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How Green Buildings Bring More ROI

Updated: Mar 21

Green buildings are quickly becoming the new standard for construction projects. Not only does it provide environmental benefits, but it also offers a range of financial incentives and tax credits that make green construction an attractive option for developers looking to maximize their profits while also investing in a better future. In this blog, we’ll take a closer look at the financial benefits of green buildings, available tax credits and incentives, and the cost associated with green building certification. With this information, you’ll be ready to make an educated decision about your next project. Let's dive in.


Green vs. Healthy Buildings

It is important to understand the distinction between "healthy building" and "green building" certifications. Although both aim to improve sustainability, healthy building certifications like Fitwel and Well prioritize the health and well-being of the building's occupants. On the other hand, green building certifications like LEED and NGBS focus on minimizing the building's environmental impact, with attention given to factors such as materials, water usage, and energy consumption. While Energy Star is a widely recognized certification, it is solely focused on energy efficiency and does not fall under the category of a green or healthy building program. In short, while these certifications share the goal of promoting sustainable practices, the specific areas of focus can differ significantly.


Which Program Is Right For You?

When evaluating which green or healthy building program is most suitable for your project, there are several factors to consider. Firstly, each certification requires that the building meet certain criteria in order to gain certification. For example, LEED requires that a building must be energy efficient and incorporate renewable energy sources, while Fitwel considers the design of the space and the amenities available to occupants. Additionally, each certification has its own set of criteria and scoring system, which can also influence the decision-making process. It is important to weigh your options carefully and determine which program best suits your project.


Financial Benefits of Green Buildings

Green buildings are not only good for the environment but also for investors. They bring a plethora of advantages that can significantly increase return on investment (ROI). Imagine reducing operating costs and increasing cash flow through energy-efficient and sustainable building systems, leading to higher ROI for investors. Picture attracting more tenants with green buildings, resulting in higher occupancy rates and stronger rental income – not to mention increasing property values by 8-10%. Green buildings also use less water and electricity compared to traditional buildings over the long run, resulting in even more cost savings.


The USGBC has reported an impressive ROI of 19.2% for existing green buildings and 9.9% for new construction projects. Not only does building green benefit investors, but it also helps the US economy by creating jobs and wages. In fact, studies have found that rental rates are higher in LEED-certified buildings than non-certified ones.

You might think that sustainable development is more expensive, but think again. By using smart design practices such as using low-carbon building materials, diverting construction waste, and reusing materials, building green can be cost-effective while also benefiting the environment and society. It's a win-win situation.


Stay Updated With The Latest Trends

As climate change continues to be a pressing issue, buildings have become a major contributor to global emissions, accounting for almost 40% of it. To combat this, the United Nations Framework Convention on Climate Change (UNFCCC) aims to limit the rise in global average temperature to 1.5˚C. It's evident that regulations regarding building development will become stricter in the future, with a focus on reducing emissions.


To stay ahead of the curve, developers should keep up-to-date with the latest versions of certifications. By doing so, they can proactively implement sustainable practices before they become mandatory, potentially saving them from the costly and time-consuming process of adapting to new standards. Not only does this help meet environmental goals, but it also positions developers as industry leaders, demonstrating their commitment to a better future.


Green Building Benefits for Short Term Investments

According to the US Green Building Council, upfront investment in green building can increase property value by 10% or more. Green buildings also create a more sustainable environment that leaves tenants feeling happier and more fulfilled in their workspace.

In fact, a study by the Capital E group found that the total financial benefits of green buildings are more than ten times the average initial investment required to design and construct them. This is because green buildings lead to improved health, productivity, and lower operations and maintenance costs.


Green Building Tax Credits and Utility Incentives

The federal government offers the §45L Residential Energy Tax Credit for developers of energy-efficient apartments, condos, or spec homes. This is just one of the many incentives available to green builders. In addition, businesses can receive a 30% investment tax credit (ITC) for solar energy and qualified fuel cell properties, while renewable energy equipment can also benefit from a 10% to 30% ITC to lower procurement and operating costs. Moreover, there are proposed bills in the works that would establish credits for homes that obtain ENERGY STAR certification.


Moreover, Cities like Chicago offer several tax incentives and utility programs for green buildings. The Class 7(a) and 7(b) programs provide real estate tax incentives for commercial projects in specific areas, while the Class 7(c) CURE program offers real estate tax incentives for commercial properties regardless of location. The city also has Green Building Permit Programs that offer potential solar tax credits, rebates, and other incentives. Homeowners can apply for a 30% credit for solar systems installed on or after January 1, 2022, and earn larger tax credits for purchasing high-end products such as solar water-heating equipment or fuel-cell power plants. Additionally, Illinois' SEDAC offers rebates for retrofits that achieve energy savings of 20% or more. It's important to confirm eligibility requirements before starting any project. We can help you navigate the complexities of green building certification and incentive programs to ensure your project is successful.


Green Building Certification Cost

If you're considering a green building certification, you might be wondering about the upfront costs. Typically, the certification fees are calculated based on either the project's square footage or the number of buildings and units. However, the specific costs for your project will depend on a variety of factors. If you're interested in learning more about the costs associated with a green building certification for your project.


By integrating sustainability into a project from the start, both the hard and soft costs associated with green building certification can be minimized. For instance, selecting sustainable materials and systems during the design phase can reduce construction costs, while energy-efficient features can lower operational costs over the building's lifespan. Contact our team at tad@GAINcre.com to learn more about how you can incorporate sustainability into your project while keeping costs in check.

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