Costs and valuation of green buildings

July 20, 2009 at 1:22 pm | Posted in Events | Leave a comment
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Ecological buildings are slightly more expensive, but more valuable as well, when compared to standard constructions. This was the main conclusion of the informative workshop organized in Bucharest, by the Romania Green Building Council, July 7th.

rogbc_steven borncampOn the long run, both the tangible, and the intangible benefits of a sustainable building make it far more profitable than a regular building. For developers, investing in a green building instead of a traditional one means reducing risks, since such an investment attracts buyers interested in the reduced operational costs, better working and living environments, and other benefits of a green building. „Building green requires more upfront investment only if compared to building sub-standard quality constructions. You can try to save money by constructing poor quality buildings but strengthening building codes and enforcement, falling costs of technology , the missed benefits of better planning and design principles, and growing awareness among buyers of energy cost considerations will make it a poor investment strategy.“ explained Steven Borncamp, President of the Romania Green Building Council.

When talking about the tangible benefits of green buildings we are referring to energy savings of 30 % to 50%. To these we add benefits that are more difficult to measure, but are very important to companies, like a better reputation, better CSR programs, a decrease in employee absenteeism and an increase of employee productivity. A study published by Greg Kats for the Massachusetts Technology Collaborative shows that employee productivity is 1% higher in companies operating in LEED – one of the international green building certification schemes – buildings. The certification costing only .6 percent more of total costs for the basic green building certification compared to standard buildings.

The same study indicates that an initial increase of 2% in the upfront costs for green design will yield life cycle savings of more than ten times the initial investment, or 20% of total construction cost.

Another element which raises the value quota of green buildings is the fact that green buildings are slower to depreciate than normal buildings. Since they use much higher building standards than normal buildings, green buildings have more chances to maintain a good position on the market, even when basic standards are heightened.

Today, when thinking of a green building, we also think of premium prices. Yet tomorrow it is possible to notice a change. The specialists are expecting that, in the near future, buyers will no longer agree paying more for green buildings, but will probably ask for a price deduction for traditional buildings.

Moreover, significant market shifts are expected to happen in the green building sector with mandatory Energy Performance Certificates enforce in Romania from 2007 by the EU’s Energy Performance in Building Directive (EPBD). A stronger version was approved by the European Parliament, earlier this April. Following a likely adoption by the Council of Ministers, each Member state must transpose the stronger standards into national legislation and draft new laws, action plans, and strategies to accomplish the set targets. The goal is having all Member states ensure that all new buildings are at least “net zero energy” buildings by 31 st of December 2016 with public buildings subject to these standards three years earlier.

Romania Green Building Council organized a half day workshop to equip real estate developers and investors, valuation experts, financiers, facility managers, architects, engineers, project managers and other stakeholders with a better understanding of the ways in which sustainability affects the level or risk, and subsequently the value, associated with a green building.

Trainers for this event were: Steven Borncamp – RoGBC, President and CEO, Florin Dobrescu – Technical Advisor and Member of the Board of the RoGBC and General Manager of STARDOME, and Laura Nemoianu – Marketing & Operations Manager for the RoGBC. The trainers highlighted the key business case value factors for the various stakeholder groups and explained how sustainable buildings provide benefits in each instance.

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