Green Building set to become the “norm” in the construction industry

As the green building movement gains momentum, there is a growing recognition by the financial markets of the magnitude of potential investment opportunities in the sustainable building and construction sector.

A recently published research note by Canaccord Genuity concluded that the adoption of green practices is a significant trend that is likely to become the norm in the global building and construction industry. In recent years, the percent of non-residential building that is “green” has increased rapidly – growing from less than 1% in 2000 to 10%-12% in 2008 – and is expected to reach 20% or more by 2013. Mc-Graw Hill Construction recently estimated that market spending for green building in the U.S. will reach $135 billion by 2015.

The demand-side, supply-side, and regulatory factors driving this transformation include:

1. the proliferation of green building standards, such as LEED®, ENERGY STAR® and ASHRAE
2. the realization of financial benefits, including lower energy costs, higher rents and lower vacancy rates
3. legislative mandates such as green building codes, and incentives such as tax credits, accelerated permitting and equipment rebates
4. the continuing volatility of energy prices

There were several key developments in 2010 that helped to maintain the momentum of the green building movement:

• ASHRAE 189.1. The American Society of Heating, Refrigeration and Air-Conditioning Engineers introduced “a new standard for the design of high-performance green buildings” that is expected to result in a 20% or more improvement in energy performance over the standard it replaces. The release of a new standard by ASHRAE is an important development because ASHRAE standards are often referenced in building codes.
• International Green Construction Code. In March the International Code Council (ICC) launched the International Green Construction Code. This is a green version of the existing ICC codes, which are widely used to define local and state building codes. The ICC collaborated with ASHRAE and the US Green Building Council on the development of the new code, and it is expected to have a significant impact on standardization of building codes at both a national and international level.

The report also highlights the momentum being gained by green retrofits to existing buildings. Existing buildings comprise a much larger market than the new construction market, and several researchers have estimated the potential for retrofit investments could run into hundreds of billion dollars. Spending on energy efficiency has been held back by the recession, but is expected to rebound strongly in the coming years, as building owners respond to regulatory pressures and tenant demand for sustainable workplaces.