Green Building, Indoor Air Quality, LEED, Sustainable Building

The Economics of Green Buildings

The evidence is growing that sustainable buildings provide financial rewards for building owners, operators, and occupants. Green building requires a collaborate effort between, architects, engineers, and contractors in order to co-create a built environment that focuses on renewable energy, sustainable materials, water conservation, site development and indoor environmental quality.

Green design and construction help significantly reduce energy, water, and HVAC costs as well as improve the indoor environment. It is these factors that have driven the popularity of green architecture. Investors, operators, and tenants are drawn to green building and in this post, we’ll explore some of the economic benefits of going green.


Design and Construction Costs


Recent surveys find that perceived first costs remain the primary barrier to green building. For example, Global Green Building Trends study, reports that 50% of over 1000 respondents surveyed cited “higher first costs” as an obstacle to green building. China and the US came in above average at 60% and 70% respectively.

Top challenges to increase green building

There seems to be a general misconception that green buildings designed to use fewer resources and to support the health of their inhabitants are more expensive to build than standard buildings. This is evident in an opinion poll conducted by the World Business Council for Sustainable Development where a 2007 survey showed that green buildings were thought to cost 17% more than conventional buildings.

In fact, of 170 buildings analyzed for Greening our Built World, costs average at less than 2%. Another study conducted by the World Green Building Council found that actual design and construction costs have been documented to be in the range of -0.42 to 12.5%, with the latter value corresponding to a zero carbon building project. 

With the effective integration of cost strategies, program management, and environmental strategies right at the start of the development process, green building does not need to cost more. Although addition costs associated with building green can increase the cost of a project, the actual cost is not as high as perceived by the building industry.


Increased Value


Buildings that boast higher sustainability credentials have recently seen an increase in demand due to the fact that investors and tenants alike are becoming more conscious of the environmental and social impact buildings have on the built environment.

Benefits expected from green building

A study conducted by the University of California-Berkeley showed that green building does attract higher rent than conventional ones and enjoy higher growth in rental rates.

The study looked at 694 certified green buildings and compared them to 7 489 conventional office buildings, each located within a quarter-mile of a green building in the sample. On average, the sustainable buildings enjoyed a 2-6% premium over the conventional buildings. The study went on to calculate that at prevailing capitalization rates, these increased rentals added more than $5 million to the market value of each property.


Reduced Operating Costs


The Dodge Data & Analytics report states that between 20% and 29% of respondents select reduced operating cost as the main trigger for going green. Lower energy consumption and the resultant lower energy cost is a key component of any green building. As utility prices rise, the emphasis on operational efficiency and its impact on the buildings running cost will become more pronounced. The operational efficiency of a building is becoming an important driver of occupant demand.

The WorldGBC estimates that green building uses 25% – 30% less energy than traditional buildings, while a similar study in New Zealand puts that cost-saving much higher at between 35% – 50%.

The graph below shows the results of the LEED study by Kats (2003), that suggests that buildings with higher levels of certification often correspond to higher percentages of energy saving. Kats also reports in a 2010 study that water saving strategies such as water reuse and efficient plumbing fixtures save 39% more water than similar non-green buildings.

LEED certification


Green building benefits significantly from the focus on durability and longevity of materials and finishes. The result is less routine maintenance than conventionally found in buildings. Green solutions like radiant cooling have much fewer moving parts than traditional air conditioning and thus require less routine maintenance.


Improved Workplace Productivity and Occupant Health


Sustainability is playing a larger role in driving the productivity of teams. There is significant research that shows the improved indoor environments have a significant effect on worker productivity, occupant health, and well-being. Considering sustainability, the 5 key factors that affect worker productivity are:

  • Indoor air quality
  • Thermal comfort
  • Lighting
  • Access to outside views and external space
  • Acoustics

study published by Carnegie-Mellon University that ran from 1985 until 2000 showed that improved indoor air quality increase productivity between 0,5% and 15%, while daylight access in offices increased individual performance by between 5% and 15%.

In the 1994 publication “Greening the Building and the Bottom Line”, the Rocky Mountain Institute cited how high indoor environmental quality improved worker productivity by 16%, which in turn helped speed up the payback on the increased capital investment. Similarly, a study at Herman-Miller showed up to a 7% increase in worker productivity following a move to a green, daylit facility.

There has also been an increased focus on the monetary benefit of indoor environment quality in green building. A popular study done by Kats in 2003, looked at 33 eco-building projects and found that increased worker productivity and the decrease in sick time created a financial gain of 18 USD per square foot.

Finally, a study done by the Lawrence Berkeley National Laboratory found that in the US businesses could save as much as $58 billion in lost sick time and an additional $200 billion in worker performance if improvements were made to indoor air quality.

By greening our built environment at the neighborhood and city scale, we can deliver on large-scale economic priorities such as climate change mitigation, energy security, resource conservation and job creation, long-term resilience and quality of life.


indoor air quality

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