Have You Started ‘Building Green’?

Published:

by Brandon Cook, CPA

Team Member of the Construction Services Group

Business owners and contractors may be reluctant when it comes to the idea of building green. After all, the initial costs of going green are certainly higher than traditional construction costs, and the whole concept of going green may seem to be little more than a sales gimmick to entice environmentally conscious customers. However, there are some clear tangible benefits, both financial and non-financial, to building green.

Customers have shown that not only are they ready and willing to purchase green buildings, they are willing to pay a premium for them. LEED-certified and Energy Star buildings have sustained a constant premium over standard buildings. Also, green buildings typically have higher occupancy rates than non-green buildings because consumers are willing to pay the higher cost for the benefits of a green building (Gunther and Occhiolini 56). Green buildings typically have lower operating costs, which is beneficial to both owners and occupants. In addition, the federal government, along with many state & local governments, has tried to entice businesses and contractors to jump into the green building game by providing tax credits, tax abatements and other tax and/or financial incentives.

During this current economic climate, lenders know that green buildings have higher sales prices, occupancy and rental rates, along with lower operating costs, when compared to non-green buildings. Increased cash flow for the building owner will help mitigate the risks a financial institution has when loaning money for a building project. Because of these factors, some banks may offer green construction loans.

Going forward, contractors with knowledge and experience in green construction have a clear advantage over those that do not. The green building trend is likely to continue growing in the future. When bidding on new contracts, the option of building green provides the contractor with a competitive advantage. Not only can green expertise differentiate a contractor from the competition, but that knowledge can significantly reduce initial planning time and any extra time or material wasted in the field. More and more contractors and consumers have entered the green building market, bringing green construction costs down. As new customers enter the market and as building codes/regulations continue to evolve toward green initiatives, reputable green contractors demand will increase. Contractors who go through the initial cost of investing in green construction now will be in a position to reap the benefits in the future.

Source: Gunther, Emily E. and Steven J. Occhiolini. "Green: Changing The Way We Do Business." CFMA Building Profits, pp. 55-61. Nov/Dec 2009.