There continues to be a shift towards sustainable and “green” architecture and construction across the U.S.1 Over 138 businesses and organizations, including the American Institute of Architects2 and the Structural Engineering Institute,3 are committing to the World Green Building Council’s Net Zero Carbon Commitment or developing their own sustainability initiatives to pursue net zero carbon emissions by 2050.4 As a result of this shift, GlobalNewswire reports that the global non-residential green construction market will grow from $79 billion in 2020 to $103 billion in 2023,5 and Acumen Research and Consulting expects the global market to reach $774 billion by 2030.6
Along with increased commitments to reduce carbon emissions in the building industry, states and cities across the U.S. are updating their building codes and regulations to include a requirement for greater standard of sustainability.7 An example of a continually evolving regulation in the U.S. is the Leadership in Energy and Environmental Design (“LEED”) certification program.8 The LEED certification program was launched by the U.S. Green Building Council in 1998 and is now the most well-known sustainability rating system in the world.9 The number of LEED-certified commercial projects reached 100,000 in 2019.10 This number is expected to grow further as many cities across the U.S. begin requiring municipal and commercial buildings to achieve specified levels of LEED certification.11
To meet specific LEED certifications, designers and contractors must use more sustainable design, construction, and “final use” practices. These practices could involve sourcing less carbon-intensive materials, reducing construction waste (e.g., modular or prefabrication construction techniques), or incorporating more energy-efficient building operations in the final design.12 Designers and contractors may also be expected to obtain LEED accreditation themselves to stay competitive in green building projects.13
In addition to meeting governmental regulations for sustainable construction practices, owners will likely want to consider the cost implications associated with “building green”.14 The U.S. Green Building Council estimates that the upfront cost of a green building is 2%-3% higher than a comparable non-green building.15 However, once completed, green buildings typically use 25-35% less energy than comparable non-green buildings, reducing operating costs.16 In the long-term, LEED-certified buildings can also have a market sales price per square foot that is approximately 20% higher than their non-green counterparts.17
Part of the upfront construction costs for developing a LEED certified building are the direct certification fees.18 For example, the cost of certifying a newly constructed 500,000 square foot office building could be as high as $42,000.19 To counteract this potential cost hurdle and to promote LEED certification in the private sector, many states and cities have created incentive programs (e.g., grants, tax credits, reduced permit time frames, or other reduced fees).20 Illinois, for example, incentivizes certain green energy upgrades by reducing interest rates on loans.21 An additional example, Houston, Texas, among other state-wide incentive programs, provides a partial tax abatement for LEED-certified commercial buildings.22 Similarly, the state of Colorado, among other incentive programs, provides property and sales tax exemptions to commercial properties with renewal energy systems.23
Sustainable architecture is becoming increasingly relevant in the construction industry. While these sustainable project elements are expected to decrease future operational costs and increase future overall project value, they may include designs and materials that are new to contractors and potentially introduce additional variables and constraints to a project’s schedule and costs. Breakwater is experienced in analyzing a variety of potential schedule and cost impacts for our clients’ projects, including those that may result from sustainable design and construction (e.g., design coordination, material delays, permit/certification delays).
1: “The 7 Most Popular Green Building Practices in 2022” by Kayla Matthews, dated April 29, 2019.
2: “The AIA 2030 Commitment” by AIA.
3: “SE2050 Commitment” by SE2050.
4: “The Net Zero Carbon Buildings Commitment” by Worldgbc
5: “Non-Residential Green Buildings Industry 2022-2030” by Lauara Wood, dated August 19, 2020. Note, GlobalNewswire sources its data to the “Nonresidential Green Buildings Global Market Report 2021: COVID-19 Growth and Change to 2030” by The Business Research Company, dated May 2021 as produced by Research And Markets.
6: “Green Construction Market Size Projected US$ 774 Billion By 2030” by Acumen Research And Consulting, dated May 25, 2022.
7: “LEED Legislation by City: See Where LEED Certification is Required” by Lesley Baulding dated March 4, 2022.
8: “LEED” by U.S. Green Building Council.
9:“LEED” by U.S. Green Building Council.
10: “Infographic: LEED Reaches over 100,000 Commercial Projects” by Selina Holmes, dated November 13, 2019.
11: “LEED Legislation by City: See Where LEED Certification is Required” by Lesley Baulding, dated March 4, 2022.
12: “5 Techniques for Sustainable Building Construction” by Jessica Lombardo, dated May 20, 2020.
13: “Benefits of LEED Accreditation for General Contractors” by Billy Stutz, dated March 17, 2021.
14: “Is It Affordable to Build Green?” by Samar Hamad, dated May 6, 2020.
15: “Is It Affordable to Build Green?” by Samar Hamad, dated May 6, 2020.
16: “Is It Affordable to Build Green?” by Samar Hamad, dated May 6, 2020.
17: “They Cost More to Build But LEED-Certified Assets Command Much Higher Prices” by Lynn Pollack, dated September 13, 2021.
18: “They Cost More to Build But LEED-Certified Assets Command Much Higher Prices” by Lynn Pollack, dated September 13, 2021.
19: “They Cost More to Build But LEED-Certified Assets Command Much Higher Prices” by Lynn Pollack, dated September 13, 2021.
20: “LEED Certification Incentives in Other States” by Lee R. Hansen.
21: “LEED Certification Incentives in Other States” by Lee R. Hansen.
22: “Incentives” by the City of Houston, Texas, Green Building Resource Center.
23: “Colorado Green Business Program Rebates and Financial Resources” by the Colorado Department of Public Health and Environment.
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