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Article
Publication date: 29 July 2014

Billie Ann Brotman

The purpose of this paper is to address the apparent slow acceptance on the part of developers located in the USA to seek green certifications. If green-certified construction…

1153

Abstract

Purpose

The purpose of this paper is to address the apparent slow acceptance on the part of developers located in the USA to seek green certifications. If green-certified construction costs more than non-green construction, then is there a financial reason for not seeking a green rating. Do green buildings perform better than non-green buildings financially? The paper develops and presents a discounted present value model for doing a cost-benefit analysis for building green. This model enables an investor to determine the feasibility of constructing a new green-certified building instead of a conventional non-green building. Non-green buildings are not certified by a rating agency such as Leadership in Energy and Environmental Design (LEED), Energy Star or Building Research Establishment Environmental Assessment Method (BREEAM). Real estate permits are granted by local municipalities in the USA. This means that local government mandates requiring green construction that significantly adds to the initial cost of a project could have the unintended result of encouraging new non-green construction just outside their municipal boundaries.

Design/methodology/approach

The paper collects publically available research data for office buildings located in the USA, and inputs this information into an income statement. It tests the hypothesis: is green-certified construction a financially feasible choice for an investor? An incremental approach using a 15-year holding period is presented. This time period takes into account equipment wear and tear. Heating/cooling systems and other green-technologically based operating systems have a limited life and do not last for 30 or 40 years. They are likely to need replacement after 15 years have lapsed.

Findings

The negative net present value (NPV) results and high payback periods indicate that increased rents for green construction, a tax credit for the present value loss and/or property-tax reduction covering the shortfall is needed as an incentive to commercially build green. The implication of a negative NPV is that green office buildings will be built by government agencies where green is mandated, corporations that want a green image and benefit from this image, where local ordinances mandate green construction features and where local and federal tax incentives are available increasing a construction project's feasibility.

Research limitations/implications

The limitation of any cost-benefit study is that analytical models and/or data used to forecast energy and water consumption savings in green-certified buildings compared to conventional buildings can be inaccurate. Forecasting models can understate or overstate the actual savings realized from green construction especially in the long-term given the difficulty of predicting equipment wear and tear, net rents and energy costs. The modeled percentage cost associated with green new construction features could remain constant or grow through time. Tables I and II results assume energy and water expenses remain a constant percentage over the 15-year period. The agency costs associated with obtaining a LEED or BREEAM certification was not calculated as an upfront cost. Certification by LEED or BREEAM increases the upfront cost associated with building a green building.

Practical implications

The length of the payback period estimates coupled with negative NPV for green certified compared to non-green construction suggests that developers do not have an incentive to build green. Higher WACC rates would result in green-certified projects being less feasible to build.

Social implications

The LEED certification point system may need to be reviewed. Points are assigned for features that improve occupant satisfaction, but may have little impact on reducing energy usage.

Originality/value

A model is presented for determining whether green-certified construction is financially feasible. The model enables the investor to determine the size of a tax incentive that is needed to enable new green construction to be economically feasible to build. The higher the negative NPV the larger the income or property tax incentive or other financial incentives needed. Prior research studies compared green and non-green buildings, but did not compare the energy savings generated to the additional construction and upfront costs incurred using a discount rate. They assumed the energy savings justified the additional initial cost associated with building a new green certified.

Details

Journal of Property Investment & Finance, vol. 32 no. 5
Type: Research Article
ISSN: 1463-578X

Keywords

Article
Publication date: 17 October 2018

Chamali Bandara, D.M.P.P. Dissanayake, Gayani Karunasena and Nadun Madhusanka

The successful continuation of green certification in the Sri Lankan hotel sector is vital for tourism industry as well as the economy of the country as it balances the economic…

Abstract

Purpose

The successful continuation of green certification in the Sri Lankan hotel sector is vital for tourism industry as well as the economy of the country as it balances the economic interests with social and environmental responsibilities. However, it has become an issue in the Sri Lankan hospitality and tourism industry to sustain green certification due to many challenges. The prevailing situation highlights the need of exploring long-term strategies to mitigate challenges in sustaining green certification which has not been researched to date. Thus, the purpose of this paper is to propose strategies to mitigate challenges in sustaining green certification in the hotel sector in Sri Lanka.

Design/methodology/approach

In total, 3 hotels were selected as cases of the study and 12 semi-structured interviews were conducted with engineers, maintenance managers and supervisors, who are responsible for sustaining green certificates at such hotels. The collected data were subjected to cross-case analysis to determine challenges in sustaining green certification. The findings were analysed with the support of the QSR.NVivo version 11.0 computer software.

Findings

Challenges were identified in detail under five main categories. They are technical, managerial, political and legal, environment and biological and social and cultural. Such challenges include design and construction defects, use of poor quality building and other materials, improper maintenance practices, incomplete and unclear construction documents, plans and specifications, resource limitations, insufficient budget allocations, government intervention, legal constraints, lack of user awareness and natural environmental conditions. Finally, strategies to mitigate such challenges are proposed based on empirical research findings.

Research limitations/implications

Only the Green Globe certified hotels in Sri Lanka were selected considering their need to renew certification annually. Further, interviewees were selected mainly focusing on the operational phase of a building. Hence, the findings were mostly limited to the perceptions and knowledge areas of selected interviewees. This can be highlighted as a primary limitation of the research, where a further study should be carried out on the perceptions of design stage professionals incorporating design stage challenges and strategies into the study.

Originality/value

The proposed strategies can be pursued by hoteliers to mitigate challenges in sustaining green certification, which will ultimately facilitate to balance economic interests with social and environmental responsibilities.

Details

Built Environment Project and Asset Management, vol. 8 no. 5
Type: Research Article
ISSN: 2044-124X

Keywords

Book part
Publication date: 16 November 2023

Anne Bowers and Hyeun J. Lee

We study ceremonial adoption of voluntary standards, where participants adopt the standard in principle but do not change their practices. Ceremonial adoption can benefit…

Abstract

We study ceremonial adoption of voluntary standards, where participants adopt the standard in principle but do not change their practices. Ceremonial adoption can benefit individual participants, who may be able to reap the benefits of association with the standard at lower cost, but it can be problematic for overall levels of adoption. We conceive of ceremonial adoption as an interaction between strategic incentives of participants and social ties to their audiences, such that not all participants are likely to ceremonially adopt. Our setting is the Leadership in Energy and Environmental Design (LEED) certification for sustainable construction. We study the conditions under which projects register for LEED certification, allowing them to claim affiliation with LEED, but then do not actually finish certification. While our data are correlational in nature, our results suggest that studying the competition for audience members (in our case, occupants) can provide greater understanding of certification behavior as well as overall levels of adoption. Our findings have implications for organizations that design and maintain voluntary standards and for organization theorists who wish to understand field-level change. Thus, we provide more evidence that strategy and organizational theory interact in important and often unexamined ways.

Details

Organization Theory Meets Strategy
Type: Book
ISBN: 978-1-83753-869-0

Keywords

Article
Publication date: 12 July 2023

Frank Victor Mushi, Huba Nguluma and Jacob Kihila

Green buildings have proven to be essential contributors to the sustainability of buildings in the construction industry. However, in developing economies, the rate of green

Abstract

Purpose

Green buildings have proven to be essential contributors to the sustainability of buildings in the construction industry. However, in developing economies, the rate of green building adoption is slow. Moreover, the factors linked to a relatively slow adoption rarely feature in the literature. This study seeks to bridge the gap by first exploring factors influencing the adoption of green buildings. Second, analysing strategies and preferences determining the adoption of green building principles and lastly, exploring case-based opportunities for their adoption in Tanzania.

Design/methodology/approach

Semi-structured interviews were conducted to collect qualitative data from twelve key informants. The qualitative data were analysed using content analysis.

Findings

The findings indicate that the most influential factors in green building adoption are related to key organizational decisions. Moreover, social and environmental factors are more related to green building adoption than economic factors. In addition, energy and water efficiency are the most commonly adopted sustainability features, while certified materials, recycling and reusing are rarely implemented.

Practical implications

Since green building adoption is still in its infancy, this study informs policymakers, professional bodies, developers, and researchers of the empirically supported factors for green building adoption. The conclusions can be amplified within the sustainability movement.

Originality/value

This study provides an in-depth understanding of the precursors of green building adoption, which is increasingly becoming a paradigm shift in the construction sector. The study is the first to present an in-depth analysis of the real-life factors influencing the adoption of green buildings in Tanzania.

Details

International Journal of Building Pathology and Adaptation, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 2398-4708

Keywords

Article
Publication date: 9 May 2022

Sonali Abeysinghe, Chandula Jithmi De Zoysa, Chandana Siriwardana, Chaminda Bandara and Ranjith Dissanayake

The purpose of the study is to mainstream the disaster risk reduction (DRR) and disaster resilience measures into the GreenSL® building rating system in Sri Lanka to demonstrate a…

Abstract

Purpose

The purpose of the study is to mainstream the disaster risk reduction (DRR) and disaster resilience measures into the GreenSL® building rating system in Sri Lanka to demonstrate a more holistic approach in achieving sustainability with resilience.

Design/methodology/approach

First, a comprehensive literature review was carried out on green building practices and rating tools, natural hazards and DRR and global and local frameworks. Next, criteria were developed incorporating the disaster resilience aspects through eight expert committee meetings and included the rating tool in three levels. Finally, 11 green-certified buildings from the Green Building Council of Sri Lanka were reevaluated using the new disaster resilient GREENSL® rating system for built environment as a validation for the new tool and to analyze the new certification levels.

Findings

All the green-certified buildings in hazard-prone areas dropped their certification by one level while the buildings in nonhazard-prone areas remained in the certification after being evaluated by the new DRR-incorporated rating system, which recommends the use of new tool for the buildings in hazard-prone areas. But due to the rapid changes in climate and the unpredictable trends of natural hazards, the use of new DRR incorporated GREENSL® rating system for built environment for the certification of buildings is highly endorsed.

Originality/value

This is the first research study based on the GREENSL rating system. And it is the first effort to incorporate DRR aspects to any rating tool in Sri Lanka. The projects that were evaluated for the validation of the new tool are the actual projects which obtained green building certification. Also, it is apparent that this study has gone some way towards enhancing the understanding of blending the sustainability and resilience in rating systems for built environment.

Details

Smart and Sustainable Built Environment, vol. 12 no. 4
Type: Research Article
ISSN: 2046-6099

Keywords

Article
Publication date: 15 February 2013

Wadu Mesthrige Jayantha and Wan Sze Man

It is known that people's expectation towards their living “green” is increasing. Green features are now regarded as one of the important considerations of buyers in purchasing a…

2398

Abstract

Purpose

It is known that people's expectation towards their living “green” is increasing. Green features are now regarded as one of the important considerations of buyers in purchasing a property. This research paper aims to investigate the significance of the green features of residential buildings to property buyers.

Design/methodology/approach

HK‐BEAM certification and HK‐GBC Award are used as the measurement of green residential buildings. The study used a hedonic price model to determine whether there is a relationship between green features and residential property price and the influence of green features on the residential property price if there is such relationship.

Findings

The empirical results show that green features have a significant and positive relationship with residential property price. People are willing to pay more for green buildings recognized by HK‐BEAM and HK‐GBC. They are willing to pay a sale price premium ranging from 3.4 percent to 6.4 percent. Furthermore, a relatively larger premium is found in Hong Kong Island compared to the New Territories.

Research limitations/implications

The results imply that environmentally friendly green buildings both increase the value of a property and attract property buyers; and well‐recognized green building schemes add value to properties and hence increase the property price.

Originality/value

The study has contributed an indication of the amount a buyer would be willing to pay for quality green buildings as a reference for users, developers and investors. The study sheds light on the ability of the market to capitalize environmental considerations in investment decisions.

Details

Journal of Facilities Management, vol. 11 no. 1
Type: Research Article
ISSN: 1472-5967

Keywords

Article
Publication date: 18 November 2013

Giacomo Morri and Federico Soffietti

Real estate sustainability can be best demonstrated through a “greencertification such as leadership in energy and environmental design, but, in markets where little precedent…

Abstract

Purpose

Real estate sustainability can be best demonstrated through a “greencertification such as leadership in energy and environmental design, but, in markets where little precedent is available, quantification of costs and premiums related to green buildings is still ridden with uncertainty. The aim of this study is to shed some light on market rent and price premiums as perceived by professional operators in Italy.

Design/methodology/approach

A survey of two cohorts of real estate stakeholders, either members of the Green Building Council Italia or commercial real estate investors, was carried out by means of an online questionnaire.

Findings

Based on 270 responses, it can be inferred that, while the importance of green building is widely acknowledged, caution is still prevalent regarding expected gains. In fact, the majority of respondents perceive the increase in rent and price premiums as being equivalent to additional costs.

Originality/value

This is the first attempt to analyze perceived importance of greenbuilding in Italy.

Details

Journal of European Real Estate Research, vol. 6 no. 3
Type: Research Article
ISSN: 1753-9269

Keywords

Article
Publication date: 6 July 2015

Eddie Chi-man Hui, Eric Wing-fai Chan and Ka-hung Yu

– This study aims to examine whether Leadership in Energy and Environmental Design (LEED) certification yields additional premiums for Shanghai’s office rental sector.

Abstract

Purpose

This study aims to examine whether Leadership in Energy and Environmental Design (LEED) certification yields additional premiums for Shanghai’s office rental sector.

Design/methodology/approach

The hedonic model is utilized to evaluate the impact of LEED, as well as of other factors, on the rental values of 59 Grade A office buildings in Shanghai, including 23 LEED-certified buildings and 36 non-LEED-certified buildings.

Findings

It is found that rental values of buildings with LEED are about 12.8 per cent than those of buildings without the same certification. Other factors, for instance accessibility to facilities such as subway station and 4-star hotels, the availability of catering services in surrounding areas as well as the building’s location (i.e. inside the CBD) also are significantly positively correlated with office rents in the sample commercial buildings.

Originality/value

Besides being one of the earlier contributions to the literature with regard to the study of the impact of green certifications in China’s office market, the findings in this study also provide some empirical evidence for stakeholders, such as developers, investors, property managers and market practitioners, to evaluate the introduction of green features (and/or green certifications such as LEED) as an investment decision.

Details

Journal of Facilities Management, vol. 13 no. 3
Type: Research Article
ISSN: 1472-5967

Keywords

Article
Publication date: 20 November 2017

Farhan Rahman, Ian Rowlands and Olaf Weber

It is becoming increasingly clear that as the pressures of climate change increase around the world, all nations must strive to lower their carbon footprint through conservation…

Abstract

Purpose

It is becoming increasingly clear that as the pressures of climate change increase around the world, all nations must strive to lower their carbon footprint through conservation. If the growth trend of green building and infrastructure construction is to be continued and improved upon, then evidence must be collected as to the benefits they bring about, and the level of support they enjoy in the market. The purpose of this paper is to shed light on the economic performance of green buildings by evaluating whether LEED for Homes and BOMA-BEST properties capture higher market valuations and lower vacancy rates. These types of research questions have not been investigated to a great deal in the Canadian context. The primary analysis concerning municipal market valuation of green buildings was conducted using robust ordinary least squares and logistic regression models. Commercial vacancy rates were compared through the use of χ2 tests. Our analysis did not lead to conclusive evidence that there exists a “green” premium in the real estate market with respect to municipal market valuations. The authors argue that this may largely be due to municipal appraisal methods that currently do not incorporate sustainability factors. As such, they may not adequately reflect market tastes and trends. Furthermore, while the vacancy rates of green commercial buildings were, on the whole, lower than their non-green counterparts, the differences were not statistically significant. Given these results, the authors propose a set of research activities that the academic community should pursue.

Design/methodology/approach

Statistical techniques are utilized test whether green certification (LEED/BOMA-BEST) leads to higher municipal valuation for both commercial and residential green properties, using regression analysis. Furthermore, χ2 tests are conducted to evaluate whether certification leads to lower vacancy rates for commercial properties.

Findings

In terms of valuation, certification does not exert (on average) a positive role in terms of higher valuations for both commercial and residential properties. However, with respect to vacancy rates, there is a tendency towards lower vacancy rates for green properties, but the relationship is not statistically significant.

Research limitations/implications

The next set of research needs to gather greater amount of data with respect to how municipal evaluations are performed since the results are counter-intuitive. Greater tracking of the financial performance of green buildings should be conducted and made available for both public and private bodies. Particularly, rental and sale prices of green buildings need to be tracked in an organized manner.

Practical implications

The valuation techniques utilized by the municipal authorities need revision as green properties are being assessed without appropriate guidance from educational institutions. Furthermore, the limited amount of “green” valuation techniques in existence may not be applied.

Originality/value

This is the first Canadian-based research looking into the valuation of green certification using rigorous quantitative statistical techniques and original and publicly available data. Furthermore, it holds important lessons for municipal authorities with respect to green building valuation beyond Canada as the limitations of current practice go mostly likely beyond the North American context.

Details

Smart and Sustainable Built Environment, vol. 6 no. 4
Type: Research Article
ISSN: 2046-6099

Keywords

Article
Publication date: 29 April 2021

Kofi Agyekum, Samuel Fiifi Hammond and Burcu Salgin

This study examines occupants' satisfaction with the indoor environmental quality (IEQ) of a green-certified building [The Green Star South Africa (SA) Building] in Ghana.

Abstract

Purpose

This study examines occupants' satisfaction with the indoor environmental quality (IEQ) of a green-certified building [The Green Star South Africa (SA) Building] in Ghana.

Design/methodology/approach

Views of 300 respondents are solicited on 15 IEQ (obtained through a critical review of the literature and complemented with a pilot interview on the subject) parameters. Data obtained are analysed using both descriptive and inferential statistics.

Findings

Findings suggest that occupants are generally satisfied with five critical aspects of IEQ. The results also indicate that the occupants perceive five key IEQ parameters to have high levels of importance. Further inferential analysis of the parameters revealed that two core IEQs require the highest levels of improvement actions.

Research limitations/implications

The study was conducted in Ghana and analysed occupants' perceptions of working within one green-certified building. Again, the collection of the occupants' responses was not linked with the direct measurement of physical characteristics of the IEQ parameters of the building. Hence, the findings cannot be generalised.

Practical implications

Practically, the study contributes to providing all stakeholders involved in the Green Star SA Ghana certification system with the relevant feedback for their decision-making on current and future projects to be certified under this certification system.

Originality/value

This study provides valuable information on the performance of IEQ parameters of the building and points out potential IEQ areas that need improvement efforts, especially concerning current and future facilities certified under this certification system.

Details

Built Environment Project and Asset Management, vol. 11 no. 4
Type: Research Article
ISSN: 2044-124X

Keywords

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