PAGE 1
1 Cost Premium of LEED Certified Development Proving Value of Investment in Sustainable Construction Matt D evarona Abstract Developing sustainable properties should be a concept that we are pushing to become a requirement in our society. Many developers & owners are against sustain able development because of the logistical of this research because most people ignore the return on investment that is received by many LEED items tha t cause those extra costs. Certain building orientations, HVAC systems, plumbing systems, and many others may have an initial cost that is higher than their code based design alternative. Many developers go into a project with a specific budget, so they wo uld have to sacrifice time or quality in other areas of the project to include these sustainable features. However, this research will be oriented worth the ext ra investment or sacrifice they would be making in other areas of the project. This evidence will include different time frames in which different LEED items will prove their ROI to be worth the extra investment. Lastly, we shall make the most convincing c ase with the given data to help developers accept this sustainable development requirement. Intro duction Sustainability : the ability for something to be maintained at a certain rate or level, according to the Oxford Dictionary. When the in a sentence, quite the oxymoron because our current construction development is contributing a decline. However, ideal definition of sustainable development is the act of constructing with renewable resources and materials , while reducing waste, pollution, and energy con sumption in the construction process and finished developments. As much of many people. The question of the century is , why is this promising concept so difficult to feasibly enforce ? Before diving into my answer and proposed solution to this the positive effects that sustainable development may have on our environment, along with our current disposition on construction have . Increases in sustainable development may result in a variety of benefits to our society that most people are unaware of. The most obvious one is the environmental rehabilitation that most proponents of this subject are seeking , but most people ignore or are unaware of the endless future possibilities that could result from widespread investment in this sector of development. Technology is booming more than ever and the same technology that we utilize everyday could be morphed to cha nge the world of sustainable development with new inventions and construction applications. Finally, t he monetary impact of University of Florida Rinker School o f Construction Manag ement
PAGE 2
Cost Premium of LEED Certified Development Proving Value of Investment in Sustainable Construction 2 sustainable development is the most controversial one that can and should be the solution to our problems if properly exploited to t he industry. Environmental Effects of Current Code based Construction The Department of Energy (DOE) breaks down the environmental effects of construction development into 3 main divisions: Construction, Operation, and Demolition. These are broken down into more specific subsectors , but the table provided belo w sho ws the vast span of environmental effects that can be drastically impro ved by sustainable a lternatives . 1 In some cases, there may not always be a viable alternative to the non ren ewable option simp ly because some thin gs like structural ste el are irreplaceable in most instanc es. However, there are many a lternatives regarding material and site s election , energy use, operations, and demol ition. I n the table 1 The Environmental Benefits of Sustainable Design
PAGE 3
Cost Premium of LEED Certified Development Proving Value of Investment in Sustainable Construction 3 that I created b elow , you can take note of a few alternatives that may satisfy your sustainability goals and actually cost less than the per code requi rements in some cases. Just a few years ago, building developers looked at the invention of renewable energy sources like they were some kind of alien technology. And , the thought of implementing this technology into construction seemed like such an impossible feat due to the lack of knowledge and improvements that have come about in recent years. However, this technology has become much more feasible without even having the backup of full corporat e funding in the development industry. If the industry had the means to completely replace inefficient building systems, utilize sustainable material sources with low emissions, and implement software to create the most sustainable building design, the sus tainable technology would exponentially improv e.
PAGE 4
Cost Premium of LEED Certified Development Proving Value of Investment in Sustainable Construction 4 The harm of c urrent development methods are fina lly being realized for their negative effects. While there are still certain environmental codes and guidelines to meet the bare minimum requirements , current authoritative organizations are not enforcing the proper According to the US Green Building Council, C onstruction accounts for 40% of worldwide energy usage, with estimations that by 2030 emissions from commercial buildings wi 2 Separate research by Construction Blog Bimhow, states that the construction industry is responsible for or directly related to 23% of air pollution, 50% of climat ic change, 40% of drinking water pollution, and 50% of landfill waste. 3 Although there are many people and organizations trying to battle this construction related environmental destruction, b egin to mandate our optional sustainability upgrades. Th e Environmental Protection Agency (EPA) has enforced some codes and rules that have helped slow decline , but there is still so much more that can be changed regarding basic construction activities and materials. As mentioned earlier, roug hly 23% of air pollution and 50% of climatic change are due to greenhouse gas emissions that come from diesel/gas usage in machinery, material procurement, and a whopping 76 million tons of finished concrete curing that pr oduces 9.2 million tons of C02 emissions per y ear . 4 Although not all these things can be replaced with m ethods, materials, or activities that provide an ROI, there are many things that can be done to further reduce this detrimental carbon footprint that the development industry is inducing. Logistics of Inves ting in Sustainable Devel opment Many aspects of sustainable development can be more costly than our current, code based methods of construction, but most people are unaware or unwilling to recognize that many sustainable construction methods can actually provide a return on investment (ROI) f or their building . Many people are also unaware that o bliging to these sustainable de velopment guid elines may cost them l ess mo ney than the ty pical, code based development . For instance, developing a retention pond on the building s property may cost much less than an entire plumbing system that takes care of waste/groundwa ter . Although some large developers have begun to come around and begin to accept and explore the concept of green buildings, the majority of developers and developing corporations laugh at the thought of accruing higher costs for the purpose of sustainable dev elopment. The average costs of d eveloping a green building are 2% of the total building costs, but they ca n range from 1 10 % . 5 However, these c ost premiums can vary depending on how much more str ing ent the owner s requirements are in comparison to the base , code requirements. The owner may re quire that the development in cludes certain s ustainable methods of construct ion without necessarily aiming for a specific LEED certification. In these cases, the cost p re mium would be relatively lower to the owner since they may have already planned on spending a certain amount of money on a n ideal type of const ruction development. More specifically, these costs can be broken down by planning, certification, construction, and operation costs. Eric Rosenkranz Sustainable construction projects are 2 How Does Construction Impact the Environment? 3 How Does Construction Impact the Environment? 4 How Does Construction Impact the Environment? 5 Financial Benefits of Green Buildings Are They Expensive?
PAGE 5
Cost Premium of LEED Certified Development Proving Value of Investment in Sustainable Construction 5 usually a bit more complex as they require the usage of new materials and technologies that are not implemented on a large scale. This also means that the architects and engineers need to have more knowledge about these factors, which makes it harder to find these professionals. Furthermore, because of the high demand in this sector at the moment, archit ects can charge higher amounts as compensation 6 On large projects, LEED certification costs are minimal in the grand scheme of the registration fee, $5,000 general service fee, and a certification review fee that totals a fraction of a cent per square foot. 7 There are different green building organizations around the world, but LEED is the general standard, so construction costs will be broken down in relation to the different levels of LEED certification in the table below . 8 9 After accruing these additional costs throughout the development of a building the operational costs that are immediately cut down by the increased efficiency of the building. Money will be decreasing energy, water, and waste costs from normal operation. At the end of the day, yes, the initial investment is a substantial amount of . Nevertheless, the savings and ROI compound very quickly to ensure the additional costs are returned throughout months and years. Return on Investm ent in Sustainable Development R 19%, according to the U.S. Green Building Council (USGBC) , outweighing the initial costs that are required 10 Attached 6 Financial Benefits of Green Buildings Are They Expensive? 7 Financial Benefits of Green Buildings Are They Expensive? 8 Financial Benefits of Green Buildings Are They Expensive? 9 Financial Benefits of Green Buildings Are They Expensive? 10 5 Ways You Can Achieve Roi with Green Buildi ngs
PAGE 6
Cost Premium of LEED Certified Development Proving Value of Investment in Sustainable Construction 6 below is a table showin g an example of a building s costs , init ial investment , and its breakdown of how energy efficient systems saved money over a 7 year per i od . As you can see, the initial investment , or cost premium , was 10% of the conventional cost and saved the owner $67,000 o ver a span of 7 years. At this p oint in time, the ROI was around 10%, but it s clear to see that this percentage will continu e to increase as time go es on. The re are many different LEED items and sustainable features that provide an ROI and can be broken down into 3 main categories : energy, water & wastewater, and materials/maintenance savings. These energy savings are produced by more efficient lighting and HVAC systems, predesigned wall and roof insulation, heat resistant gla zing , exterior material reflectance , optimized energy metering, renewable energy sources, and many others. These energy savings have immense variance depending on the investment placed into these specific areas, but there is an average of energy reduction of 3 7.5 % compared to conventional buildings, according to the World GBC. 11 Water and wastewater savings can be more complex than most think; simply installing low flow plumbing fixtures. Water and wastewater savings definitely require low flow fixtures, but other investments may include water reuse, rainwater catchments, greenroofs, specialized irrigation systems, and plumbing orientation that fully utilizes gravitational flow. According to Eric Rosenkran z , average water reductions are reduced by an average of 25.5 % with the implementation of green design . 12 Just like energy , water has a any of these cost reductions, but the percentages should speak for themselves. The last division of items that add to a green that green buildings provide enhancement to. Despite most sustainable materials having lower emittance of toxins and chemicals than conventional 11 Financi al Benefits of Green Buildings Are They Expensive? 12 Financial Benefits of Green Buildings Are They Expensive?
PAGE 7
Cost Premium of LEED Certified Development Proving Value of Investment in Sustainable Construction 7 materials, they also have already proven increased adaptability a nd reusability in the industry. This added value comes from the initial investment of higher quality materials and installations, but then This decreased requirement for material replacement adds value to the building for future sale of the property and saves the owner from replacement expenses prior to the sale . In the case study examined by Alpin Limited, this material selection saved an ave rage of $8 per square foot over a 20 year period. 13 Since this data was published after a 20 year period could multiply that number by 150 to 200% , totaling thousands of dollars of return for these large CRE bu ildings by a simple investment in material choice. Although LEED Certified buildings have an average 2% premium of the total building cost, it ranges up to 10% of the total building cost for the highest level of certification, LEED platinum. LEED Platinum buildings are the most sustainable and efficient buildings that could be developed right now and are by far the best investment a developer could make at this point in time. Due to the m any sustainable building additions that provide an ROI for the developer through time, a variety of national averages and percentages will be provided below to show that this investment can actually be doubled within the first year. Commercial real estate (CRE) buildings come in all different shapes, sizes, and uses, so these numbers and percentages will not be applicable to every development , but this example is merely based on national averages and size s of commercial real estate buildings. The average size of a CRE building is around 16,000 square feet , costing around $60 per square foot to construct , and total ing just around $1 million to develop . 14 15 According to Constellation Energy Resources, average CRE operating costs are around $ 17.68 per s quare foot per month, totaling close to $ 3.4 million a year for our average sized building . 16 Energy usage accounts for $2.14 of th ose operating costs and comes to $410,880 a year. 17 With the average CRE building of this size utilizing close to it certainly still adds up. 18 Maintenance costs utilize $2.15 of the total monthly operating costs and adds up to $412,800 a year. 19 With those three operating costs totaling how sustainably developing with a LEED Platinum Certif ication will affect the owner and their costs down the line. As mention ed earlier, a LEED Platinum building will have closer to a 10% cost premium to develop the building, which does seem like a hefty amount without initially accepting th ese costs. However, g reen buildings reduce energy consumption by an average of 37.5%, water consumption by 25.5%, and maintenance costs by 12% , drastically reducing operating costs for the 3 main components of sustainable design. 20 These statistics reduce operating costs for t his sector by $204,249 per year, swiftly returning the initial 10% cost premium made in the LEED Platinum design and implementation. is certainly 13 LEED Costs, Benefits and ROI (Energy, Water, CapEx, Health and Productivity) 14 Information of Building Dimensions: What Is the Dimension of Building: Building Dimension 15 Commercial Building Cost 16 Reducing Commercial Real Estate Operating Costs 17 Reducing Commercial Real Estate Operating Costs 18 U.S. Energy Information Administration EIA Independent Statistics and Analysis 19 Reducing Com mercial Real Estate Operating Costs 20 Financial Benefits of Green Buildings Are They Expensive?
PAGE 8
Cost Premium of LEED Certified Development Proving Value of Investment in Sustainable Construction 8 enough to prove t he success of sustainable development as a worthwhile investment in the industry as a whole. In other words, why is this form of sustainable development not a worldwide requirement if we have the knowledge to implement it in a financially feasible manner? Why D evelopers A re S till A gainst It Oth er developers are against green buildings because of the additional effort or hiccups that may come along with the design or procurement process. As mentioned earlier, these minor headaches that come from this concept being newer will vanish after being fu lly integrated into this industry. By simply utilizing some of the best, new technology in the construction industry like BIM 360, the design hiccups and slowdowns can easily be diminished with increased familiarity of this development style. The best deve lopers and corporations at the top of the business world have jumped on the green building train as a public statement and moral attract ion change in the environmental decline until everyone is on board. As can be expected, the leading developers and corporations of our world have more insight on global issues that are induced by th that have begun to implement changes. These developers understand the R OI that green buildings produce and also strive for the moral appeal that their compan ie s sustainability achieves to society. Aside from the ROI directly correlated to operating costs and the general societal appeal that green buildings achieve, sustainable developers bring in more cash flow than the reduced operating costs show . Newly constructed green buildings have the ability to substantially increase rent because of the added valu e to the building . According to Rosenkranz, the high demand and low supply of sustainable buildings has resulted in an asset value increase of 7 to 18% , resulting in more cash flow from rent and future sale of the property (Rosenkranz retrieved these statistics by large, related companies like Knightfrank and BDC Network). 21 Rental rates and occupancy rates of green buildings have shown increases of 5 to 12% and 6 to 16%, respectively . Lastly, even tenant productivity has sh own a 5% increase in green buildings due to improved lighting, climate, air, and sound conditions . 22 Ignoring the direct ROI from operating costs in a green building, the added value seems that it should be enough to convince developers to go green, but exploiting some more specific data from the ROI of operating costs of green buildings may be the tipping point. From the perspective of many developers, it may not be worth it to sacrifice an additional 2 to 10% of the total building cost on sustainable development ; many of them may just have no way of providing those extra funds without sacrificing other aspects of their building. worldwide reform needs to com e into play; financial institutions and lenders will need to provide different aid when it comes to loans for these types of buildings. This alternative funding may not be necessary for all developers, but it could be as simple as a higher loan to value ra tio with said loans while maintaining mortgage rates equivalent to the typical required loan for that development . Many developers may quickly come to terms with this sustainable development and come up with the extra funds for the required investment, simply because they know the ROI will make it worth it. With that being said, there is still one other group of develo pers to account for; many developers simply construct a building to then immediately sell it after completion. 21 Financial Benefits of Green Buildings Are They Expensive? 22 Financial Benefits of Green Buildings Are They Expensive?
PAGE 9
Cost Premium of LEED Certified Development Proving Value of Investment in Sustainable Construction 9 The main argument for the developers that choose to construct a building and then sell it is that afraid of its value not matching up to the increased investment in sustainable building methods . Some starts developing in the same sustainable manner. While that may be partially true, continued advancements in sustainable development will only decrease the costs of its current methods by improving material manufacturing and widespread expertise of these means and methods. There truly i concern from that simply needs to be properly exploited to the development industry through international reform and cooperation. How T his Change Could Impact T he World Environmental changes everything up to global warming and call it a day, but t an excess of greenhouse gases that may or may not be depleting our ozone to the point of global warming. Construction development doles a huge contribution to excess waste, water pollution, ecosystem pollution, non renewable resource depletion, spread of materials with high toxic emissions, greenhouse gas emissions, and much more. Enforcing this form of development through worldwide reform would change the way things are done entirely so that our society can continue to develop in the most sustainable way possible. Aside from the ROI that certain LEED development methods would provide , following other LE ED guidelines would help prevent the vast pollution cause d by runoff and erosion. It would immensely reduce the usage of non renewable resources, utilize materials that are reusable and eliminate high toxic emissions. Materials and buildings would last lon ger and provide more value through reduced maintenance costs and increased consumer attraction. After explaining the negative contributions that the development industry brings to the health of our this industry at fault for the majority of all raw material usage , worldwide energy usage, waste contributions, water , and air pollution, a solution is right in front of us today. This solution not only provides monetary compensation to developers, but it also provides increased occupant efficiency and a brighter future for generations to come. According to the USGBC, green construction contributed 1.1 million jobs and $75.6 billion in wages as of 2018 . 23 Just from 2015 to 2018, contribution to the GDP is estimated at $304 billion and LEED construction projects will have contributed 386,000 jobs and $26.2 billion in wages by 2018 . 24 This form of development not only provides hope for our environment, but it's also generating more business, jobs, societal pleasure , and peace amongst many business leaders and environmental activists . The simple concept of return on in vestment with sustainab le solutions is all that needs to be properly exploited to the leaders and business professionals of our industries and governments. There are surely some logistical hoops that some people will need to jump through to assure everyone is on the same page, b ut there are solutions to all groups of people that are concerned with this change. 23 Benefits of Green Building 24 Benefits of Green Building
PAGE 10
Cost Premium of LEED Certified Development Proving Value of Investment in Sustainable Construction 10 Sources Alpin Limited. U.S. Green Building Council , May 2018, https://www.usgbc.org/articles/benefits green building. Metal Buildings , https://www.buildingsguide.com/costs/cost to build commercial building/#:~:text=The%20cost%20to%20build%20a,cost%20upwards%20of%20%241%20millio n. on of Building Dimensions: What Is the Dimension of Building: CivilJungle , 4 Jan. 2022, https://civiljungle.com/sizes of buildings/. LB&B Associates Inc , 23 Mar. 2020, https://www.lbbassociates.com/achieve roi with green buildings/. EIA EIA , 9 Feb. 2017, https://www.eia.gov/consumption/commercial/reports/2012/water/ . Constellation , Constellation Energy Resources, https://www.constellation.com/solutions/for your small business/small business resources/commercial real estate.html#:~:text=Commercial%20real%20estate%20q uick%20facts,in%20non%2Dfixed%20op erating%20expenses. Smart CRE , 26 May 2022, https://smart cre.com/financial benefits of green buildings are they expensive/. GoContractor , 22 July 2020, https://gocontractor.com/blog/how does construction impact the environment/.
xml version 1.0 encoding UTF-8 standalone no
fcla fda yes
!-- Cost Premium of LEED Certified Development Proving Value Investment in Sustainable Construction ( Book ) --
METS:mets OBJID AA00092485_00001
xmlns:METS http:www.loc.govMETS
xmlns:xlink http:www.w3.org1999xlink
xmlns:xsi http:www.w3.org2001XMLSchema-instance
xmlns:daitss http:www.fcla.edudlsmddaitss
xmlns:mods http:www.loc.govmodsv3
xmlns:sobekcm http:digital.uflib.ufl.edumetadatasobekcm
xmlns:lom http:digital.uflib.ufl.edumetadatasobekcm_lom
xsi:schemaLocation
http:www.loc.govstandardsmetsmets.xsd
http:www.fcla.edudlsmddaitssdaitss.xsd
http:www.loc.govmodsv3mods-3-4.xsd
http:digital.uflib.ufl.edumetadatasobekcmsobekcm.xsd
METS:metsHdr CREATEDATE 2023-05-10T13:43:22Z ID LASTMODDATE 2023-05-10T10:59:07Z RECORDSTATUS COMPLETE
METS:agent ROLE CREATOR TYPE ORGANIZATION
METS:name UF,University of Florida
OTHERTYPE SOFTWARE OTHER
Go UFDC - FDA Preparation Tool
INDIVIDUAL
UFAD\renner
METS:dmdSec DMD1
METS:mdWrap MDTYPE MODS MIMETYPE textxml LABEL Metadata
METS:xmlData
mods:mods
mods:abstract lang en Developing sustainable properties should be a concept that we are pushing to become a requirement in our society. Many developers & owners are against sustainable development because of the logistical headache and extra costs that they believe to be incurring. However, those “extra costs†are the subject of this research because most people ignore the return on investment that is received by many LEED items that cause those extra costs. Certain building orientations, HVAC systems, plumbing systems, and many others may have an initial cost that is higher than their code-based design alternative. Many developers go into a project with a specific budget, so they would have to sacrifice time or quality in other areas of the project to include these sustainable features. However, this research will be oriented around providing developers and owners factual evidence that proves these LEED items’ ROI to be worth the extra investment or sacrifice they would be making in other areas of the project. This evidence will include different time frames in which different LEED items will prove their ROI to be worth the extra investment. Lastly, we shall make the most convincing case with the given data to help developers accept this sustainable development requirement.
mods:accessCondition Copyright Matthew Henry De Varona. Permission granted to the University of Florida to digitize, archive and distribute this item for non-profit research and educational purposes. Any reuse of this item in excess of fair use or other copyright exemptions requires permission of the copyright holder.
mods:language
mods:languageTerm type text English
code authority iso639-2b eng
mods:location
mods:physicalLocation University of Florida
mods:name
mods:namePart De Varona, Matthew Henry
mods:role
mods:roleTerm creator
mods:note Awarded Bachelor of Science in Construction Management, magna cum laude, on April 29, 2022. Major: Construction Management
College or School: Construction Management
Advisor: James G. Sullivan. Advisor Department or School: M.E. Rinker, Sr. School of Construction Management. Advisor: . Advisor Department or School:
mods:originInfo
mods:publisher University of Florida
mods:dateIssued 2023
mods:recordInfo
mods:recordIdentifier source sobekcm AA00092485_00001
mods:recordContentSource University of Florida
mods:relatedItem series
mods:part
mods:detail Year
mods:caption 2023
mods:subject
mods:topic Undergraduate Honors Thesis/Project
mods:titleInfo
mods:title Cost Premium of LEED Certified Development Proving Value of Investment in Sustainable Construction
mods:typeOfResource text
DMD2
OTHERMDTYPE SOBEKCM SobekCM Custom
sobekcm:procParam
sobekcm:Aggregation ALL
UFIR
IUF
UFHONORS
UNDERGRADWORKS
sobekcm:MainThumbnail Devarona_Matthew_Honors_Thesisthm.jpg
sobekcm:Wordmark UFIR
sobekcm:Tickler 2231_SPRING_2023_HONORS
sobekcm:bibDesc
sobekcm:BibID AA00092485
sobekcm:VID 00001
sobekcm:Publisher
sobekcm:Name University of Florida
sobekcm:Source
sobekcm:statement UF University of Florida
sobekcm:SortDate 738520
METS:amdSec
METS:digiprovMD DIGIPROV1
DAITSS Archiving Information
daitss:daitss
daitss:AGREEMENT_INFO ACCOUNT PROJECT UFDC
METS:techMD TECH1
File Technical Details
sobekcm:FileInfo
METS:fileSec
METS:fileGrp USE reference
METS:file GROUPID G1 PDF1 applicationpdf CHECKSUM e72b66913f3cc9756022bc3e2d9ad19a CHECKSUMTYPE MD5 SIZE 655833
METS:FLocat LOCTYPE OTHERLOCTYPE SYSTEM xlink:href Devarona_Matthew_Honors_Thesis.pdf
G2 TXT2 textplain
Devarona_Matthew_Honors_Thesis_pdf.txt
G3 METS3 unknownx-mets 09db73306f313f6120dda45c795002a0 7162
AA00092485_00001.mets
METS:structMap STRUCT2 other
METS:div DMDID ADMID ORDER 0 main
ODIV1 1 Main
FILES1 Page
METS:fptr FILEID
FILES2 2
FILES3 3
|