarily due to the fact that sustainability and resource conservation have become of increased importance on the agenda of large commercial corporations and governments alike(Morris, 2007). The environmental and commercial cost of carbon emissions is beginning to be recognized by developed countries, resulting in enhanced precedence of the concept of sustainability in the planning and implementation of new developments. (Williams, 2007)
Studies have been undertaken, examining the emerging design strategies aimed at fulfilling the requirements of Green Star approved status as well as capital and life cycle costs in achieving the various green ratings in commercial office buildings (Morris et al, 2004). The conversion to 4 , 5 or 6 Star building from a non-green one currently comes at a cost, but results in a more appealing building to investors and occupiers and meets rising expectations of the market. (Williams, 2007)
Benefits for building owners include:
- potential higher occupancy rates
- higher future capital value
- reduced risk of obsolescence
- less need for refurbishment in the future
- ability to command higher lease rates
- lower operating costs
- mandatory for government tenants
- lower tenant turnover costs less to maintain and operate (Williams, 2007)
The delivery of a Green building, either through new development or renovation, can be implemented in several ways; however the key determinants of a buildings ‘greenness’ are seen as its consumption and associated conservation of energy and water. Therefore, design strategies are focused on these two factors which are favoured in the quest for a 5 Star solution or greater (Morris, 2007).
Achieving high Green ratings also acts as a safeguard to minimise the effects of future energy price increases – the impact of which should not be underestimated.
Socially responsible investment is progressively being viewed as a priority for investors in developed countries and there is increased recognition of carbon emissions as a real cost (Rawlinson, 2007). The significance and consciousness of these aspects, previously not recognised as traditional costs, is escalating, with many important companies and individuals making public their concern regarding greenhouse gas emissions and climate change(Morris et al, 2004).
If, in the future, a tax is imposed on energy consumption, a more energy efficient building will incur a lesser impact. Needless to say, government decisions on carbon trading and tax implications will have a significant impact looking ahead, however, policies are yet to be formed. A growing public knowledge of the impacts of climate change is gathering momentum, and this shift in public opinion will be the driving force of future policy(Williams,2007).
Importantly, the image of environmental consideration and green concepts has moved on from a ‘tree hugging hippie’ image towards widespread awareness of environmental issues which has filtered into the public domain and common consciousness (Williams, 2007). This increased knowledge and understanding has also begun to infuse itself into the working environment. The workforce is realizing the benefits of improved working environments in Green buildings (Pitts, 2004). This realization is spreading and publicity around this fact will further enhance the notion in the minds of office employees. Labour and skills shortages are constantly rising, which means that the retention and productivity of staff is increasingly crucial (Morris, 2007).
Recently, executives from various high carbon emitting industries including air transport, energy and technology, congregated to discuss how best to reduce emissions in what was termed the Global Roundtable on Climate Change. The group includes more than 100 of the world’s largest corporations including Ford, General Electric, Toyota, investment bank Goldman Sachs and the massive retail chain Wal-Mart. At this conference, the group appealed to governments to set targets for greenhouse gas and carbon-dioxideemissions (Morris et al, 2004).
Carbon emissions are beginning to be recognised as a real cost in developed markets and there is an emergent probability of a carbon tax being imposed on energy consumption. A tax such as this will aim to provide incentives to switch towards less harmful practices and more sustainable production methods (Morris, 2007). If and when a carbon tax is put in place, a more energy efficient building will incur a lesser impact, saving on costs as well as providing protection from future energy price increases. A tax on carbon emissions will be a catalyst towards some mode of trading system in which carbon credits can be bought and sold in the market (Williams, 2007). Corporations with the capability of reducing carbon emissions to a large extent will thus be encouraged to operate as energy efficiently as possible. They can then sell the carbon credits to corporations who have inherent difficulty in reducing their carbon footprint (Morris, 2007).
Cost of energy 2007- 2030 (Morris, 2007)
One of the principal contributors which lead to excessive energy consumption in the current economic and social climate has been the availability of cheap energy. This situation, however, is changing as global energy costs are rising substantially (Rawlinson, 2007). This has a significant bearing on the movement toward sustainable practices as the need and interest in alternative energy sources grows. Alternative energy options are being investigated and employed to some extent in certain parts of the world. These options include using power from the sun, wind and as well as hydrogen as well as nuclear and even steam but, on the whole, limited success (Morris et al, 2004).
Energy is not the only resource that is short in supply. Water availability is becoming increasingly limited, again causing price increases and the search for new technology to provide for ever increasing demand. Technologies such as desalination are extremely costly and utilizing rainwater is a far more cost effective option than using harvested and desalinated water from the sea (Carpenter, 2001).
One of the key benefits of green buildings that requires careful consideration is that of staff productivity. In most cases, particularly in large commercial concerns, the greatest proportion of a company’s cost is incurred through the payment of salaries. Therefore, any increase in staff productivity will have a massive positive effect on profitability (Rawlinson, 2007). The improvement of staff productivity through enhanced Indoor Environmental Quality is a fundamental principle of sustainable building that manifests through occupant comfort, lighting, temperature and increased natural ventilation (Morris, 2007).
The drawback of this concept is that the benefits derived from such factors are often difficult to quantify. There has been little conclusive long term evidence of measurable benefits of productivity gained from Green buildings(Morris et al, 2004). Whilst the benefits have been shown to be obvious in the short term, research into the determination of these benefits is still at a fledgling stage and will need more years of assessment to prove conclusive (Williams, 2007).
The most often quoted cause for not employing sustainable concepts and practices into the design and construction of developments is its perceived high initial cost. Evidence, however, suggests that while there is no comprehensive resolution on the cost of ‘green’, there is extensive scope for sustainability to be incorporated into design and construction to a meaningful and practical extent at little or no added cost. (Morris, 2007)
The cost issues related to green building and the misperception that accompanies it are beginning to change. Demand for green features is increasing as owners and tenants are begin to recognise their value and sustainable features as well as environmentally friendly materials and systems are becoming more affordable and accepted into the mainstream of project design. (Morris, 2007)
It is true that new environmental technology which can be very advanced and complicated comes at a significant cost. Innovative, cutting-edge solutions to energy consumption are an important part of green design in order to ensure progression of the movement in the future, but these features are not the only option to reduce energy use and emissions(Williams, 2007). They will add substantially to a project’s cost but should be valued independently in terms of their cost effectiveness and their environmental impact. (Morris, 2007)
There are various factors which influence the cost of any individual project or type of building. Similarly, there are various characteristics which will influence the cost for incorporating sustainable elements into a specific project. These factors are extensive and while their cost influence may be singularly insignificant, their collective impact can have a substantial bearing on the cost of sustainability for a particular project (Rawlinson, 2007). These include local climate, site conditions, project location, building type, and knowledge and expertise of the project team in sustainable practices. Therefore, there can be no all encompassing clarification of the definitive cost of green. However, there are clear indicators to the cost of green of individual projects and this cost can be managed to efficiently and cost-effectively integrate sustainability into project design and implementation. (Morris, 2007)
Davis Langdon in Australia has undertaken research in order to indicate the initial impact on construction costs that building green experiences above comparable non Green projects. The research investigates the additional cost of construction for each level of Star rating on the Australian Green Star system. The study has been undertaken within the parameters of the Australian property market and compares the budgets of green buildings to similar non- green buildings and concludes that there is a 3% to 5% premium for a 5-Star building, with an additional 5% for a 6-Star building. The research also notes that standards in the country have been set so that reaching 4 Stars is usually easily achievable (Morris et al, 2004).
The research is based on a building greater than 15,000m2 Net Lettable Area (NLA). It assumes:
a build, own and operate model is used
based on a 15 year holding period
rental is on a Gross Lease Rental basis with rental growth of 3.5% per annum
an Internal Rate of Return (IRR) of 11% has been used in the calculations
escalation rates of 3% for construction costs and 3% for Energy (Morris, 2007)
In addition, other normal allowances have been used as part of the feasibility calculations.
This equated to an initial impact of approximately $19/m2 NLA/pa for a potential change from 4 to 5 Star and $40/ m2 NLA/pa for a potential change from 4 to 6 Star. Reducing the capital costs whilst maintaining the target Green rating involved the re-prioritisation of construction costs(Morris et al, 2004).
This included the maximization of consequential offsets arising out of design (eg reduced riser area, reduced floor to floor height etc) and the evaluation and prioritisation of the Green attributes where possible above other features of the building. However, over time and assisted by the inclusion of environmental requirements as part of the PCA’s Guide to Office Building Quality, this perception of ‘extra’ cost will diminish as the design strategies employed become ‘the norm’ i.e. ‘business as usual’ cost will rise(Morris et al, 2004).
In the pursuit of marketplace differentiation, it is likely that more cutting-edge design solutions will be seen, pushing the boundaries of innovation. The goal of ever-greener buildings by increasing numbers of committed building owners and investors will lead to a greater focus on the lifecycle benefits of the technologies and design strategies, assisting the financial evaluation of the various attributes beyond the initial capital cost impacts (Pitts, 2004). It should also mean that design teams will need to work harder to evaluate and balance Green initiatives, look for ways to counterbalance costs and prepare measures to ensure the attributes are maintained through to construction(Morris, 2007).