By Suzan Erem
In the Spring of 2007, two of the world’s largest financial institutions announced multibillion-dollar commitments to finance environmentally-friendly ventures, a move that could trigger a wave of work for savvy contractors and leave others in the dust.
On March 6, Bank of America announced it will allocate $20 billion toward green companies, construction and ventures and just two months later, CitiGroup trumped it with a whopping $50 billion 10-year gamble on green, including a promise to address its own ecological footprint at 15,000 properties worldwide. Some of CitiGroup’s companies include Citi Cards, CitiFinancial, Primerica and Diners Club. CitiBank FSB alone has more than 50 locations in Northern Illinois.
Are the billions being spent to influence policy and make customers feel better about the future creating just another fad or is a real market available for innovative plumbing, mechanical and other construction contractors?
A recent PAMCANI-sponsored Green Building Seminar panel discussion in Oak Brook in May took a shot at answering this question, but generated many more. While Northern Illinois is poised to enjoy the fruits of latest trend, (some PAMCANI members have already earned profits from green projects) skepticism abounds among a number of contractors and inspectors.
The night’s discussion included presentations on two green projects, Loyola University’s Information Commons and the Elgin Academy, plus an overview of the environmental situation and emerging plumbing technology. But much of the evening focused on the attraction and challenges of LEED certification. LEED, or Leadership in Energy and Environmental Design, is the newest measure of successful sustainable construction. Launched by the U.S. Green Building Council, an umbrella group of 9,000 construction-related organizations, LEED is a strenuous but voluntary standard for sustainable or “green” construction. The USGBC has so successfully marketed LEED that lenders, building owners, architects and developers now actively tout the conservation gains of their LEED-certified projects the same way they used to tout the excesses of their largest, flashiest building project. In fact, size, cost and LEED certification seem to be the magic combination to win the hearts and minds of the public these days.
What’s driving the need for LEED?
Jim Allen, board member of Plumbing Contractors of America and the Water Conservation
Manager of Sloan Valve Co. presented the harsh reality to about 100 plumbing
inspectors and contractors at the PAMCANI event. - 70 percent of Earth’s surface
is covered in water
- 3 percent of the water on Earth is fresh water but only
1 percent is available for human consumption.
- While the population of the U.S. has nearly doubled since 1950, water usage has nearly tripled in that time.
- The cost of water and sewer is expected to rise 2 percent faster than inflation
in the coming years.
These numbers are so alarming that some of the most powerful people in the world are buying into the idea that conservation is the future. In 2004, Bank of America announced construction of its new $1 billion headquarters in New York City. The building would be New York’s second tallest and the first to attempt to attain LEED Platinum, the highest standard. For an estimated 5 percent premium, Bank of America and partner The Durst Family would build a skyscraper complete with its own co-generation plant, green roof with rainwater recapture, gray water recycling system and more all stretching an impressive 945 feet into the sky. Hyped by the company as “the world's most environmentally responsible high-rise office building” the project is supposed to save $3 million annually on energy costs.
Still, with a $1 billion price tag, it could take a long time to earn back that green premium. But energy costs aren’t the only factor. They aren’t even the most important.
Green grows up
Green construction has grown into adolescence since its early days of straw bales and skylights. Its endurance has allowed researchers to measure air, water quality, sunlight and other environmental factors. When businesses wanted to know the bottom line, researchers measured the affect on employee productivity as well. What they found? Fewer allergy-related illnesses. Fewer sick days. Higher productivity.
“A mere 1 reduction in illness-related absenteeism among the bank's anticipated staff of some 5,000 could deliver a $10 million annual boost in productivity,” reported a March 19, 2007 Business Week story.
While a healthier building makes green projects more attractive to employers, developers are seeing advantages as well. As green construction matures, the cost of materials goes down. As energy costs go up, green buildings become more attractive to tenants.
The same Business Week article cites a 2006 survey of developers by the magazine’s parent company, McGraw-Hill Construction. Developers expected to see occupancy rates for green buildings 3.5 percent higher than market norms, and rent levels increased by 3 percent, while operating costs were expected to be 8 to 9 percent lower. These developers also anticipated that green building values will rise by 7.5 percent per year. The study estimated that today’s 2 percent per year of new nonresidential green construction would jump to 10 percent per year, worth $20 billion, by 2010.
Greening Northern Illinois
Chicago jumped on the green band wagon in the 1990s and since then has seen some major green construction including the Center on Halsted and the current Loyola University Information Commons. Rush University Medical Center expects to apply for LEED certification for part of its $810 million campus construction project.
But as some costs go down, design and engineering costs expand with every innovation.
“Candidly, we knew there was going to be an incremental cost in committing to Silver LEED,” Loyola Vice President Wayne Magdziarz admitted at the PAMCANI event. “But we didn’t think it would be to this magnitude.” Magdziarz estimated a premium of 25 to 30 percent for the green aspects of the $25 million construction.
Then there was the unanticipated protest by some students who feared losing valuable green space and their lakefront view. Magdziarz said he was eventually able to convince them of the merits of the project.
Project architect Devon Patterson of Solomon Cordwell Buenze said the challenges were worth it. “It took a lot of educating of the city and educating Loyola,” he said. “It’s been a painful process, but I think it’ll be one of the premier buildings in the city of Chicago.” On the plus side, the energy savings are higher for the project than originally anticipated, Magdziarz said.
“We expected a 36, 37 percent energy savings,” he told the group. “That number has grown to closer to 49 and 50 percent, so we’re looking at a payback period of about 15 to17 years on our initial investment. [That’s] is a blink of an eye in the life of a university environment,” he said. “That’s really what put us over the edge to commit to a sustainability effort.”
PAMCANI members also heard from John Cooper, PhD, the president of Elgin Academy, a private school in the midst of a green building project, who confirmed that a long-term pay back isn’t unusual for an educational institution. “Ours is going to come in at about 6 to 8 percent,” he explained of Elgin’s premium for going green. “When you’re a school and you expect to be around forever…to use that building for 100, 200 years, then the payback ratios change for you.”
Despite the full-color, high tech presentations and persuasive testimony from building owners and architects, questions from the audience exposed layers of skepticism. One contractor asked Ted Buecker, the state’s Chief Plumbing Inspector, how the industry could hope to stay ahead of the curve when it takes the state two years to make a code change. Buecker said that new technology can go through a much faster approval process and that the state has progressed on some code changes, such as those for recapturing rainwater. He also said permits for experimental projects are available, but the liability falls on the contractor if those projects aren’t successful.
A number of contractors and inspectors commented on Allen’s presentation about new technology, most notably waterless urinals, dual flush toilets and the technology used to run complex energy systems in large buildings. The critical need for skilled and properly trained journeymen to oversee green-oriented products to ensure proper operation was brought up again and again.
“All those energy savings go right down the drain if those systems are not maintained by a licensed professional,” remarked plumbing contractor and PAMCANI member Bob Abbott (Abbott Industries, Bensenville, IL)
Maintenance was a concern of another experienced contractor as well.
“Untrained maintenance guys may just turn the computer off and you’re not saving anything,” emphasized plumbing and mechanical contractor and PAMCANI board member Paul Buddy (Paul F. Buddy Plumbing and Heating and Cannonball Mechanical)
A word from the wealthy
If the future is a warm and fuzzy green, there’s a good chance a 25 percent premium on a multi-million-dollar building won’t cut it. But Kenneth D. Lewis, CEO and president of Bank of America, was talking cold hard cash when he explained to the Boston Chief Executives’ Club in 2004 why the company was going green.
“My point is that the green building trend is rapidly becoming ubiquitous. From low-income housing to the tallest office towers, bankers, developers, planners and elected officials are working together more and more often to move our urban developments to the cutting edge of environmentally-sensitive design and construction.
“Not because it’s nice.
“And not just because it’s the right thing to do -- although it is.
“We’re forming these partnerships and helping to lead this movement because we are convinced that more efficient and cleaner use of our natural resources will result in healthier people, lower energy costs, lower maintenance costs, greater long-term investment value, and a stronger overall economy in our communities.
“All of which brings me back to my first point: building strong economies is what banks are all about.”
In other words, there’s gold in them thar hills. And at least for now, that gold is green.
Suzan Erem is a professional freelance writer for nonprofit organizations and labor unions, and researched and wrote this article at PAMCANI’s request. She can be reached at (814) 466-2263.
For more on LEED go to www.usgbc.org |
