Do green buildings cost more?

I am intrigued by the fact that depending on who I talk with, the answer to: does a green building cost more?" varies wildly. Almost all the cutting edge green designers (architects and engineers like those at KEEN and Busby) will tell you - "no, that is not an issue any more. If you know what you're doing, it shouldn't cost more." And yet any conversation you ever have with the owners or developers, like the developers out at UBC here, they'll tell you: we do it when it is cost effective, but this green design stuff isn't alwaus cost effective."  Which is it?

Reply:

Answer: It depends. There’s the theory and then there is the research. Let’s start with the theory. Amory Lovins talks about “tunneling through the cost barrier” and what he means is that if you go deep green, you get to a place where the building is cheaper. To some extent, that speaks to the difference between the developer viewpoint and the deep-green-designer viewpoint: there are few developers that are going that deep green yet. When they do, like at Dockside, they find they have to be very creative with the accounting – in the case of Dockside they are using extensive government grants and, perhaps more importantly, using a large amount of the marketing budget (the marketing budget for this type of project usually dwarfs the architectural budget) and using all the free marketing they are getting for being such a cutting-edge green design and that re-allocation allows them to pay for some of the larger cost items.

But the other side of that notion of funding savings when you go deep enough green is that Amory is talking about a building that wouldn’t necessarily have all the functionality of investment-grade commercial real estate. If you can give up some of the things that for the last 25 years we’ve convinced ourselves we need: lights on all the time even in daylight, a temperature range in office buildings that effectively doesn’t vary (meaning energy has to go into cooling and heating all the time) then you can talk about getting to a cost neutral of less expensive and deeper green building. But if you want all the same functionality then it may cost more as well.

In addition, there are added costs to the fact that many design teams do not know much about green building at the beginning of a project. The learning curve adds to the cost, but if you get an experienced team then this should go down. And then of course there is the integrated design aspect. An integrated design process should bring the team together and help find these opportunities to tunnel through the cost barrier.

That’s the theory. Then there’s the research. One of the best studies done to date on green building costs was “The Costs and Financial Benefits of Green Buildings” which was a “Report to California’s Sustainable Building Task Force in October 2003. What it finds is that: “While the environmental and human health benefits of green building have been widely recognized, this comprehensive report confirms that minimal increases in upfront costs of about 2% to support green design would, on average, result in life cycle savings of 20% of total construction costs -- more than ten times the initial investment.   For example, an initial upfront investment of up to $100,000 to incorporate green building features into a $5 million project would result in a savings of $1 million in today’s dollars over the life of the building.” It also finds that of the 33 LEED registered projects that were studied, there was the following correlation the higher the standard, the more the incremental capital (first) cost (above a standard building):

Figure III-1. Level of Green Standard and Average Green Cost Premium:

-Level 1 – Certified 0.66%

-Level 2 – Silver 2.11%

-Level 3 – Gold 1.82%

-Level 4 – Platinum 6.50%

Average of 33 Buildings 1.84%.  You can download the full report here: http://www.usgbc.org/Docs/News/News477.pdf

The other major research in this area is the “Green Value Report”; an independent research study that looked at green buildings in Canada, the USA and the UK. It concludes that a clear link is beginning to emerge between the market value of a building and its green features. It finds that “The study combined a review of literature and case studies and finds that not only are green buildings good for the environment, provide healthier places to live and more productive places to work, they can command higher rents and prices, attract tenants more quickly, reduce tenant turnover and cost less to operate and maintain.” Find it here: http://www.rics.org/Property/Green+value.htm.

Hope that helps!