Costs Slow Green Building Market Growth

The building industry is reducing energy and operating costs while trying to enhance asset value over time with green building. Nearly all vertical segments within the green building products and services market offer environmentally sustainable alternatives with positive end-user interest and account for a sizeable portion of the market.

"A significant challenge for market participants is the cost hurdle that frequently dampens end-user interest," says Frost & Sullivan Research Analyst Konkana Khaund. "However, as the level of competitiveness increases with more options surfacing in the market, price is expected to experience downward pressure, eventually allowing for their better market penetration."

New research from Frost & Sullivan, "LEED and Beyond: Evolving Trends in Green & Intelligent Buildings in North America," finds that the market earned revenues of more than $12 billion in 2007 and could reach as much as $42.6 billion in 2015.

Half of the total energy consumed in the United States is by commercial, institutional, or industrial buildings, and any increase in energy price is set to have a dramatic effect on the operating cost of these sectors. As such, new building projects must consider ways to lower bills through the efficient use of water, heat, and electricity. This is where the adoption of Leadership in Energy and Environmental Design standards for environmentally sustainable design and performance, developed by the U.S. Green Building Council, can help.

One obstacle to LEED adoption, however, is the high cost of certification, which can include data collection, administrative, and commissioning costs. Expenses can reach up to $60,000; a prohibitive amount for many small- to medium-sized projects.

Differing outlooks on climate change and energy supply also confuses market perceptions and leads to the idea that green buildings are a fashion, not a confirmed market poised for significant expansion. To counter this, industry awareness of the benefits of high-performance green buildings is critical.

The maturity attained by the North American construction industry makes it imperative for participants to explore ways of adding valuable differentiators to their projects. "By adopting LEED, builders and designers have an opportunity to prove themselves as leaders and innovators in an industry now focusing intently on environmental, social, and financial responsibility," observes Khaund.

For an overview of the report, send an e-mail to jhaynes_pr@frost.com.

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