There is no significant difference between construction costs for green buildings and those of conventional buildings, and green buildings achieve better investment returns and higher valuations, says industry body Green Building Council of South Africa (GBCSA) CEO Brian Wilkinson.
The majority of reported premiums for green buildings in the US are between 0% and 4% higher than conventional buildings. However, the latest studies in Australia show that a 4-Star Green Star building is actually cheaper to build on average, while a 6-Star Green Star building – signifying world leadership – usually has a relatively small premium of about 6%.
The comparative immaturity of the South African green building market means there have not yet been any broad empirical studies on the capital cost impacts of green building locally. However, the local case studies documented in the green building ‘Rands and Sense’ report show the South African property industry can expect cost premiums of a new commercial green building to be between 1% and 10%, he says.
In young green building markets like South Africa, sustainable buildings generally incur a green premium above the cost of standard construction. However, once these markets mature and green building materials and practices become more prevalent, these “new market premiums” decrease and green building can be done at similar costs to conventional buildings, he says.
“While there seems to be consensus on the environmental benefits of green buildings, there is a lack of accurate, thorough financial and economic supporting information,” explains ‘Rands and Sense’ report author Nicola Milne.
The report highlights the financial and environmental benefits of green building, such as lower operating costs owing to savings on energy and water in particular, higher returns on assets and increased property values based on the lower operating costs.
Green buildings are also viewed as less risky, future-proofed buildings, which can fetch lease premiums and retain tenants longer than conventional buildings. Other benefits include the enhanced marketability of a green building, as it is a technologically advanced, environmentally and socially responsible building representing a differentiated product in the market, she says.
Green buildings also represent responsible investing, and reduced liability and risk because developers are cognisant of, and guard against increasing utility costs and supply constraints, as well as being mindful of possible carbon taxes and potential mandatory energy performance disclosure and broader regulation, says Milne.