Construction Execs: Green Building Leads to Increased Efficiency and ROI

Construction Execs: Green Building Leads to Increased Efficiency and ROI

Turner Construction Company has announced the findings of its survey of 719 building owners, developers, architects, engineers and consultants on green building issues. The online survey was conducted by Bayer Consulting during July 2004. For the purposes of the survey, green buildings were defined as buildings which use design and construction practices to significantly reduce or eliminate negative effects on the environment and occupants.

Growth of Green Building

In the coming three years, 93% of executives working with green buildings expect their Green workload to rise. More than half (51%) of them anticipated substantial increases in their green building activities while another 42% expected these activities to increase somewhat. Even among executives not currently working with green buildings, nearly one-third (30%) thought it was very or extremely likely that their organization would work on a Green project in the next three years. The survey also found that 88% of executives currently involved with green buildings have seen their activities with green buildings increase during the last three years, and nearly 40% have seen Green activity increase substantially during that period.

"An increase in sustainable building practices is great news for everyone," said Rod Wille, Senior Vice President, Manager of Sustainable Construction, Turner Construction. "First and foremost, the design, construction and maintenance of green buildings is healthier for the environment and for the people who live, work, shop and play in them. Secondly for those who design, construct and maintain green buildings, research shows that the more experience an organization has with green buildings, the more effective and cost efficient they become. These findings are also borne out by the fact that LEED(TM) (Leadership in Energy and Environmental Design) registrations double every two years."

Experience Makes a Difference

Roughly three-quarters of executives at organizations involved with green buildings reported that these buildings generated a higher return on investment (ROI) than other buildings. Among executives lacking direct experience with green buildings, only 47% believed that green buildings generate increased ROI.

Of executives involved with green buildings, 91% believed that the health and well-being of their building occupants is greater, as did 78% of executives not involved with green buildings. Another gap existed among executives at organizations involved with green buildings. Sixty-five percent of executives involved with six or more green buildings said the residents or occupants of green buildings enjoy much greater health and well-being, compared to 49% of executives involved with three to five green buildings and 39% of executives involved with only one or two green buildings.

"With many decision-makers, a near-term cost bias often overshadows the reduced long-term operating expenses due to energy efficiency, labor productivity, occupant wellness and the resulting decrease in liability that are apparent in a lifecycle cost analysis for a green building project," Wille said. "Turner has learned through nearly 10 years of experience on more than 80 green buildings that the application of learned efficiencies can more than offset any upfront costs of green buildings to a level comparable to traditional, non-sustainable methods. Beyond the important environmental, social and energy conservation factors, it is now increasingly clear that green buildings make economic sense."

"Turner's portfolio of Green projects extends over many market segments including: commercial, educational, research, multi-family residential, healthcare, retail and airports," Wille continued. "This experience led to the development of a Turner databank of Green cost information and an integrated approach that assists designers and clients when selecting cost- effective Green materials and processes."

Through the application of these tools, Turner was able to partner with Toyota to develop a Green, LEED(TM) Gold Certified, building in Torrance, Calif., that cost no more than traditional construction. The Toyota Motor Sales - South Campus building is 636,000 square feet on a 38-acre site. For use as administrative offices, it features 53,000 square feet of rooftop photovoltaic panels that can generate 550 kilowatts of electricity-or about 20 percent of total energy usage. Its first cost was competitive with the cost of other local, non-sustainable office buildings.

Factors Leading to Mainstream Green

According to the survey, executives at firms involved with more green buildings were far more likely to report that ongoing costs of green buildings were much lower than those of non-green buildings. Thirty-six percent of executives at organizations with six or more green buildings said that green buildings have much lower operating costs compared to 19% of those at organizations only involved with one or two green buildings. Of those executives most actively involved with green buildings, 37% said that 10-year costs are much lower compared to 18% of organizations involved with only one or two green buildings.

The survey found that the largest obstacles to widespread adoption of green building techniques are perceived higher construction costs (by 70% of all executives), a general lack of awareness regarding the benefits of green buildings (by 63% of all executives) and short-term budget horizons (by 53% of all executives). Eighty percent of all executives said that green buildings repay any additional upfront costs through lower operating costs and other benefits. When asked to compare a list of benefits generated by green buildings with those generated by non-green buildings, a significant percentage of executives said that green buildings outperform non-green buildings in the following categories:
  • Greater health and well-being of occupants (86%)
  • Higher building value (79%)
  • Higher worker productivity (76%)
  • Higher return on investment (63%)
  • Higher asking rents (62%)
  • Higher occupancy rates (52%)
  • Higher retail sales (40%)
Disproving the Green-Premium Perception

"The survey uncovers a misperception about the initial costs of green buildings on behalf of the inexperienced," said Wille. "Executives who have little or no experience working with green buildings believe up-front costs are higher, ROI is farther into the future, and energy and natural resource savings are lower. Beyond these measures, many underestimate the human reactions to these projects-that is, productivity enhancements, higher occupancy rates and asking rents, and increased retail sales."

A comparison of the perceptions among executives with experience in green buildings vs. those who have not worked with green buildings shows that while many benefits are understood, the extent to which they affect the bottom line is not. Although a February 2003 U.S. Green Building Council white paper says that LEED(TM) Green certification can be achieved with as little as 2% premium, executives involved in green buildings on average estimated Green construction costs to be 14% higher while executives not involved with green buildings estimated construction costs at 20% higher. Still, 80% or more of each group believed that green buildings repay these perceived higher construction costs through lower operating costs and other benefits.

The self-administered survey was conducted over the Internet from July 9-16, 2004. Bayer Consulting, on behalf of Turner Construction, surveyed 719 executives on green building issues who were involved with buildings either as owners of rental buildings, owner-occupants, developers, construction firms, architects, engineers, or consultants.