The Brilliant Economics of Green Buildings

Taipei 101 in the skyline
Taipei 101 in the skyline

Despite the fact that not so long ago environmentalism was a concept that was mocked, recent studies and figures have shown that not only are environmentally friendly projects being taken seriously, they are proving to be big business.

The green market has become a highly successful and lucrative niche, and there are a lot of suppliers, designers and contractors that are quickly seeing both the economic and environmental benefits of green builds. It’s not just the people involved with construction that are taking interest, tenants have a big interest in the development of eco friendly projects.

Green Growth is Not Where You Think it Would Be

Now, you’re probably thinking that the rise of environmental development contracts has to be because of growth and investment in the domestic building sector. You must be thinking that more and more homeowners are trying to reduce their energy bills by investing in green builds. You are probably thinking that landlords are investing green technology to improve the value of their home. But you’d be completely off the mark.

It is in fact the commercial construction sector which is experiencing the most intensive period of growth when it comes to environmentally focused projects, in both new builds and renovations.

  • In 2010 33% of all new commercial construction projects were green builds, weighing in at an estimated cost of $54 billion.
  • It is estimated that by 2015 the number of commercial green buildings will have tripled, creating a real estate market worth approximately $130 billion in new construction projects and a further $16 billion in renovation projects.

Clearly this is a lucrative field and more and more contractors and landlords are pushing for further developments that involve environmentally minded projects.

Classifying Green Commercial Buildings

Like other commercial properties, it’s worth recognising that not all green builds are the same, in fact there has been the development of an unofficial three tier classification system to help developers and tenants determine both the financial and environmental value of commercial buildings.

Class A: High quality prestigious buildings that utilise state of the art technology that have a definite presence within the market. Rents for these for these premier offices are above average for the area.

Class B: Good quality buildings that compete for a wide array of clients with average rents in the area. Systems and technology are sufficient, but the building cannot compete with the quality and price of a Class A build.

Class C: Adequate buildings offering functional space at rents that are less than average for the area.

In essence, buildings listed as Class A are the most desirable and the most sought after, where as buildings registered as Class C are the least popular in comparison. Ultimately, greater desirability means grater revenue potential for the landlord. It’s in Class A constructions where the environmental concept has really gained traction.

In Manhattan, for example, Class A office buildings now make up just over 60% of the total market, with class B buildings taking just over 25% of the market and Class C buildings account for the remaining percentage.

What’s Fuelling the Interest and Growth in Green Construction

Environmentally minded construction projects are altering the dynamics of the real estate market. Tenants’ demands, government requirements and investor desires are all contributing to the development of green construction projects.

While government regulation and legislations may have some impact on the rise of environmentally friendly construction contracts for both new and renovation projects, it is ultimately the demands of tenants that is driving the ongoing increase of green builds in the modern society. You can be confident that Class A commercial construction builds, both new builds and renovations, will be on the rise during the coming years, because tenants will continue to desire eco friendly builds.

For prospective contractors and landlords it’s well worth noting that many tenants are willing to invest a considerable sum in order to secure working space in green buildings. This is because tenants acknowledge:

  • the deceased operation costs
  • the increase in employee productivity
  • The increase in rapport with partners and clients which comes with an association to an environment with superior eco friendly performance.

Author Bio: Peter Smith is a guest author at various sites and writes mainly on the topics related to environment and earth. One of his articles titled “Warren Ventures LLC buy my house for cash “became very popular in the audience.

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