THREE | The value of green building

”Green building has gone mainstream” was a common quote at U.S. Green Building Council’s 2006 Greenbuild conference, but the expression is a bit misleading. A recent study by McGraw-Hill Construction estimates the percentage of homes and commercial buildings constructed with “green” designs in 2005 comprised about 2 percent of all those built, representing a $7.2 billion market share.

While innovation and government incentives continue to foster growth in the industry, the straight dope is that green building design won’t really enter the mainstream until its energy-efficient features, health and productivity benefits and durability are accurately valuated in the real estate market.

In 2007, the Green Building Finance Consortium (GBFC), a group of independent real estate companies, corporations and special interest groups, plans to release a sophisticated cost/benefit framework aimed at bringing green building to the masses.

“One of the key things is there is nothing independent out there,” says Scott Muldavin, GBFC’s executive director and co-founder of Muldavin Co., a $5 billion dollar consulting firm serving the real estate industry.

Muldavin is commissioning an independent study to provide a comprehensive tool for valuating the performance of green buildings in comparison to traditional ones. According to the U.S. Department of Energy, buildings account for 39 percent of the nation’s total annual energy consumption. The McGraw-Hill study predicts more than $59 billion will be spent annually on green building by 2010, up from $10.2 billion in 2004.

But the number of green building certification programs, including the U.S. Green Building Council’s Leadership in Energy and Environmental Design (LEED) system, Green Globes, Earth Advantage, Energy Star and others, has led to some confusion in the investment community. And because information about expected energy savings is not always reliable, banks are sometimes hesitant to finance such projects.