In only a handful of years, green building has moved from obscurity to a significant trend in the global construction market.
Canaccord Genuity expects its share of the world construction market to be over 20% by 2013. Longer-term, they expect green building practices to become the norm in the construction industry.
Currently. the US green building market is estimated at $36 billion - $49 billion, representing about 10%-12% of total construction dollars spent annually, according to McGraw-Hill.
While green building historically has represented little more than an interesting niche market driven by forward-thinking architects and builders, the mainstream building industry is opening up to these practices given accelerated demand and attractive tangible returns, says Canaccord.
The Environmental Protection Agency (EPA) describes a green building as one that reduces its "direct and indirect impact on the environment throughout its life - from the time construction begins, during occupancy, and eventually, when it's decommissioned."
Multiple factors are driving the green building market, including:
- The proliferation of green building standards is contributing to the growth of the industry by providing specific guidelines and support for constructing green buildings.
The USGBC's Leadership in Energy and Environmental Design (LEED) certification program is a consensus-based, third-party rating system that has taken hold in the US and abroad, and has helped standardize and encourage sustainable building practices.
In addition, the recent release of ASHRAE 189.1 standards and the International Green Construction Code are key milestones in the evolution of the market, in our view, as they are likely to eventually become widely accepted within the building industry.
- The economic benefits of green, energy-efficient buildings are compelling, encouraging a steady market shift toward these practices.
Various research studies conclude that green buildings can achieve higher market values, higher rental rates and tenant occupancy levels compared to traditional non-green counterparts.
In fact, the USGBC states that sale prices for energy-efficient buildings are as much as 10% higher per square foot than conventional buildings.
- Legislative mandates/incentives and regulatory requirements are among the main reasons that firms integrate sustainable practices. Incentives such as accelerated permits, tax credits, and rebates on green technology make building green an attractive and cost effective choice.
As green building technologies have become more mainstream and widely used, costs have fallen significantly and are now comparable to legacy products in many cases.
- Volatile energy prices, with energy costs continuing to increase, cause companies and governmental organizations to be increasingly concerned with becoming more energyefficient.
- Increasing global environmental concerns have accelerated the industry's adoption of green building practices.
While the focus has largely been on pollution levels from the transportation and utility sectors, buildings are significant consumers of energy and emitters of CO2.
- Energy-efficiency initiatives and green retrofit projects often represent the simplest, most cost-effective ways to reduce a building's operating costs.
Volatile energy prices, government mandates/incentives, and rising demand from building owners and tenants are the primary driving forces behind making existing buildings greener.
While green building will still face the ups and downs of the broader construction cycle, the combination of these factors are expected to drive its market share to over 20% by 2013. Longer-term, we estimate that green buildig practices will become the norm in the construction industry.
Canaccord will soon publish an update to its Green Building industry report, "The Green Building Boom Continues: Profiting from the Green Building Movement."
The white paper examines a wide range of green building/energy efficiency topics, including market forecasts, the economic benefits of green and energy-efficient buildings, regulatory/legislative mandates, new building codes/standards, industry challenges, and profiles of each company in their Green Building coverage universe.
Canaccord Genuity is the global capital markets group of Canaccord Financial Inc. (TSX: CF; AIM: CF)