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Economics & Finance

Economics of Green Sustainable Building
Making a commitment to sustainable development is not just about environmental ideology, but also dollars and cents. Current data identifies that it costs no more to build “Green” than to build “Conventional,” and when you underwrite the lifecycle costs of the building, the cost’s are always significantly less. A Costar study released in 2014 showed the following:

Rent for Green vs. Conventional Buildings

  • LEED buildings rent for $11.33 per square foot over Non-LEED
  • LEED buildings have a 4.1% higher occupancy
  • Energy Star buildings rent for $2.40 per square foot over Non- Energy Star buildings
  • Energy Star buildings have a 3.6% higher occupancy

Sale of a Green Building vs. Conventional Building

  • LEED buildings trade for $171 per foot more than Non-LEED
  • Energy Star Buildings trade for $2.40 per square foot more than Non- Energy Star Buildings

Community Economic Benefit
Besides these immediate economic benefits, Green buildings have longer economic lives, and stimulate employee productivity while providing a socially responsible image for their corporate tenants. The LEED system also spurs “Green Collar” jobs, as materials originate within 500 miles away from the project. The environmental benefits such as reduction of carbon footprint, better indoor air quality, and overall net positives to the environment are an added bonus.

What is Sustainable Development?
According to the World Business Council on Sustainable Development, “Sustainable development involves the simultaneous pursuit of economic prosperity, environmental quality and social equity. Companies aiming for sustainability need to perform not against a single, financial bottom line but against the triple bottom line.”

Finding this balance is essential in developing projects that will be environmentally and socially responsible as well as cost effective. All three of these areas work together to form synergies which support each others’ goals. In Green Buildings, an example of the synergies between the 3 E’s is the use of Daylighting in a building. Daylighting creates happier and more productive employees and building occupants. The building uses less energy for lighting and cooling which is good for the planet and also saves money.

The Business Case for Sustainable Development
Businesses can benefit by investing in green building through energy savings, increased business, higher property values and rental rates, greater worker productivity, and government incentives. Green buildings address the Triple Bottom Line, balancing social and environmental needs and concerns with your financial bottom line.

Increased Property Values
Green buildings sell for an average of $173 more per square foot and command higher occupancy and rental rates compared to conventional buildings. Cost savings from increased energy and water efficiency and lower maintenance costs are being recognized as consumers are demanding and preferring high performance green buildings. The recognition of the importance of Green buildings is creating momentum in the Green building market. By 2015, the total Green building market value for the United States is projected to be at $173.5 billion.

Increased Business
Many businesses have had an increase in sales after incorporating sustainable principles into their businesses. The comfort provided by green buildings as well as their positive marketing exposure attribute to improved business in retail locations. Green buildings have shown to have a positive impact on employee health and have increased worker productivity because of better indoor air quality and improved thermal and lighting comfort. Many businesses have seen cost savings due to a reduction in absenteeism and increased productivity because of improved indoor environmental air quality.

Government Incentives
With the government acknowledging the growing problem of climate change as well as the benefits of Green buildings, there is a growing list of incentives being offered to build Green. Some of these include expedited permitting processes, density bonuses, and awards. Monetary incentives can include grants, rebates, property tax abatements, and tax credits. The City of Pittsburgh’s LEED Density Bonus allows an additional 20% in floor area ratio and height for buildings that achieve LEED for New Construction or LEED for Core and Shell certification.

Costs of Building Green
The World Business Council for Sustainable Development found that the costs of building green are often perceived as much higher than non-LEED certified buildings. In fact, many studies have shown no difference in costs of LEED certified green buildings and non-LEED buildings. Even while construction costs continue to rise, “Many project teams are building green buildings with little or no added cost, and with budgets well within the cost range of non-green buildings with similar programs.” This study also found that many project teams

view sustainable design as an added and separate feature which leads to the notion that green design is something that gets added to a project – therefore they must add cost. However, when teams view sustainability as a fundamental part of their project and incorporate it into the design phase, they can actually save money. Using an integrative design approach, which involves developers, architects, engineers, clients, and other team members in the pre-design phase, will ensure sustainability is a goal from the very beginning of the project leading to the most cost effective sustainable design.