Economics of Efficiency

The real estate market traditionally has not accounted for the costs of operations and maintenance in valuations. As a result, builders have had no financial incentive to invest in even the simplest and cheapest means of reducing life-cycle costs. A good example of this is the way window frames are so often not properly sealed. A few dollars worth of sealing and a few minutes of prep prior to the installation of those windows could prevent hundreds, if not thousands of dollars worth of lost energy over the life of the window and add years if not decades to its life. This cheap and easy work often goes undone because builders on tight budgets and schedules have had no incentive to spend that marginal cost, despite its long-term value to the end user.

This old way of doing is business is changing as a new paradigm of valuation is emerging. Building owners and occupants are beginning to think about how much water and energy they will need, how often will they have to do repairs, and even how happy, healthy and productive they will be when considering what they are willing to pay to buy or lease space.

If you consider the long-term value of reduced water or energy demand, renewable energy production, reduced repairs and maintenance, and occupant health against the marginal increase in building costs, you can easily see the extraordinary economic opportunity in ‘going green.’

When considering the long-term value of energy savings you must also remember to take into account the rising cost of energy over time. There is a broad range of opinions about how much the price of energy will go up, but there is no question that it is going up. Unfortunately now water too is being treated more and more like a precious commodity which will likely lead to substantially higher water costs in the future as well.

A major emerging consideration of the value provided by ‘green’ buildings is the human impact. Science is now proving what people have always understood, that the more healthy and happy people are the more efficient and effective they will be. The marginal costs of building ‘green’ seem negligible when weighed against the long-term payback of increased productivity, decreased sick days and boosted morale.