The Art of Green Building and Sustainable Architecture

Green building and sustainable architecture are still phenomena that are relatively in their infancy, so it is with a great deal of indeterminacy that current researchers approach the future of these phenomena, and what they will mean for traditional building values, the future of sustainable building, certification standards, and other relevant issues. It is true that it may be too early to look at pricing trends in sustainable and non- sustainable buildings; although there is evidence to suggest that secondhand, non-sustainable or non-green properties will become harder to let and have shorter lifecycles as more green buildings come on stream, there is also the possibility that historic or older buildings can be converted to standard. For property investors, the implications of green building are mixed, because they involve a sort of hedging on bets regarding a future that may or may not happen. For those property owners holding a portfolio of older stock, the future may have more of a risk, but, then again, the conversion of this stock, as mentioned, may also be an option.

Green Building - Eco Home

In the current US and UK real estate market, the trend towards green building is firmly established, just as it is across Europe, the US, and Canada. Modern, industrialized nations are paying more and more attention to sustainable building standards, and incentives are currently still attractive to many investors regarding making new buildings as sustainable as possible, for the sake of energy and tax credits. Rational behavior in the real estate market involves, for property investors, a combination of risk management and return on investment. The term inertia is bandied about frequently, in terms of new factors which have impacted the market, but are continuing to develop as of the current writing. When these factors overcome inertia, then they become much more serious considerations for property investors; before this status, they are often simply viewed as fads. Green building, due to the intense scrutiny of current environmental problems and the web of credentialing and standardization practices, is arguably no longer being viewed as a fad in this environment, but then again, it is also not being viewed as a phenomenon that has overcome its inertia. As one source states, “For investors, the key consideration lies in future performance; for this the comfort and support of performance measurement is required.” The Sustainable Property Appraisal Project (SPAP) has made strides towards this sort of assessment and measurement, but unfortunately, as with certification programs and other standardizations in green building, it is only being applied to a small number of properties, which, in turn, may yield a future index of price differentiation that is useful to investors, but currently, is too nascent to yield reliable data.

Green building is no longer seen by property investors to be as much of a risk; the city of Chicago sets an example for an eco-friendly real estate development and now it has gained mainstream credibility. The public has become increasingly aware of the need for sustainable models of living, and as a result, society has changed and shifted along the lines of public interest. The current stage of the market, however, in terms of product life cycles of buildings, seems to be a transition between awareness and concrete action. “The question to be resolved is whether or not market agencies will now start to systematically accumulate, analyse and disseminate the evidence which supports corporate strategic objectives relating to social responsibility and responsible property investment view.” As mentioned above, hedging bets on the future is a large part of property investment in green building; this also includes investment in traditional or “secondhand” building. For a property investor with a lot of older properties, green building and its popularity could be construed as a definite threat, because the logical conclusion would seem to be that as the public demands more and more sustainable models, those models of the past (buildings made before the green building phenomenon) will lose value as demand for them slackens. This worry causes a lot of concern, particularly among property investors whose portfolio contains a lot of old properties.

In a situation in which most of a property investor’s holdings are old buildings, however, there is no need to worry about a future that is still indeterminate, and not set in stone. Properties are not non-modifiable products. If a company issues a product that is not environmentally sustainable, such as a Freon air conditioner, and then replaces it with a new product that is much more environmentally aware, with reduced energy and no more Freon, those with the old Freon unit are stuck; air conditioners are not properties, however. Properties can be modified. “Data from the Energy Information Agency shows that on average, buildings built before 1920 are more efficient than those built between 1920 and 2000... Buildings constructed before the advent of modern HVAC systems had to be designed and sited to make the best use of natural means of heating, cooling, and ventilation.” Based on this above data, there may be fewer reasons for property investors to worry that older buildings in their portfolios will lose value in the wake of green building.

Since codified inspections services started, the process of rating building systems has been around in the UK and in the US, but it is arguably only in the latter part of the 20th century and the beginning of the 21st century, that green building rating systems have become correlated with environmental standards, rather than standards that are merely based on the measurement of safety. The predominant building rating systems during the last few decades have been based only on security and safety issues, and although these variables are very important, the framework of these services was already in place, waiting to be transferred to sustainable building models and other sorts of certification. As people become more energy and environmentally conscious, building code procedures are transferred ore and more to green building rating certifications. Overall, statistics show that, total renewable energy consumption for electricity generation increased by three percent to 4.3quadrillion Btu in 2004, “despite a decline in conventional hydroelectric power, while renewable energy consumption for non-electric use decreased by four percent to 1.8 quadrillion Btu, with most of the decrease in biomass energy for the residential and industrial sectors. Biomass consumption increased by four percent.” There are different green building based rating systems that focus on different parts of the process of green building.

BREEAM is the predominant green rating system that is used in the UK and Europe; in the US, the certification program does not work, but they have their own system called LEED. BREEAM in the UK applies predominantly to buildings that are tenant build outs for leasing. The certification is updated annually and represents a proprietary system that is protected internally and organizationally; this protection makes some of BREEAM’s internal mechanisms hard to descry, unless it is through a licensed organization. “The licensed assessor organization determines the BREEAM rating based on quantifiable sustainable design achievements. Although most in the sustainable design profession are aware of BREEAM and many rating systems have used it as their development basis, the rating system results are neither used nor recognized by U.S. design professionals.” BREEAM differs from other certification measures in that it is relatively time-tested. It is, however, relatively difficult to apply BREEAM in a non-UK, non European environment. Other systems also exist on an international level, such as GBTool. “GBTool would be applicable for all but tenant build out and operations and maintenance applications; however, an operations and maintenance version is under development.” GBTool is frequently updated and utilizes checks and balances through third party organizations. It is similar to Green Globes in the US and Canada. Implementation in the UK is difficult. One strength of GBTool is in its ambition to become a standard that is applicable internationally, which, arguably, is necessary, because international standardization is what is needed for green building. Pollution is not a problem that respects national borders.

What this means for property investors is that green building certification procedures can be utilized, and a happy medium can be struck between old and new properties by finding ways to convert old properties to GBTool and BREEAM standards. As a result, investors can reap benefits such as increased return on investment, reduced expenditures on maintenance efforts, reduced running costs of the properties, insurance savings, tax incentives, and reduced void periods in re-letting. The situation for the property owner with old and new buildings is not lost, when it comes to the old properties. However, even though rating and guideline systems have improved through the setting of standards such as BREEAM and some of the other organized bodies mentioned above, and dissemination of other certifications, there are still potential problematic aspects of applying these standards, especially in such a quickly-changing and mercurial market as real estate investing, where there is often a gulf between theory and reality. Aside from property investors and building planners, in the current environment, contractors and architects are also helping to realize this new building reality. “First, designers need to assemble a team that truly understands and is ready to support all the technologies that are desired for the project. Second, designers need to work with the architect and owner to ensure the process empowers the design team with the ability to ensure the technologies are properly applied in order that the performance expectations of the design are achieved.” As noted above, the challenge of the future for investors remains less about hedging bets on old properties and more about streamlining and integrating a single international standard for green building, so that the standards can be streamlined.

Property investors tend to have a financial bottom line mentality, and therefore, the impact of energy costs is something upon which there is a lot of hesitancy in the market. However, it is not just investors, but also building mangers, designers, and occupants who are affected by the phenomenon of savings on energy that are possible with green building and green conversion. “This cost (energy) is the single largest and most manageable expense in the provision of office space. Rising energy costs will only increase the salience of this issue for the private profitability of investment in real capital.” More and more stakeholders in properties are getting involved with, and giving attention to, green building and sustainable living. “It appears that modest programs by government and by nonprofit organizations to provide information to participants in the property market (i.e., “nudges”) do have a large payoff. Buildings certified by independent entities as more energy efficient or sustainable really do command economic premiums in the marketplace.” The permanence of these premiums, along with the issue of conversion of older buildings to green standards, remain unclear issues.

Overall, in terms of energy savings, green buildings are more efficient, and this efficiency is used to calculate asset values, in a way that may threaten some property investors who hold a lot of older buildings in their portfolios. However, as noted above, it has been the assertion of the current report that, since properties are not appliances or singular products that cannot be changed or modified, there is the possibility of cutting possible losses by simply converting these older properties to greener standards, through any of the standardized agencies mentioned above. “These results suggest that more aggressive policies – in the U.S. and elsewhere – of certifying, rating, and publicizing buildings along these dimensions (including, perhaps, those buildings that score low on measures of energy efficiency) can have a large payoff in affecting energy use and maybe the course of global warming.” One must keep in mind, that with all of the talk of cost savings and return on investment, that it is really the health of the planet and air we breathe that is at stake here. More and more people, fortunately, are becoming aware, and “Within the UK, this growth in policy awareness has been paralleled by a shift in the understanding of the breadth of sustainability with concerns for environmental protection now extending to a wider remit encapsulating well-being and triple bottom line sustainability.” Property investors with old buildings can rest assured that making these buildings green will add to their value, as this has already been proven through case example; “In the city of Westminster in London, for example, a plan dubbed "Improving Historic SoHo's Environmental Performance" lays out a clear "business case for retrofitting" a culturally significant neighborhood's old buildings. The economic benefits include reduced running costs and less exposure to increases in energy prices.” The challenge of the future is to accurately predict where the phenomenon of green building will go.