Clarification Please! Is Green Building More Expensive or Not?

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Recently, I attended a guest lecture by a seasoned real estate developer, and he was talking about the profitability of his projects.  This speaker has major experience will all types of investments including retail, single family, industrial, condo, etc.  I put him on the spot and asked him about the numbers he’s seen on sustainable developments.  His answer:  "They’re expensive, a break-even proposition at best.  Development is going that direction, but not now.  They’re not cheap, at all.  We’re talking 20, 30, 40% more expensive.  I won’t do them."  I was blown away. 

In stark contrast, on Monday, January 22, Rick Fedrizzi, CEO of the U.S. Green Building Council, said to the Miami Herald, "We are now at the point where you can build to LEED standards and it is not one penny more than conventional buildings.  We are more experienced now.  We have a proliferation of green building products and services."  From this perspective, it’s profitable and financially responsible to be environmental and build green. 

Someone’s wrong, who is it?

When I hear Fedrizzi’s statement, I’m led to believe that he’s accounting for construction on a first costs basis (not including the operational savings).  And I think he is.  He’s saying it costs the same to build green as non-green, on a first costs basis.  I mentioned the obstacles to building green recently, so is this a case where the developer was unaware?  What’s the deal?  I’m interested in hearing some real world discussion here. 

Quotable: William McDonough, FAIA

William_mcdonough_faia "If people have done any math, they will understand how valuable the green agenda is economically, and that if they don’t adopt it, they are probably not intelligent fiduciaries as developers or owners."  – William McDonough, FAIA, Co-Author Cradle to Cradle, Time "Hero for the Planet," + Founding Principal of William McDonough + Partners

Steven Spielberg Movie on William McDonough, FAIA, the "Eco-tect?"

Bill_mcdonough_ecotectI hope so.  When I wrote about Green Sandwich Technologies, true south orientation, and Greenbridge Developments, I was talking about Bill McDonough.  I’ve also mentioned his Cradle to Cradle notion, which is about much more than sustainability, it’s about "waste = food" and what happens to stuff when no one wants to use it anymore (C2C Book).  His ideas are transforming the way companies do business and make money.  And that’s why he’s a big deal.  He’s the "Eco-tect," or the Ecological Architect, but he’s also more than that:  he’s innovating architecture, design, and business all at the same time.  This is the story that Steven Spielberg wants to make a movie about, and I think it will be extremely compelling. 

Right now, McDonough’s company is working with Google on its campus.  He’s also helping to design six cities and one village in China with stringent standards of sustainability.  If you’ve ever been to China, you know how big these cities can get, so we’re talking about sustainability and innovation on a gigantic scale.  The American public could benefit from McDonough’s reservoir of knowledge and experience, so I’m hoping that Spielberg continues with his first impulse and follows through with the film.  Via Business 2.0.   

Skyscraper Sunday: Arterra – The LEED-Certified San Francisco Treat

Arterra

Arterra is an urban living, high-rise community in Mission Bay that will have a mixture of flats and townhomes of various sizes.  Arterra has three buildings: "Sky," a 16-level tower, "City," a 9-level building, and "Park," a 6-level building with 2-story homes.  Go to the Arterra website and you can watch a video that shows you the views from each building.  Because Arterra is a high-end lifestyle community, you will have benefits such as 24-hour concierge, state-of-the-art fitness center, community lounge, rooftop sun deck with lounge and barbecue, etc.  But, another feature of Arterra is that it will be the first LEED-Certified Green high-rise community in San Francisco. 

Green Features:
Arterra is going after LEED certification, so here are some of the current green amenities being planned:  formaldehyde-free cabinets (Studio Becker); low-emitting paint and carpets; high-efficiency water heating boiler; Kohler dual-flush toilets and other water-saving features; low-E, energy-efficient, insulated windows; Energy Star home appliances and gas ranges; bamboo for all standard kitchen floors; cork flooring at all elevator levels; recycled glass floors and FSC-Certified wood walls in entry-level lobby; bicycle storage in the parking garage; and recycled content panels for the exterior facade.  Arterra is being developed by Intracorp Companies

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Noteworthy Green News: Week in Review

Week in Review
  1. Bold U.S. Energy Goal Put Forward on Capitol Hill: 25% of Energy from Renewable Sources by 2025 – A bipartisan group of Senators and Representatives have re-introduced the 25x’25 House and Senate Concurrent Resolutions calling for a new national renewable energy goal: 25% of the nation’s energy supply from renewable sources by 2025 (see also www.25×25.org).
  2. Wal-Mart to Open First High-Efficiency Store; Supercenter Expected to Use 20% Less Energy – Wal-Mart Stores,Inc. (NYSE: WMT) announced it will open tomorrow in Kansas City, Mo., the first in a series of high-efficiency stores that will use 20% less energy than a typical Supercenter.  The new high-efficiency stores will integrate industry-leading heating, cooling, and refrigeration systems to conserve energy.
  3. Poll Says 77% of American Say U.S. Must Do More to Spur Green Technologies – The Zogby/TechNet nationwide poll of 1,043 Americans found that 77% of U.S. voters believe that our nation must do more to promote green technologies.  75% of the voting population said that their purchasing decisions in the past year have been influenced by a desire to save energy and improve the environment.
  4. Unleash Your Inner Al Gore with These 12 Eco-Tips – Being green isn’t just for tree-huggers anymore. In fact, 2007 may be a banner year for going green.  Read on. 

BusinessWeek: Beyond the Green Corporation + Sustainable Core Competency

Imagine_a_world_bw_cover On the first day of the new year, I blogged about my personal goal to flaunt the business case for green real estate.  I really do believe there are big opportunities in sustainability, and this week, BusinessWeek is doing the job for me.  Sort of.  The cover story is "Beyond the Green Corporation: Imagine a world in which eco-friendly and socially responsible practices actually help a company’s bottom line.  It’s closer than you think."  The article doesn’t have a real estate focus, but real estate is business. 

I liked one point the article made: "Companies that talk the most about sustainability aren’t always the best at executing."  Take Ford, for example.  Ford spent a reported $2 billion renovating their River Rouge facility into a green building, but do we consider sustainability one of Ford’s core competencies?  I don’t.  Sustainability is ancillary to what it really does, which is to make big trucks.  Big F150s.  Does it have sustainable practices?  Maybe, but sustainability isn’t Ford’s core competency.  And Ford’s not alone.  Everyone is trying to grapple with the complicated balancing act between quarterly numbers and long-term sustainable practices. 

Companies that make sustainability a core competency will be very profitable in the future.  But, that’s easier said than done because sustainability will require entirely new ways of doing things.  It will take time.  It takes my weekend research.  You won’t find sustainability taught in most MBA schools yet, either.  But this is what competitive advantage is all about, isn’t it? 

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