The prospects for green buildings in a red economy

It is no secret that the United States economy is, and has been, in a significant recession since the fall of 2008. Tight credit markets and falling energy prices may lead some to the conclusion that green buildings no longer make economic sense during these tough times. Clearly, the current recession will take a toll on green building development in the United States. But, to assume that this recession signals the end of the increasing influence of green building techniques would be a mistake. What is far more likely is that the green building initiatives which do not result in a rapid payback, will be abandoned, with industry professionals focusing their efforts on refining proven techniques to attain the greatest efficiency gains possible. Those who forego the opportunity to increase the sustainability of their building stock may find themselves at a disadvantage when the economy eventually does revive. The current economic climate requires those working with, and investing in, green buildings to shift their perspective and reallocate resources to more cost-effective solutions. Much of the gains in green building in the immediate future will be restricted to the commercial real estate market. This is because of the significant amount of excess residential inventory, caused by record foreclosures precipitated by the sub-prime loan crisis. In the commercial sector, there has been significantly less overbuilding than in the residential sector. A relatively small percentage of the current commercial inventory is comprised of green buildings. Recent market data suggests that demand for commercial green buildings remains high. One reason for the relative strength of green buildings is the "flight to quality," which has been spurred by the recession. Buyers and tenants who previously would have been unable to afford green buildings are now finding that depressed market values are making these facilities available to them. Another reason for this high demand is a very public shift in domestic policy by the Obama administration. More regulation, including a possible "cap and trade" program for greenhouse gases may come into effect in the near future. Furthermore, government programs are increasingly providing significant incentives to increase energy efficiency, with the possibility of greater incentives on the horizon. In light of this shift in governmental tone, developers may see green buildings as a way to obtain financial incentives while simultaneously lowering the cost of future regulatory compliance, in the event that systemic greenhouse gas regulations come into effect. With respect to existing commercial buildings and residential development, there is also the potential for growing demand for green initiatives during the current recession. Numerous studies illustrate the fact that minor changes in the operation of a structure can result in immediate and significant cost savings to the owner. Green building professionals can use these studies to take advantage of the market's current cost consciousness and present building managers and homeowners with easy money-saving techniques that can be incorporated into day-to-day operations. While owners of existing structures may not be interested in spending the extra money necessary to get their buildings certified as "green" during these tough economic times, by gaining familiarity with green building techniques, they will be more receptive to further environmental initiatives in the future. The entire real estate sector of the United States economy is under significant strain. However, in order to succeed in the future, real estate developers and professionals must resist the temptation to retreat from the incorporation of modern efficiency technologies into their buildings. Those who continue to embrace innovation will find themselves with a competitive advantage when the real estate market begins expanding again. Kevin Walsh is an associate in the environmental practice group at Certilman Balin Adler & Hyman, LLP, Hauppauge, N.Y.