ARRA and Sustainable Building
In signing into law the American Recovery and Reinvestment Act (ARRA), the federal government has ushered in a new era of “green” building. As part of this bill, the U.S. government has earmarked approximately $9 billion dollars to repair, renovate, and modernize school buildings to meet widely accepted green-building standards. In addition, the bill provides $16.8 billion for a wide array of programs within the Department of Energy; energy programs that extend to the residential consumer. Green-job training has been covered as well with as much as $10 billion dollars allocated to retrain and educate our workforce in core energy efficiency values, sustainable building practices, and alternative energy building trades.
The Invisible “Green” Revolution
Green-dollars spent on retrofitting 30-, 40-, 50-, even 100-year old public buildings aren’t seen from the street. Tax credits, abatements, and reductions for sustainable building practices and green-building standards, along with incentives and grants for certifications like LEED and Energy Star don’t warrant ribbon-cutting ceremonies. Still, the emphasis on upgrading of underlying mechanical systems is a technologically sound plan that utilizes current technologies in lighting, HVAC, insulation, and roofing systems to increase efficiencies in those systems and maps the savings on 5-, 10-, and 20-year timelines. For communities hard-hit by recent economic times, this is a boon for public building renovation projects that have been waiting for funding.
Green-building and Green Buildings
Jason Hartke, director of advocacy and public policy at the U.S. Green Building Council has said, “There is an amazing return on investment in greening existing public buildings, particularly schools. The programs that institute a focused plan for overcoming first costs and then use the utility and energy savings of green building to reflect savings over time have been the most successful.” This sums up nicely the challenges facing new “green” development: initial capital costs and a desire for short-term return on investment. Apparently, investing in green-building is very different than building green buildings.
What Are The Green Commercial Real Estate Projects?
John S. Konopka of Construction Advisory Group, Inc. said, “Commercial developers usually use a business model where they run the numbers backwards; analyzing the profit-return they require, and designating design and build solutions based on costs.” Additionally, as we all know, lenders aren’t lending. “Commercial loans that might have gone out the door with a loan-to-value of 70-30, many now require a 20% deposit,” Konopka said. Couple this with completion guarantees and occupancy guarantees and it’s easy to see why developers would be nervous. Adding in the additional upfront capital cost of solar power or wind energy design, installation and maintenance, the potential delays and cost-overruns caused by additional permitting and legal issues, the challenges of insuring both workmanship and materials on relatively new technologies, and the increases required in per square foot costs to the consumer, and it’s no wonder that “Green” is just not a priority for new commercial development projects.