Value Beyond Cost Savings - Green Building Finance Consortium

Value Beyond Cost Savings: How to Underwrite Sustainable PropertiesMoisture control: Moisture problems, due to problems in building envelope designpartiallyas a result of the sustainability goals of more outside air and daylighting—are asignificant cause of durability problems. This is particularly true for residential, but also anissue with some commercial properties.Thermal Stress: Heat can cause materials to expand and contract, affecting durability.Sunlight: Ultraviolet light degrades most materials.Ozone and Acid Rain: Ozone and Acid rain degrade materials.Insects: Insects, mostly termites, cause billions of dollars of damage annually.Material Failure: Materials wear out at different rates.Building Function: A building’s ability to adapt to changing needs is key to its durability.Functionality has been shown to be more important to durability than physical issues. 53Style: Similar to building function, buildings with “timeless” style tend to last longer andare better maintained.Natural Disasters: Durable buildings must meet the design requirements of theirlocalities—hurricanes, earthquakes, tornados, floods, and fires.F. Market Performance1. IntroductionThere is substantial evidence to support enhanced regulator, space user, and investordemand for sustainable properties. The significant demand for sustainable properties isevidenced by expert-based financial analyses, statistical based analysis, survey/marketresearch, and well-reasoned valuation theory.Market performance is the missing link that ties building performance information tofinancial performance. Historically, the green building industry has done a poor job ofarticulating the value of sustainable property investment because they have equatedbuilding performance (energy/water savings, health and productivity benefits, etc.) withfinancial performance, without taking the critical intermediary step of assessing of theresponse of the market to the building’s performance (see Exhibit IV-3 below). Full53 Athena Institute Study for Forintek Canada in 2004 examined 277 commercial and residential buildings demolishedbetween 2000 and 2003 in St. Paul Minnesota and found 31% were torn down due to physical condition and 57% due toredevelopment or buildings were not suited for intended use. 63% of the structural concrete buildings, 80% of the steelbuildings and only 14% of the wood frame buildings were less than 50 years old. (Minnesota Demolition Survey, PhaseII Report, Athena Institute, 2004) http://www.athenasmi.org/publications/index.html75