The Cost of Building Green

When “Green Construction” is discussed the focus inevitably turns to cost. How much additional will the green project cost? Some organizations are opposed to any additional first costs while others have some tolerance for additional expenditures.

The most prominent standard for green buildings is the USGBC (US Green Building Council). The USGBC LEED (Leadership in Energy and Environmental Design) program has four levels of green certification: Certified, Silver, Gold and Platinum. These levels represent increasing levels of sustainability. There have been numerous studies aimed at comparing the cost of a USGBC LEED certified building to traditional designs.

The average additional cost quoted is in the range of 2% to 5%. Based upon commercial building costs of $150/sq.ft. to $250/sq.ft., this is equivalent to a $7.50 to $12.50/sq.ft. premium for building green. The majority of this cost is due to the increased architectural and engineering design time necessary to integrate sustainable building practices into the projects. Another additional cost is for commissioning. Commissioning is the process of ensuring that the systems are designed, installed, functionally tested and capable of being operated and maintained to conform to the design intent. According to Lawrence Berleley National Laboratory commissioning can save as much as 40% of the buildings utility bills for HVAC.

As more buildings are being designed to address the green initiatives the additional design as well as construction cost is decreasing.

Now let’s examine the advantages of owning a “green” building. The obvious advantage is the reduced impact on the environment through waste recycling, reduced water and energy consumption, and better indoor air quality by reducing VOCs. In addition to these environmental advantages there are marketing and tenant retention benefits to owning a green building. Organizations want to locate and stay in a healthy building. Finally there is a productivity and health value associated with “green” buildings. Greg Kats of Capital E published an analysis that projects the 20 year NPV (net present value) savings of a Certified or Silver building. The cost savings are attributable to reduced water, energy, waste plus commissioning O&M and productivity and health value. Savings of $52.87/square foot for Certified or Silver buildings and $71.31/square foot for a Gold or Platinum buildings are projected. Of these amounts $36.89/square foot and $55.33 respectively are attributable to productivity and health value. Even if the productivity and health value is reduced or eliminated the 20 year NPV savings ($52.87 – $36.89 = $15.89) exceeds the cost premium stated above.

Source: American Institute of Architects