Breaking Ground: Environmental Practices and Big Developers

What Green Topics Most Interest Developers? Site design and environmentally responsible landscaping 74% Lighting and electrical energy efficiency 58% Building envelope issues 50% Building size and orientation 46% IAQ and natural ventilation 42% Construction waste recycling 38% Healthy construction matrials 36% Recycled content construction materials 28%

Figure 1. Developers care most about topics that affect their bottom line. The green building community has focused on recycled content materials, but builders rank it lower in importance. Respondents could check more than one answer.

Figure 2. With the real estate industry changing quickly, green building advocates have an opportunity to influence developers.

Green building has many synonyms: eco design, regenerative design, green development, sustainable design, and ecologically accountable building are a few. The best definition of green building includes three important components: resource conservation during design and construction; resource conservation during operations; and protection of occupants' health, well being, and productivity.

Our goal as real estate consultants is to make green building and technologies an integral part of the real estate development process. We have found many obstacles to this goal. But this survey, and our cumulative years working with developers, have shown us ways of overcoming these obstacles.

Green, in a Way

Developers gave themselves high marks for their understanding of green design, and they expressed a general willingness to learn more about the topic. However, the range of environmental issues they identified was rather narrow. Their answers clearly showed that they perceive green design to be a constraint that prevents development.

On a scale of 1 to 5, with 5 being strongest, 45% of developers gave themselves a 4 or 5 on their knowledge of "sustainable design." When asked to assess their knowledge of "energy-efficient" design, 73% gave themselves only a 3 or 4. When asked if they were interested in knowing more about sustainable design, 76% indicated a "definite" or "strong" desire to learn more, in contrast to 24% who stated they had "some desire" or "little desire" for more knowledge.

What was surprising about these numbers, though, was that most of the developers were only thinking about a small part of "sustainable design." As Figure 1 shows, when developers rated their interest in specific environmentally responsive development topics, they were most interested in the category of "site design and environmentally responsible landscaping" (see Figure 1). This strong interest was probably born of personal experience, since 58% of the survey respondents had recently encountered community environmental concerns, and 68% had recently dealt with environmental regulations. The type of issues these developers had been forced to deal with included wetlands, traffic, a Native American burial ground, and energy conservation.

When asked which basic development issues were most important, developers responded that basic building construction and operation issues topped the list of developers' concerns. Whether or not a developer is interested in green building, primary economic concerns will always remain paramount. This is an important lesson for advocates of green building. Indeed, as Figure 1 shows, developers were least interested in recycled-content construction materials, though that has been the primary focus for many advocates in the green design and architecture world. Developers don't seem to perceive recycled-content materials as a major impediment to building, or as a great selling point. As a group, they are simply uninterested.

It is unfortunate that developers overwhelmingly understand environmental design issues in terms of site-specific environmental impediments to development. This is an area where they tend to have bad experiences with public criticism and project delays. The parts of green design that can help them to make money and increase market share are less well recognized. Developers do not generally see green design as a new way of doing business, one that offers them opportunities for cost savings.

Deepening the Green

Comments on this question underscore the need for a sophisticated economic evaluation of the impact of green building. "It is one factor in assessing the market," wrote one. Others wrote: "Need cost/benefit determination"; "How much will buyers pay for long-term savings?"; "Need more tenants and financing"; and "Need a well constructed, logical, analytic argument." A couple wanted a more cooperative process. "Reduce stereotypical developer vs. the environment," one wrote. Another said, "Revise environmental regulations to allow more varied environmental solutions."

Builders want to know the effects green building may have on property valuation and lending, the financial impact of embracing participatory design processes, and the infrastructure cost implications of green building. This information should come from market research.

A few respondents were already committed to green building, but note the overall statistics. Of 1,166 ULI members who received surveys, only 12% took the time to respond. This response rate is within the expected range for a mailed survey, but it isn't high. Those developers who did respond conveyed a mixed message. They rated themselves fairly high on their knowledge of green building. But they expressed a wary skepticism about it, and an indication of a fairly narrow understanding of the issues. They were willing to learn more. But to address this audience, one needs specific information that shows that the developers' business concerns have been taken into account.

Opportunities for Change

• They need to define the topic in terms the builders can relate to.


• They need to understand the economics of green building and communicate economics in the builder's language.


• They must empathize with the builder by understanding how big a process change they are pushing.


• They must be prepared to help develop the consumer market.

As the survey shows, developers often don't care about green building because they define it narrowly, considering only such issues as habitat and wetlands preservation. This type of issue raises costs and creates delays, and that has given many developers a negative attitude toward all topics related to the environment. Expanding developers' definition of green building is an important first step. It needs to be made clear that green designers are interested in everything from air conditioner sizing to sewage treatment.

Speak the Builder's Language

Education and communication are not as easy as they look (see "5 Steps to Better Communication"). It is important to always keep economics in the forefront. Developers often assume that green techniques will cost more, even though that is not always true. As Home Energy regularly reports, there are plenty of energy-efficient homes with the same first costs as conventional homes. For every dollar spent on fancy windows, air-sealing, and water-conserving landscaping, a dollar can be saved on HVAC systems, irrigation systems, or callbacks. It is important to translate green building economics into the language of the owner's balance sheet. Changes in the size and timing of cash flow are key. What type of debt or equity capital will pay potential increased costs? How will the developer benefit from savings and payback?

Empathize

For green building to take hold will require changes in the development process. It's tough to change a process that involves so many players. Green building changes elements of design, finance, marketing, and management. Even when one person understands the true scope and benefits of green building, he or she must change what many other people are doing in order to proceed (see "Civano: Green Development at Work"). People who communicate with developers need to empathize, recognizing that it is a big change they are asking for.

All the players need to communicate throughout the process. A change in the wall system can affect the duct system; a change in the design can affect the schedule and the marketing; energy efficiency can affect financing. This constant communication is called "integrating the process."

Integration means that participants evaluate and design a site plan, a building, and all component systems concurrently. This allows designers of one system to respond to inputs from other fields, instead of simply reacting to what others have done. This goes beyone integrating the wall systems with the duct system. It also includes integrating land use, financing, home energy ratings, and the development schedule.

Normally, the people involved in marketing and financing a home have no part in specifying the mechanical system, for example. This means there's no reason for the specifier to buy anything but the lowest bid. Integrated design takes time, but it produces a higher-quality product.

The Consumer Market

Finally, people who support green building need to give builders adequate marketing tools to create market demand. Rather than simply crying out for "energy efficiency" or "wetlands preservation," for example, advocates should show builders why it's in their own economic interest to build sustainably. And if it isn't yet clearly in their interest, advocates need to help create the consumer demand. Home Energy Ratings Systems (HERS) are one example of a program designed to create demand. Other marketing tools, including ads and public involvement, could make developers look good even if they have simply complied with local requirements for habitat restoration or open space. Most developers don't fully understand the benefits of actions such as wetlands and habitat preservation, so most have not used these benefits as selling points. Developers need to know how their customers benefit from green building.

Spreading the Word

Similarly, advocates have created a niche market of people who are interested in green design. The gradual spread of green developments demonstrate that green design is sinking in. But for green building to become business as usual in all new developments will require a new level of communication, with both developers and consumers. It needs to focus on how green design benefits people-especially their bottom line.

Mark Rodman Smith is CEO of Pario Research, an urban economics research firm in Cardiff, California, that conducts market and financial feasiblity analysis for developers, lenders and government.

Deborah Weintraub is an architect with Southern California Edison's Design and Engineering Group. She is president of the Sustainable Policies Institute.

The survey and research discussed in this article were supported by the Urban Land Institute and by Environmental Building News. The project was initiated and underwritten by the Canadian government and the British Columbia Trade Development Corporation.

 

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