The cost and value of green buildings is difficult to quantify, and most stakeholders tend to dismiss the one as being too high to justify the other. Yet this is not the case, say experts, and efforts can and should be made to convince interested parties – developers, contractors, investors, tenants and valuers – that sustainable buildings are worth their while.
Speaking on the second day of the International Green Building Conference (IGBC) hosted in Singapore on Thursday, Professor Richard Reed, professor of property and real estate from Australia’s Deakin University, told a 200-strong audience: “Of all the things humans build, buildings last the longest. So we have to get buildings right.”
Professor Reed noted that even as sustainability is becoming more mainstream, at the same time, it is being held back by a lack of knowledge and expertise.
His solution: “We need to get all the stakeholders on board and educate them. Professional bodies can contribute to knowledge – RICS can teach people about sustainability and buildings.” Professor Reed is a fellow of RICS, the Royal Institution of Chartered Surveyors.
Other international speakers at the session brought up different factors that can encourage the spread of sustainability.
Associate Professor Yu Shi-Ming, head of the National University of Singapore’s department of real estate, observed that industry perspectives can differ widely. Landlords, for example, are concerned with return on investment; large corporate or government tenants are more fussed about setting an example or fulfilling their CSR requirements; whereas SME tenants are more worried about costs, such as rental.
“The main barrier is cost: how to convince owners that the capital expenditure is justified,” he said, adding that there is a divergence between operating cost and capital expenditure, because future savings are not tangible. “There’s always the perceived high cost of greening, the disruption to occupancy, and generally not enough incentive.”
But, he pointed out, the cost is not that great once quantified by research. Past studies have shown that there is a positive impact for landlords in terms of higher rental and higher valuations, while tenants can gain intangible benefits such as a healthier office environment and a better brand image.
A study he is carrying out supports this; an initial data sample of 23 commercial buildings in Singapore showed substantial landlord savings per square metre, in contrast to the cost of retrofitting an existing building or integrating sustainable features into a new one, which comprises less than one percent of the building’s capital value.
Agreeing with this assessment, Eugene Seah, joint managing director of Davis Langdon & Seah Singapore, pointed out that the extra cost is very low and the payback is worthwhile.
“You may have to spend 1.5 per cent more on your building, the payback may be three years, but you’ll be saving a lot in the long term,” he said. Furthermore, he added, there are methods of reducing the cost; these include passive design features such as natural ventilation and daylight, rainwater harvesting and even the use of precast or prefabricated materials to reduce wastage.
“Green buildings may cost slightly more, but as long as basic principles are followed, they don’t need to cost that much more,” he said.
On top of this, governments can play a part in engaging various groups on the value of sustainability. “If you really want to entice owners to consider (sustainable building), the current mode of incentives can improve and some tax rebates can be considered,” Professor Yu suggested.
Speaking from the Australian perspective, Professor Reed also listed a few examples of how governments can encourage sustainability: they include measures such as pricing discounts on green buildings or even fast lanes for green cars. “You don’t have to legislate green buildings, but you can convince people,” he said.
Developers can play a part too, said Mann Young, head of sustainability in Asia for Lend Lease Asia Holdings.
“We talk about green as another asset enhancement strategy,” he said of his company’s efforts to persuade tenants and owners that sustainability is in their financial interest. For example, retrofitting can extend the lifespan of a building; it also leads to higher capital valuations and rentals. Of even greater interest is the attraction value sustainability can provide.
“There is a huge capital flow from Europe into this part of the world, and most of these investors are pension funds and other big institutions which have their own corporate values and requirements (in terms of compliance with sustainability). And they’re demanding that we commit to these values before they’ll invest in us,” he said.
For tenants, “the value of a clean environment with clean indoor air speaks for itself,” he added. Citing projects his company has worked on, he pointed out a drop in average sick leave days and an increase in earnings per man hour as some of the benefits that can accrue to the tenants of green buildings.
Ultimately, Mr Young noted, each individual, no matter where their interest lies, has a part to play in convincing – and allowing themselves to be convinced – of the value of sustainability. “The mindset of cost and value, and where we stand on green building spaces, will change individually,” he says.
Eco-Business.com’s coverage of the International Green Building Conference 2011 is brought to you by City Developments Limited (CDL).
