Why Aren’t Green Buildings Already Dominating the Market?

by | Nov 10, 2021 | Buildings

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The LEED framework for buildings has served as a platform for the expansion of green building practices for nearly a quarter century. Establishment of the certification system was intended to, among other things, define “green building”, recognize environmental leadership in the building industry, stimulate green competition, and raise awareness of the benefits of green buildings (1). Market demand for greener, healthier buildings is a demonstrable outcome of the last 25ish years of progress in this way. A study by the MIT Real Estate Innovation Lab from December 2020 found that “…healthy building effective rents transact between 4.4 and 7.7% more per square foot than their nearby non-certified and non-registered peers.” (2)

What exactly drives tenants to pay more rent for green spaces? From a financial perspective, better energy efficiency means lower utility costs on a monthly basis. Furthermore, healthier spaces created through strategies such as better ventilation, filtration, or material choices means less sick building syndrome and improved health outcomes for building occupants in the every day lives. Environmentally speaking, lower energy demand or better waste handling practices in construction lower the amount of carbon or criteria air contaminants emitted by the building in throughout its lifecycle. Unpacking the stamp or seal of certification to consider the specifics of the project can show a host of direct benefits for the owners, the building occupants, the community at large, and the environment.

Increased rental premiums for owners implies a strong incentive for investment in green buildings, in fact research on this topic finds that the average marginal transaction cost exceeds the average marginal cost increase (2). That said, green buildings do not represent the lion’s share of the total market. A CBRE study done in 2018 found that, across the 30 largest cities in the U.S., green certified buildings (Energy Star and LEED) represented only 16.7% of the total building stock (3). Surveys of building owners have found that hesitation in adopting healthy building strategies derives from budget concerns, prioritization of project expenditures, and unclear business cases for health and well-being investments, among other matters (4). These concerns from the building owners points to the need for a more directed and compelling case for the increase in capital costs associated with green and healthy buildings.

factors influencing design and construction decisions table

The USGBC has recognized the importance of the real drivers behind the demand for green buildings with LEED credits awarded for triple bottom line analysis. (5,6) An economic analysis that evaluates and illuminates the value of the steps necessary to be certified provides more than just LEED points. Knowledge about the financial return on investment of your strategies can lead to more cost-effective decisions, both on the current project and future ones. Seeing the benefits provided to building occupants from the money spent on better indoor environments helps owners and tenants understand the impact of the design team’s work. Quantifying the amount of carbon, particulate matter, or nitrogen oxide that is not emitted to the atmosphere through better building practices demonstrates progress towards larger climate change and environmentalism related goals.

Autocase’s platform is a simple, easy, and cost-effective way to get informed about the value of LEED projects and designs while providing points towards your certification. Our automated triple bottom line analysis is backed by best available literature linking design interventions to economic outcomes across financial, social, and environmental effects, and the results can be directly uploaded to LEED online for submission to USGBC.

Did you miss our webinar on November 18? Watch the full recording here to find out how design teams like Page and Ecovert are already leveraging our capabilities to produce better buildings and cost-effectively get projects certified.

green building

(1) http://environment-ecology.com/environment-and-architecture/81-the-leadership-inenergy-and-environmental-design-leed-.html
(2) https://realestateinnovationlab.mit.edu/research_article/the-financial-impact-ofhealthy-buildings/
(3) https://www.cbre.us/about/media-center/2018-us-green-building-adoption-index
(4) https://worldgbc.org/news-media/drive-toward-healthier-buildings-2016
(5) https://www.usgbc.org/credits/new-construction-core-and-shell-schools-newconstruction-retail-new-construction-35?return=/credits/New%20Construction/v4.1
(6) https://www.usgbc.org/credits/new-construction-core-and-shell-schools-newconstruction-retail-new-construction-38?return=/credits/New%20Construction/v4.1


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