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One of the world's largest residential construction trade events, the International Builders' Show (IBS) took place in Florida in February. With the sub-prime mortgage collapse, a housing slump and the near certainty of a U.S. recession, there may be a slightly more cautionary mood at this event than seen in prior years. But there's an exciting story taking centre stage in the building and construction (B&C) industry — the green build boom. Less than five years ago, the green building segment was a fringe one in B&C. Now it's arguably the fastest growing segment, and early-adopters are too busy filling orders to worry about sub-prime or recessionary woes.
100 per cent plus growth
Many green materials suppliers, builders, contractors, designers and architects are experiencing staggering growth. In 2006, non-residential green building of commercial, public and industrial structures, accounted for $13.4 billion in the U.S. In 2008, that figure will have grown by nearly 160 per cent to $21.2 billion, according to The U.S. Markets Construction Overview 2008, published by FMI Corporation. Since the total market for non-residential is $490.1 billion, the green building segment has only just begun to take market share from traditional construction suppliers.
In the residential sector, the growth trend is just as good. A June 2006 report published by McGraw-Hill Construction and the National Association of Home Builders found a 20 per cent increase in the number of green homebuilders compared to 2005, and an expected 30 per cent increase in 2006. By 2010, the value of the residential green building marketplace was expected to grow by 250-500 per cent, from $7.4 billion and two per cent of the market in 2005, to $19 billion-$38 billion and five to 10 per cent of residential construction activity. In Canada, residential green building structures totaled $9.8 million in 2005. According to Harvey Bernstein, vice-president of industry analytics and alliances for McGraw-Hill Construction, their report data "indicates builders will reach the tipping point by early (2007), where more builders will be producing green homes compared to those not."
It's hard to imagine these types of growth forecasts in any traditional industry sector.
A simple market gap analysis
Judging by the trade show traffic at the largest green building show in North America, green building suppliers are racing to keep up with the pace of growth. At the U.S. Green-Build 2007 show, where former U.S. President Bill Clinton was the keynote speaker, the attendance levels were almost scary for the event organizers. Since the event's inaugural conference in 2002, attendance has steadily risen from 4,000 early adopters to 13,000 in 2006 and close to 23,000 in 2007. In the mean time the number of exhibitors grew at the same rate, from 220 in 2003, 477 in 2006, to 850 in 2007.
The show featured long registration line-ups, standing-room only conference sessions, empty coffee urns and food shortages. But people couldn't be happier. Attendees from around the world, including architects, engineers, facilities managers, developers, contractors, builders, interior designers, product manufacturers, and government representatives were too energized and busy capitalizing on the opportunity to complain about line-ups.
For readers not in B&C, this is a textbook case study for finding the next green boom in other industries.
The three classic signals of emerging markets are: changes in industry standards, regulations or government policies; changes in customer demand; and changes in technology. Typically, the presence of just one of these causes the other two to follow. The debate for old-world industries is that when it comes to sustainability markets, which of these should come first before the industry starts investing in market solutions?
National Green Building Councils
One powerful market trigger for the green build boom is the proliferation of National Green Building Councils worldwide. The World Green Building Council (WorldGBC) is a business-led coalition. Founded in 1999 and with a recent relocation of its World Secretariat to Toronto, its mission is to transform the property industry towards sustainability through its national Green Building Councils. Its objective is to rapidly build an international coalition that represents the entire global property industry.
In less than 10 years, this coalition has exploded and they are halfway there. Current members are Australia, Brazil, Canada, United Arab Emirates, India, Japan, Mexico, New Zealand, Taiwan, United Kingdom and the United States. Collectively, these nations represent more than 50 per cent of global construction activity, and touch more than 8,000 companies and organizations worldwide. At press time, there were 16 other countries that were in various stages of setting up their own GBCs, including China and Germany.
Industry-led green certification
While other sectors are only slowly following government led standards and regulations, the green build boom is being perpetuated by its own industry members. In 1998, the U.S. Green Building Council developed the Leadership in Energy and Environmental Design program, commonly referred to as LEED.
LEED is an ever-evolving, industry-determined green building rating system with a set of standards for every phase of building design and construction. It was created to establish a common standard of measurement for rating green buildings, as well as to stimulate the market for and leadership in green building suppliers and building owners. If they had waited for government to lead the way, where would the green build boom be now?
LEED is not the only certification regime in this industry. In fact, there are dozens — some national, some global, some regional. These include: Green Globes USA, Canada and United Kingdom; Passivhaus in Germany, Austria, United Kingdom; Minergie, Switzerland; Effinergie, France; and House Energy Rating. LEED is distinct only in its rapid international expansion.
Green is the payback
The green build boom may have been industry driven, but buyers and users of green buildings and homes have taken over the reins and now suppliers are scrambling to keep up. The reasons are pretty straightforward — it's about economic payback, total cost of ownership, employee retention and productivity, and brand premium.
The accepted payback period for green buildings is now five years and dropping as economies of scale in materials costs, increased competition, and contractor experience with green building practices drive green building costs down. Some industry experts argue that green building premiums are in fact a myth, because costs have fallen while heating and cooling energy costs and building ownership costs have skyrocketed. In the mean time, private building owners such as Toyota, Bank of America, and Starbucks, pin their green building investments on public image and brand differentiation. Scores of green building buyers and tenants point to increased productivity due to healthy buildings, clean air and natural light. Employee attraction and retention is a commonly-cited benefit for companies dealing with talent shortages. Homeowners want lower energy bills, maintenance costs and re-sale premiums.
At Greenbuild 2007, President Clinton addressed the keynote audience with a powerful call to action. He challenged Americans to "prove to the world that solving the climate problem is the biggest opportunity for economic and social mobilization since World War II."
If you're in any way poised to capitalize on any sustainability market, it's time to get into position for the green boom in your industry.
Susan Sheehan is director of new business and sustainability at motum b2b, a Toronto-based marketing communications consultancy specializing in sustainability marketing.