Green Buildings Gaining Economic Traction

There’s a new report from Australia’s Green Building Council (GBCA) called “Valuing Green” that points to a bullish future for green real estate.

The message of the report was summed up best by Australian property manager Daniel Grollo of Grocon:

No-one would build a new commercial building that wasn't green in Melbourne because it would be obsolete on completion.

When compared to conventional buildings, the report finds that green buildings lower energy costs up to 85%, reduce water consumption by over 60%, and eliminate 69% of construction waste.

Environmental performance has yet to translate into market value, but real estate analysts believe that investment in green buildings will pay off in the future: poor-performing buildings are likely to become liabilities as energy and water costs and environmental regulations increase.

In a recent research note, one analyst from Innovest, reacting to the GBCA report, forecast the growing trend:

Owners and managers believe that green buildings are ‘future proofed’ against the risk of rising energy costs, market rejection of non-Green Star [the Australian green rating] buildings and tightening regulations on building sustainability performance.

The GBCA report adds further evidence to the positive economics of green buildings previously reported by McGraw Hill, which found that in the US market green buildings had 8% lower operating costs, had rents that were 3% higher, a 7.5% greater market value, and a 6.6% improved return on investment as compared to non-green counterparts.

Still, Australia’s green building market is among the most advanced in the world. The GBCA found that approximately 53% of commercial building in Australia is now green, putting it way ahead of the US market where commercial green building is a paltry 10%.

Still, advocates in the US are promoting the idea that climate action in the building sector can deliver both environmental and financial profitability.

In a recent report, Solving Climate Change Saves Billions, Good for the Economy, Jobs, Ed Mazria of Architecture 2030 explains how green building is the best, most profitable and most efficient solution to curbing rising carbon dioxide levels, and also a powerful antidote to reliance on coal power.

He’s calling for making buildings carbon neutral by 2030 instead of pursuing more expensive and less effective solutions such as ‘clean’ coal (CCS) or nuclear energy. Mazria cites a McKinsey report on reducing energy demand and calculates the benefits of a single $21.6 billion investment in building efficiency.

Investment in building energy efficiency is surprisingly effective. A single investment of $21.6 billion would replace 22.3 conventional 500 MW coal-fired power plants, reduce annual CO2 emissions by 86.7 mil­lion metric tons, save 204 billion cu.ft. of natural gas and 10.7 million barrels of oil each year, save consumers $8.46 billion in energy bills annually and create 216,000 permanent new jobs.

By comparison, neither ‘clean’ coal plants, nor nuclear plants, can compete with the clean energy, cheap price, widespread economic benefits and job creation of building energy ef­ficiency. Investing the same $21.6 billion in either ‘clean’ coal plants or nuclear plants costs significantly more (rather than saving consumers money), replaces far fewer conventional coal plants, reduces CO2 by far less and would create no new jobs, since the jobs created by these new plants would simply replace existing conventional coal plant jobs.

According to latest evidence, scientists are warning that the world only has 7 years to stabilize carbon dioxide levels. With the climate already in crisis, Mazria is proposing immediate action that is both effective and profitable, and the latest report from GBCA is pointing in the same direction.

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