What is the Return on Investment for Green Buildings?

Green building owners report a return on investment of 19.2% for existing buildings and 9.9% for new buildings, according to the USGBC. A major software company that received the LEED Platinum awards stated that it had achieved a net return on its current value of almost 20% of its initial investment. Monitoring and measuring the impact of sustainable buildings on brand reputation is essential, as it affects revenue and ROI. Beyond construction costs, we must analyze how ecology attracts more outside business.

It also attracts new employees, reduces staff turnover, and reduces other operating costs that should be part of the overall ROI monitoring plan. For example, employee turnover can cost employers about 33 percent of the salary of each employee who decides to leave. Reducing this number by taking advantage of the welfare benefits of green architecture is a financial benefit. The reason is that it increases the amount of money that can be saved simply by opting for ecology.

Sustainable building architecture offers tremendous opportunities to optimize energy use. LED lighting, high-efficiency air conditioning systems, waterproofing, solar panels, recycled water and much more are major contributors. LEED construction requirements help buildings save an average of 25% of energy and 11% of water costs compared to standard buildings. Electricity and water can easily reduce operating costs.

This means that investing in sustainable solutions can help companies increase their ROI. Building owners often face delays due to some of the more extensive upfront costs required to finance green building projects. However, investments, especially in sustainable heating and cooling and in the self-sufficiency of buildings (water recycling, solar panels), will pay off in the long term. Green building owners have consistently recorded positive results, with the USGBC announcing that green buildings reduce costs year after year and reduce maintenance costs by an average of 20 percent compared to typical commercial buildings. Achieving healthier buildings while at the same time influencing climate change and employee well-being, and taking advantage of the economic benefits of green building at the same time, is a unique opportunity for companies that marks the beginning of success in more ways than one. Sustainable buildings produce enormous tax benefits that take many different forms, which are not necessarily typical financial figures.

Green buildings also offer multiple quantifiable avenues that can be used to calculate ROI. By certifying their property to a third-party building standard, investors will know that their property presents a lower risk than traditional-built buildings, as the standard eliminates concern for poor environmental performance. Another way to help increase investment to make your properties greener is to start a green revolving fund. Taking a proactive approach by designing better indoor environmental quality, increasing natural lighting, and certifying the building to an ecological standard ensures that the building is designed to be healthy and address future occupants' health problems at the same time. Both eco-labeling and operating cost reductions increase the marketability and asset value of a property. As we have seen, a well-managed green building can reduce energy, water and maintenance costs, as well as improve productivity and well-being and increase the value of the building. And because LEED certifications have a good reputation and give transparency to green projects, they improve the value of green buildings.

According to a study conducted by CoStar and US San Diego based on CoStar's US database of 2.8 million real estate properties, green buildings consistently achieved higher occupancy and rental rates as well as higher sales prices. LEED Silver or Gold green premiums range from 0% to 10%, while LEED Platinum premiums fall between 2% and 12.5%. The vacancy rates of green buildings are usually at least 4 percent lower than those of traditional buildings. Third-party verification of the green standard further reduces risk not only by ensuring that program's minimum requirements and standards are met but also by having standards inspected and verified by an independent consulting firm which positively affects ESG portfolios. In terms of energy, green buildings achieve these savings through more efficient lighting, heating and cooling systems as well as better insulation. After all, there is still some ambiguity when it comes to green buildings and their monetary return on investment.