Sustainable Building Design – ROI
Sustainable designed buildings pose a perceived financial challenge to many investors and owners, but these are often misconceptions. Green building measures can be inexpensive and the long term payback on these investments makes them worthwhile. A building that is designed sustainably offers financial return on investment for the hotel in a few years usually, serves as an example of the owner’s commitment to saving the environment, and also shows the owner’s concern for the welfare of its staff and guests as green buildings have a healthier internal environment.
Many owners and developers tend to baulk at the perceived cost of constructing sustainably. The additional costs are often thought to be as high as 20% extra above normal costs. After decades of experience it has been shown that sustainable buildings usually can be designed for less than 5% above normal costs. A World Business Council for Sustainable Development study analyzed 146 certified green buildings and found an actual average marginal cost of less than 2% 1. Traditional thinking focuses on upfront costs – the cost to build the building in the first place – rather than life cycle costs, the costs of operating the building over its lifetime. Green building practices are getting closer to break even on a first cost basis, but the real payoff comes for sustainable design is when it is viewed through the lens of life-cycle costing.
Many sustainable measures are inexpensive. LED lighting for example is priced now competitively with more traditional incandescent and fluorescent lights, and will pay over the long run due to longer life expectancy. LED lights last 5 to 10 times longer than older more traditional light sources. Many construction materials such as aerated concrete blocks and UPVC window panels are now priced competitively and will contribute to a more energy savings. Measures like these incorporated into a project help to lower operating costs over time. One Green Economy Post article cites LEED buildings tend to use 30 to 50 percent less water and energy use than those designed under current codes2. According to the US green Building Council by virtue of lowered maintenance and energy costs the return on investment from green building is rapid: green retrofit projects are generally expected to pay for itself in just seven years3.
Going green results in more revenue and value for building operators and owners. For example A Cornell University study4 showed hotel ADR to be on average $20 higher for LEED certified hotels versus non certified hotels. According to the US green Building Council upfront investment in green building makes properties more valuable, with an average expected increase in value of 4 percent.5
Having a guide to sustainable design can be a great benefit for designing and constructing a sustainable building project. An owner may want to choose a green certification system such as LEED, Green Mark, or EDGE to provide a framework for sustainable design. These systems address usually anywhere from three to eight categories relating to. LEED for New Construction for example addresses:
- Integrative Process
- Location and Transportation
- Sustainable Sites
- Water Efficiency
- Energy and Atmosphere
- Materials and Resources
- Indoor Environmental Quality
These categories will have outlines for required and optional measures that help make the design more sustainable. As suggested by the categories above these address the environmental impact of the project location, energy and water conservation, the carbon footprint of the building materials chosen, and features of the internal environment of the building such as air quality, lighting, and thermal comfort.
The process for certifying a green building usually involves several stages.
- The Owner hires a Sustainable design consultant specializing in the chosen system (LEED, EDGE, TREES, Green Mark, etc.).
- The owners and design team meet with a green building consultant to verify the sustainability goals the owner wants to achieve with the certification system.
- The owner usually produces a document known as the Owners project Requirements to outlines these measures and the design team in turn creates a Basis of Design matching the Owner’s goals.
- The team meets in a series of meetings to integrate sustainability into the design process.
- The Green Building Consultant educates the contractors for any requirements from them for the sustainable design, and monitors their incorporation of these into the construction process.
- After the project construction is complete documentation is gathered for submission to the green building system certifying organization (LEED, EDGE, TREES, Green mark, etc.).
- The green building system certifying organization review the documents, asks for corrections and approves the project for certification.
Qualified consultants such as Development Management Group Co., Ltd. are available to help lead owners/developers through the certification process.
These certification systems have the added benefit of the marketing value showing the property has been certified by a respected independent third party. Green buildings can be more attractive to perspective tenants. Researchers have studied the impact of sustainability on tenants. Tenants, it turns out, are more healthy and productive in LEED buildings for example. Their air is cleaner, the lighting is better, more daylight reaches interior occupants, temperature is better controlled and toxins like formaldehyde are kept out. One Forbes magazine Article quoted a major U.S. real estate investment and amendment firm (Hines) Executive Vice President as saying “At Hines, we specialize in Class A space (the most valued real estate space in a given market), and we’ve reached the point where clients don’t think it’s Class A unless it’s green.”6
Going green does not have to be an enormous obstacle to overcome. With the right guidance sustainable design can be within the grasp of most projects. Designing a building it turns out usually has little upfront financial challenges, and in the long term reduced operating costs for operators and increased potential revenue from tenants makes the investments worth it.
- Kats et al., Green Buildings and Communities: Costs and Benefits (Good Energies, 2008).
- The Green Economy Post: Return on Investment for Green / LEED Projects (2010).
- McGraw Hill Construction: World Green Buildings Trends: Business Benefits Driving New and Retrofit Market Opportunities In Over 60 Countries (2012).
- The Impact of LEED Certification on Hotel Performance: Cornell University -The Center for Hospitality Research (2014).
- Benefits of building Green: US green Buildings Council website (2016).
- Forbes: The Brilliant Economics of Green Buildings (2012).