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Study Shows Growth in Green Building Among Retail and Hospitality Sectors

Forecasts & Statistics, Green Building

McGraw Hill Construction and Waste Management report predicts double-digit increase in green construction.

CDR Staff September 23, 2013
Owners of retail and hotel establishments are reporting growing levels of green building activity planned over the next two years, according to a new report released by McGraw Hill Construction, New York, in partnership with Waste Management (WM), Houston, entitled “Green Retail and Hospitality SmartMarket Report: Capitalizing on the Growth in Green Building Investments.” The report is based on a study of 79 retail, 30 hotel and 22 restaurant owners conducted in 2013 by McGraw Hill Construction.

The study defined a green building project as one built to LEED (Leadership in Energy and Environmental Design) or another recognized green building standard, or one that is energy-efficient, water-efficient, and improves indoor air quality and/or engages in material resource conservation. Notably, by this definition, the percentage of retail owners that have taken a green approach in more than half of their building projects rose from 18 percent in 2011 to 38 percent this year, and is expected to rise to 52 percent by 2015. Hotel owners show an even greater investment in green building—the percentage of those owners that have taken a green approach in more than half of their building projects rose from 28 percent in 2011 to 48 percent in 2013, and is projected to rise to 64 percent by 2015.

According to the study, owners also are committing to green operations and maintenance (O&M) practices, with nearly two-thirds (65 percent) of retail owners reporting high green O&M activity, and an even stronger 73 percent of hotel owners reporting the same. 

Owners note strong business benefits from green building investments and green O&M practices, helping to drive this growth. Most notably, they report the following when comparing the performance of their green buildings to traditional buildings: 
 
  • Annual operating cost reductions: Reported by 66 percent of retail owners (at an average reduction of 8 percent) and by 51 percent of hotel owners (at an average reduction of 1 percent);
  • Energy use reductions: Reported by 58 percent of retail owners and 67 percent of hotel owners at an average reduction of 15 percent for both;
  • Asset value increases: Reported by 61 percent of retail owners (at an average increase of 7 percent) and by 71 percent of hotel owners (at an average reduction of 11 percent); and
  • ROI (return on investment) increases: Reported by 67 percent of retail owners (at an average increase of 8 percent) and by 85 percent of hotel owners (at an average reduction of 14 percent).
“Green building has taken such hold in the industry that even sectors with unique challenges, such as retail and hospitality, are making stronger investments,” says Harvey Bernstein, vice president, Industry Insights and Alliances for McGraw Hill Construction. “Clearly the benefits that owners are reporting are key reasons for their green building investments, and as they find better ways to measure those impacts and quantify the value to their sales velocity and to the well-being of their staff, customers and guests, we expect even more rapid engagement in green.”

There are many factors driving these owners toward adoption of green building investments and practices. While operating cost reductions are the most highly reported reason for going green (by 66 percent of retail owners and 73 percent of hotel owners), there are several other factors considered highly important in their decision-making process: 
 
  • Utility rebates: according to 63 percent of retail and 70 percent of hotel owners;
  • Protecting/enhancing brand: according to 51 percent of retail and 73 percent of hotel owners (for hotel owners, this is as important as operating cost decreases); and
  • Improving ROI: according to 52 percent of retail and 67 percent of hotel owners.
However, business factors alone do not account for the increasing commitment to green building. Forty four percent of retail owners and 50 percent of hotel owners find that human impact benefits have also been an important factor in encouraging their decision to invest in green building projects. Seventy percent of retail owners see meeting government regulations and standards as a key factor in their decision to do green projects in the future, and 70 percent of hotel owners consider water use reduction an important factor in that decision. In addition, more than half in both sectors report that improved environmental health and well-being has a strong impact on their decision to make future green investments.

Key factors posing challenges to increases in green building investments include higher initial implementation costs for green practices (47 percent retail, 43 percent hotel); budgeting challenges (37 percent retail, 40 percent hotel); and getting corporate leadership buy-in (30 percent retail, 50 percent hotel). However, it is notable that no challenge was reported as having a high impact by more than half the respondents.

While energy efficiency is a key factor behind engagement in green building investments and practices, other aspects of green building also hold weight. For retail owners, 62 percent report recycling and waste management of critical importance and 63 percent of hotel owners report the same. These owners are also placing green building requirements on their contractors and suppliers—77 percent of retail owners and 73 percent of hotel owners say they require green waste handling practices from their contractors, and nearly the same percentages report requiring recycling and composting from their O&M contractors.

“These findings suggest that consumers feel better when they purchase a product from a company they know is contributing to a better planet,” says Jane Sumner, vice president, Waste Management’s Food & Retail and Construction segments. “Waste Management has been transforming its business to tap into this growing market and we are helping owners in the retail and hospitality space to do the same.”

The report also includes opinions from the construction community. In fact, contractors are reporting increased requests from their customers for green projects, reinforcing the findings reported by the owners.

To download the full “Green Retail and Hospitality SmartMarket Report: Capitalizing on the Growth in Green Building Investments,” visit http://analyticsstore.construction.com/index.php/retailsmr13.html?sourcekey=SMRPRES

 

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