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Sustainable real estate development projects, or buildings designed, constructed, and managed with minimal environmental impact, are an increasingly desirable asset class as climate-change-related disasters continue to shape communities. Green buildings have numerous benefits, saving your team money, improving efficiency, lowering carbon emissions, and creating safe and healthy places for people to live and work. In addition, the buildings are necessary for meeting environmental, social, and governance goals, which ensure responsible business practices, manage risks, and meet stakeholder expectations through long-term asset value.
Buildings made with sustainable materials and practices are increasing in desirability, but eco-conscious development has been in the conversation for a long time. The Green Building Council has been promoting sustainable development for three decades, transforming building environments through LEED green building rating system. LEED standards align with the U.N. sustainable development goals, and buildings are awarded points for their ability to promote sustainability through materials and practices around energy, water, waste, transportation, materials, health, and indoor environmental quality.
Investors are more eager than ever to get behind safer, higher-performing green assets as new technology and stricter standards allow for better tracking of development’s carbon footprint. If you’re considering pursuing a sustainable real estate development project, being familiar with the correct materials and practices, as well as the common obstacles that emerge, will continue to provide value throughout the process.
Sustainable Materials: An Essential Component of Green CRE Development
In order to build a sustainable building, you must be familiar with sustainable materials, or any building materials that help reduce waste, conserve energy, and minimize the need for manufacturing. Here are a few of the materials developers can expect to work with on a green development project:
- Renewable Materials. In construction, renewable materials are any material that can be grown sustainably, such as cork, hemp, straw, or bamboo. Bamboo is one of the fastest-growing examples of reusable material in construction, appealing to both builders and tenants, popular for its aesthetics and ability to be used in plywood and flooring. The material has high compressive strength and low weight, and since it is a plant that doesn’t take long to grow or replenish, it can also be inexpensive and keep costs down.
- Recyclable Materials. The recycled materials from post-industrial or post-consumer waste are often difficult to find uses for, as toxins pose health or safety concerns for some practical uses. In construction, recyclable materials get an ideal and safe second life in the form of recycled steel, reclaimed wood, and recycled glass and plastic. Recycled materials can provide cost and environmental benefits in your development process, providing long-lasting, high-quality construction materials with lower overhead.
For example, recycled plastic is becoming increasingly popular in construction because it’s durable, cost-effective, and environmentally friendly. Plastic can be used to meet a variety of construction needs, including PVC pipes and structural components, such as wall panels and beams. In addition, plastic can be used for aesthetic components, such as interior detailing, and mixed-in construction materials, such as sand blocks or concrete. Plastic-infused concrete can withstand extreme weather and temperatures, making it an even better option for your construction team.
- Green + Sustainable Roofing. Any city-dweller will recognize the “green roof” trend, where developers install a garden or vegetative layer on a rooftop to fight the city heat island effect, or the phenomenon in which structures absorb and re-emit the sun’s heat. Green roof installations can keep temperatures 30-40 degrees lower than a conventional roof, provide desirable park space for prospective tenants, and reduce building energy use, including electricity demand, saving costs in the long term.
In addition, solar panels can be a worthwhile green investment, offsetting a higher upfront cost with long-term savings on energy. Installing solar panels helps you get closer to a net zero building, helping meet LEED criteria and increase occupancy or leasing rates. You can also send excess solar energy to the public utility grid and receive credits toward energy bills, resulting in even greater savings.
Reliance on sustainable materials, whether those are renewable, recyclable, or low impact, has both ethical and financial benefits for your team. The first is reducing a building’s overall environmental impact, decreasing the carbon footprint and resource consumption in the construction process. Increased energy efficiency also saves you money on utility costs, and for buildings with eco-friendly thermal designs, lower heating and cooling rates can further decrease operational expenses.
Demand is also increasing for green buildings among tenants and buyers, and environmentally conscious residents will often pay higher premiums for low-impact properties with green features. As a result, investors, whom the government is already trying to steer toward investing in resilient assets, are also looking to contribute money to projects with a commitment to sustainable materials in the development process and take advantage of this market.
Sustainable Practices: Going Beyond Materials
Eco-friendly commitments in real estate development can go beyond materials. Sustainable practices, including green design, construction, and operations, are also essential to greening your development process.
Here are a few of the practices you’ll need to leverage to be a leader in sustainable development:
- Green Building Design. In the design phase for a project, several structural considerations can allow a project to meet sustainability standards and lower immediate and long-term environmental impact. Buildings with solar-ready design facilitate and optimize the installation of a rooftop solar photovoltaic (PV) system after construction is completed. Water conservation systems, such as greywater systems that recycle water from showers, washing clothes, and other sources for landscaping purposes, and rainwater harvesting or low-flow water systems, are also becoming increasingly popular green features.
Energy-efficient designs, such as radiant floors, use concrete electrical tubing in concrete floors or tubing with water connected to solar panels to heat buildings from the floor up. Occupants receive heat more quickly, and less energy is wasted than in traditional heating systems where heat rises to the ceiling. Geothermal systems also heat and cool buildings without using a non-renewable resource, using natural cool or warm water temperatures from below the ground and running the water through a cooling or heating coil system, providing cool or warm air to the building. Site location can also impact a project’s sustainability potential. Adaptive reuse development can help your team build sustainably and save funds, repurposing existing infrastructure and its resources to create new and profitable properties.
- Sustainable Construction The EPA defines sustainable construction as the practice of creating structures and using processes that are environmentally responsible and resource-efficient throughout a building's lifecycle. Sustainable construction means environmentally–sound principles are used at all stages of a project, from design, construction, operation, and demolition. From a design point of view, sustainable construction sets out to minimize energy waste, focusing on insulation, windows, and HVAC systems that reduce reliance on fossil fuels and non-renewable energy sources.
Operating major equipment in a manner that is safe for the environment and the workforce can also contribute to sustainable construction practices. Construction waste is a major pollutant, with concrete being one of the most significant sources of solid waste in landfills. Innovative strategies to recycle concrete and offset air pollution or CO2 emissions are also being leveraged by eco-conscious construction teams.
- Operational Efficiency Operational efficiency is the process of minimizing the consumption of energy, water, and construction materials for a development project. Technology can help you optimize project deliveries and reduce the mileage, emissions, and carbon footprint of a project throughout the construction process. Project managers can leverage software with robust schedule management capability to keep construction on track, ensuring timelines are met. Operational efficiency is a huge source of cost savings in sustainable real estate, and by relying on technology to ensure projects run lean, you can also reduce energy consumption and fossil fuel use.
Several buildings that have gone up in the past decade exemplify sustainable material use and practices. Transbay Transit Center in San Francisco is on track to receive a gold LEED certification and consumes 28% less energy than the 2008 Title 24 Energy Efficiency standards. Transbay’s design features tall skylights or “light columns” that bring sunshine into the building and a rooftop park with walking paths and Bay Area plant life. Boston University’s newly opened Center for Computing & Data Sciences is a fossil-fuel-free building and one of the most sustainable in New England. The building features a stacked, geometric shape that allows for the collection of solar energy and is heated and cooled by geothermal wells drilled 1500 feet underground.
Overcoming Challenges in Sustainable CRE Development
Sustainable real estate development offers many benefits and opportunities, but the process can also present a few common challenges. Understanding the obstacles present in climate-friendly development can help you tackle sustainable projects without any timeline delays or unexpected cost overruns.
Higher Upfront Costs
The planning and design stage of a sustainable real estate development project can be costly, requiring you to collaborate with architects, engineers, and other professionals with specialized knowledge of energy efficiency, specialized materials, and innovative technologies. In addition, high-quality, sustainable materials can come at a high premium, with certain utility assets like solar panels driving up costs.
Higher building costs can be easily offset by developers. Grants are available for teams looking to use solar, geothermal, or other LEED-promoting technology through the government and climate-oriented organizations. Several states have incentive programs for LEED-certified building development, with tax credits or grants and expedited permitting processes or lower permitting fees. In addition, the long-term savings of lower utility bills can be taken into consideration when your team is running budget scenarios on a project.
Sustainable real estate development practices are important to reduce carbon emissions and decrease the impact of climate change, but the practice can also future proof your projects, mitigating the impact of hazards and ensuring longer-term returns. Northspyre’s platform can empower you to run different budget scenarios on your project and do a cost-benefit analysis, showing how the use of sustainable materials will impact overall costs and whether or not increased returns will provide sufficient ROI.
Zoning and building codes may complicate a development project with sustainable components. Regulations in many places haven’t kept pace with sustainable building practices and technology, and these regulations can even dictate the use of certain materials, methods, or systems for construction. Being familiar with these regulations, and having a plan to rezone or get exemptions as necessary, can help keep your sustainable development project on track. LEED certification can also take additional time, requiring a project to go through inspections and an approval process.
On the other hand, some states have initiatives to get green-friendly development approved and permitted more quickly, especially for buildings that will help address ongoing housing shortages. Looking into state policies, which often include additional tax incentives to offset costs, can help you make up for the expenses accrued by adhering to regulatory measures.
Knowledge and Skill Gaps
Implementing sustainable materials or building techniques can require special construction knowledge or skills, and it can take time and resources to close those knowledge and skill gaps. Conducting additional market research in the pre-planning stage of a project can be useful for building knowledge around sustainable development practices, allowing you to better understand market preferences or expectations for green buildings. Developers can also opt to work with sustainability consultants, who can help make up gaps in their knowledge and offer more insight into what’s possible for a project. Leveraging technology to increase visibility on key project data can also promote institutional knowledge, ensuring your next generation of project managers is versed in what worked well on past green projects.
Sustainable real estate development comes with its own complexities, but the benefits often outweigh the downsides, and it’s an important asset class for you to be familiar with. Green development is likely to continue to shape the real estate industry, with investors looking for resilient assets amid a changing climate, properties that appeal to an eco-conscious tenant market, and projects that keep them in line with shifting government regulations.
Download our whitepaper on Recruiting Top Real Estate Project Managers and learn how you can assemble the best team for your sustainable development projects.
Tag(s): Real Estate Development
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