Green Building ROI

In an effort to stimulate the U.S. economy and lessen our environmental impact, the government has offered various tax breaks to consumers on items ranging from geothermal wells and solar panels to energy-efficient furnaces and better insulation. Homebuyers are responding, as they look to tax breaks combined with energy savings to realize a return on their investment.

But how is the shift toward green building affecting builders, who need to dedicate time and money to train their staffs on green building practices? Efficiency may suffer in the short run as they become familiar with new methods and new ways of working. Nonetheless, green builders say they are confident that they, too, will see a positive ROI.

“There’s been a tremendous learning curve for us, but we see it as a long-term play because [green building] is the future,” says Keith Dinehart, vice president of Goldberg General Contracting in Chicago. The company built the Yannell House, a record-setting LEED Platinum-certified home in Chicago, as well as a LEED Gold-certified restaurant, XOCO, for celebrity chef Rick Bayless.

“Short-term, these are costly jobs with a lot of down time, a lot of learning, a lot of sitting down with people from various trades and explaining what we need. But it’s been well worth the costs of materials and hours because it puts us in a position of leadership and separates us from our competition,” Dinehart adds.

What’s more, because of Goldberg’s growing experience with green technologies such as geothermal wells and solar hydronic systems, the company can provide better cost estimates—something that can help its bids stand out.

“You see these projects that we’ve done and you know we have the ability and experience to deliver a high level of execution,” Dinehart says. “That’s afforded us more chances to bid on jobs, and when we do, we can assemble a bid that’s incredibly accurate.”

Environmental and economical
Goldberg specializes in high-end, custom jobs, but other builders have a similar outlook. In Daytona Beach, Fla., ICI Homes uses its own “E-Factor” brand to market its green properties, with “E” representing concepts like energy efficiency and environment-friendly design.

“We've sold some homes because of E-Factor, but we've also cut our margins to do it right now, we're not seeing those features appraised into the homes’ values, so we're absorbing the extra costs,” says Arlan Bartling, director of purchasing for ICI Homes. “But we're sticking with the philosophy because we still feel it will build long-term profitability for the company. As energy costs increase, the savings and efficiency of owning one of these homes will become greater and gain the value that's not currently in the marketplace.”
 
Learning to construct green buildings isn’t a simple endeavor—it requires a substantial investment of time and money, and involves risk because of the learning curve. But considering that consumers are increasingly intent on buying green—a trend that’s unlikely to change—builders may not have much choice other than to learn and adapt. In that case, their return on investment is simple: the costs of greening their operation is the price of staying in business by catering to the demands of the marketplace. After all, the customer is always right.