The True Cost of Green Buildings

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THERE IS A commonly held belief in the Malaysian construction sector that green buildings are costly and require substantial investment to design and build. The refrain of “it’s too expensive” is echoed by stakeholders throughout the industry as justification for maintaining the status quo.

This view is further exacerbated by the fact that environmental considerations, largely unfettered by effective regulation or enforcement, are generally seen as value-added, rather than integral. It is a perception that continues to be the single greatest obstacle to the adoption of energy efficient and environmentally sustainable building design and construction practices in the country.

But are green buildings really more expensive?

Since its founding in 2009, Malaysia’s internationally recognised green building rating tool, the Green Building Index (GBI), has certified over 560 projects totalling more than 265 million sq ft of gross floor area. This rapid embrace of more sustainable building practices is testimony to the urgent climate challenges faced by our community. Yet even in the midst of this global movement to design and build more efficiently, misconceptions continue to prevail that green buildings are expensive, and cannot be undertaken without incurring significant additional costs. A closer look at the GBI rating tool tells a markedly different story.

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With its performance-based approach and emphasis on passive design solutions, many GBI criteria, including some of the most impactful, can be realised simply by way of effective building design, planning and policy. Indeed, of the 51 individual criteria in the GBI Non-Residential New Construction tool, as many as 40 can be scored with little to no additional investment. With proper strategic planning and project management, many GBI certified buildings achieve well over 50 points (the minimum certified score) without any significant capital expenditure whatsoever.

Analysis of detailed statutory filings for GBI certified buildings submitted by the Board of Architects to the Inland Revenue Board of Malaysia from 2012 to 2019 reflect the prevalence of cost effective green building solutions. For the initial 160 projects certified by GBI, the average overall investment required was less than 1% of their construction cost. Commercial buildings targeting a GBI “Certified” rating incurred an average incremental green cost of between 0-2% while residential buildings, typically with fewer major mechanical systems, required additional investment of just 0-1%. In other words, for every RM1mil in total construction costs, the average project needed to invest less than RM10,000 to “upgrade” its environmental performance.

These figures demonstrate that when it comes to green buildings, as with all construction projects, costs are generally incurred as a function of design, procurement and project management practices, rather than any inherent or hidden expenses from environmental initiatives. While some green building features do require additional investment, others can be realised simply by way of good design. Which solutions are appropriate for any given project or budget is up to the discretion of the building’s owner, developer and project team.

Focusing solely on expenditures also does not reflect the whole picture. How much more profitable are green buildings for their owners by way of reduced operating costs? The average energy consumption of a GBI certified office building is 124.8 kWh/yr/m2, a 50.1% reduction as compared to a typical Malaysian office. This improved efficiency yields substantial and immediate dividends. The average GBI-rated office building saves over RM800,000 annually in reduced operating costs, a savings of approximately RM1.63 per sq ft. Overall, the Return on Investment for GBI certified buildings is just 2.9 years.

Over a building’s life, these ongoing operational savings can accumulate into returns of tens of millions of Ringgit. Energy efficiency initiatives in particular tend to have relatively short payback periods and even small improvements in a building’s overall performance can yield impressive dividends over the long term. While results can vary from project to project based on individual design specifications and operations, even buildings with relatively modest ambitions to improve their efficiency can yield significant financial dividends.

Maximising Green Returns on Investment

Foremost among these are the consideration of basic tenants of passive design during a project’s initial planning and design stages. Items such as building orientation, external shading, location of lift and service cores, fenestration design and even exterior facade colour can all significantly improve a building’s overall energy efficiency, while incurring little, if any, additional costs. Moreover, projects that successfully mitigate heat gain via effective passive design solutions require less cooling capacity from their active air-conditioning systems. This reduced demand allows for the specification of smaller chillers, further reducing upfront capital costs. Adopting sensible, holistic, low-cost approaches to green building design as prerequisite also helps maximise returns from subsequent investment in engineering and technological solutions.

Does white paint cost more than black paint? The answer may be rudimentary, but a light coloured facade can improve the thermal performance of a building in the tropics by as much as 15-20% compared to a dark coloured one. Simply put, in a well-designed and coordinated project, the energy saved by a high-efficiency chiller or generated by rooftop solar panels effectively increase revenues by lowering energy bills. In more poorly conceived instances, the very same systems may do little more than offset the extra energy necessary to cool a building with dark exterior walls or an inefficient greenhouse glass facade.

Additionally, while a decision to install solar panels on a building would certainly be raised during project meetings and likely be the subject of feasibility studies or other reviews, low-cost and no-cost strategies are more easily overlooked. Decisions that do not have significant cost implications are sometimes even left off the agenda entirely. When it comes to green buildings, the absence of sensible decision-making can be expensive, even if the underlying design solutions are often not. To this end, there are several basic strategies that are essential for optimising a project’s green costs and returns:

Establishing Green Objectives in the Initial Project Design Brief

Projects that fail to set out their green targets and strategies during initial design and planning stages can incur significant and unnecessary costs. Many, if not all, of the most inexpensive and impactful green design solutions may no longer be available if they are not integral to the original building design. Variation orders can be expensive and after a main contractor is appointed, subsequent changes to plans and specifications become increasingly prohibitive. Waiting until construction is already underway to make improvements to building systems or to apply for green building certification can be a recipe for disaster and may lead to an owner facing unnecessarily inflated construction costs.

Effective Coordination of Consultants

Many green building features and technologies can yield impressive returns, but to maximise these benefits, it is essential that the entire project team is able to communicate around a common set of goals. Some savings can only be effectively realised if architects, engineers, builders, owners and occupants are mutually aware of each other’s intentions and are able to incorporate inputs from others into their respective endeavours. Green building rating tools can be invaluable in this regard as they help to establish a common framework of targets and objectives for the project.

Adopting Appropriate Green Solutions

It is important that all systems proposed for a given project are suitable for its ambition and budget. Strategies tailored for one building may not yield the same results and may even incur additional costs when applied to a different location, building type or development model. While the green cost data from GBI shows that even higher ratings can sometimes be achieved with modest additional investment, generally speaking, the higher a building’s rating target, the greater the costs incurred.

While buildings targeting the basic “Certified” rating incurred average added costs of just 0-2%, the figure rises to 1-3% for “Silver” rated buildings and 2-5% for those targeting the highest “Gold & Platinum” ratings. As such, it is vital that all stakeholders are aware of the potential cost impact, returns and benefits of various green initiatives.

Not all green technologies are inherently profitable in every instance. But when strategies employed to achieve a project’s green targets are identified early in the design process; are well coordinated among its stakeholders; and commiserate with its overall development goals, green costs can be limited, and its profits maximised.

While this article has focused primarily on the most tangible indicators of green building costs and profitability, these are far from the only benefits these projects afford. Significantly reduced absenteeism, increased productivity, social responsibility, higher rental returns and lower vacancy rates all serve to further differentiate efficiently designed and operated green buildings from the rest of the pack.

Though green building practices are still viewed as superfluous rather than imperative, we cannot afford to abide these sentiments for much longer. In the 21st century, there should be no doubt that energy efficient building design, construction and operations are absolutely fundamental to the future of our built environments.

This article has been adapted from material previously published in the book Greening Malaysia: Building Toward Sustainability. Available online at: www.pamonlinestore.com

Mitchell Gelber has worked with issues of architectural design and sustainability in both Asia and North America. He holds a degree in Urban Studies from Columbia University in New York and a Masters of Architecture from the University of British Columbia in Vancouver, Canada. Gelber is a principal of YIDesign Green Buildings, an active member of Malaysia’s Green Building Index (GBI) Technical Committee, and has previously lectured at the University of Malaya, School of Architecture. Originally from the United States, he has been based in Malaysia since 2007.



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