Green Buildings Market Grows to $260 Billion

Construction of green buildings rose to 325 million square meters of new floor space in 2013, representing a $260 billion market, according to a report by Lux Research.

In addition, green buildings are delivering predictable internal rates of return of 5 percent or more.

Lux analysts studied utility savings, rental rates, resale value and government incentives in green buildings and their impact on internal rate of returns. Among their findings:

• Green certification fuels growth. Buildings with LEED Gold certification outperform their baseline peers. As an example, the report notes that higher rental income added $4.1 million in value to a model 80,000 square foot commercial building in Los Angeles.
• Internal rates of return are increased from subsidies. Incentives like Germany's subsidized interest rates for energy-efficient homes, or government cash rebates in India, can lead to an internal rate of return of 5 percent to 6 percent over 15 years.
• Energy efficiency codes offer market opportunity. While green building standards like LEED helped build market demand for green buildings, building energy efficiency codes such as ASHAE 90.1, IECC and ECBC India can create a much larger market opportunity. In Germany, Lux estimates that in 2013, new floor space compliant with the EnEv 2009 code was 50 million square meters, or about 36 percent of overall new construction.

In the US, green buildings make up an estimated 20 percent of new construction.

In June, a report by McGraw Hill Construction showed that Canadian companies investing in green buildings were realizing a significant return on their investments. As a result, companies there are expected to increase their green practices from one third to one half by 2017.

In addition, at Greenbuild last month, McGraw Hill, CBRE, the US Green Building Council and a number of other organizations presented a report indicating that about 47 percent of building owners cut their healthcare costs for employees in facilities with green building features.