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(Last updated: 21 Mar 2011)
Trends and opportunities
The market
In today’s US$4.7 trillion global construction marketplace, green building represents a tremendous market opportunity for Australian companies. According to research by McGraw-Hill the green sector represents a growing share of this activity, with a majority (63 per cent) of industry professionals estimating that the green sector currently makes up at least five per cent of domestic output in their country.
In the US, green building is a focus within land use development, construction and retro-fitting with an emphasis on increasing energy efficiencies and cleaner energy production and use within a real estate development, its community and its infrastructure utilities in residential, commercial and government projects.
The green building sector in the US has expanded rapidly due to a number of factors such as:
- Growing public awareness of green practices
- Heavy increases in government intervention, regulations and subsidies (eg. the stimulus package) at federal, state and local level
- Recognition by building owners and tenants of the bottom line advantages, mainly cost benefits, to reduce energy costs and improved health and well-being of occupants
In 2005, green building was a small, burgeoning market, approximately two per cent of both non-residential (commercial and institutional) and residential construction, valued at a total of US$10 billion – for non-residential, US$3 billion and for residential, US$7 billion.
In 2009, 80 per cent of corporate America was expected to be engaged in green at least 16 per cent of the time and 20 per cent expected to engage in green six per cent of the time. In fact, green building has grown in spite of the market downturn in the USA. This seems to be one area of construction insulated by the current downturn.
The green building market can be categorised into two key sectors, non-residential and residential. Both sectors are predicted to experience considerable growth over the next five years. The non-residential sector provides the most immediate opportunity with considerable funds from the federal government’s stimulus package being directed into this area.
Non-residential
According to McGraw-Hill commercial and institutional green building market is expected to continue in growth. By 2013, McGraw-Hill projects that the commercial and institutional green building market will be 20 per cent to 25 per cent of new construction starts by value. This would equate to US$56–US$70 billion.
The industry sectors with the highest penetration of green building are education (eg. schools and dormitories), office and healthcare (eg. hospitals). This bodes well for green growth since these sectors represent the highest share of non-residential construction overall:
- Education – expected market value between US$8–US$11 billion
- Office – expected market value of US$7-US$9 billion
- Healthcare – expected market value of US$3-US$4 billion
Residential
The green home marketplace is growing according to both builders and home buyers. In the context of the down economy, green homes offer an opportunity for market differentiation for builders as well as cost savings and health benefits for homeowners. McGraw-Hill’s residential green building research demonstrates that the green home market is expanding despite the downward trends of the market as a whole.
The market opportunity for green homes is growing. In 2005, information pointed to a green residential market size of two per cent of starts, valued at US$7 billion in that residential market. Despite the downturn, indicators point to an increased share of new homes containing green features over the past three years.
With a stronger construction market expected over the next five years, green building is expected to see healthy growth. Specifically, analysts expect it to double over the next five years, to be worth 12 per cent to 20 per cent of all residential construction starts by value, or US$40 billion to US$70 billion.
Retrofit of existing buildings (highest market potential)
While the opportunity for green building has grown significantly in the US, the market share of retrofit, alteration and renovation market activity accounts for approximately 5-9 per cent of total activity, which is in the region of US$2-US$4 billion. This figure is expected to increase to 20-30 per cent by 2014.
According to McGraw-Hill the built environment in the US comprises approximately 76.9 billion square feet including 4.4 million non-residential buildings.
In 2009 the value of the total retrofit and alteration market is in the region of US$41 billion (projects over US$1 million) and is expected to grow to US$50 billion by 2014. Once again the sectors with the largest retrofit opportunity are education and office which account for 50 per cent of total retrofit activity.
Recent legislation has also focused on increasing energy efficiency in existing buildings. Eighty-six per cent of commercial building owners expect the green retro fit market to grow, with half expecting an increase of 20 per cent or more over the next three years.
Most building owners of existing buildings focus on the following improvements in major projects that fall within the retrofit market:
- All owners installed energy efficient saving lighting or re-design exiting space to reflect the use of more natural lighting
- 92 per cent of owners installed energy efficient mechanical and electrical systems
- 71 per cent installed water efficient plumbing, which also supports the finding that 85 per cent of the industry ranks water use reduction as an important green building practice
- 79 per cent engaged in activity that improved occupancy comfort (better indoor environmental quality due to improvements in commercial interiors and better use of natural light)
(Source: McGraw-Hill)
US Government federal stimulus and efforts to promote green building:
- The almost US$800 billion American Recovery and Reinvestment Act (ARRA) (17 February 2009), signed by President Obama, includes large money amounts for green building and energy efficiency in government buildings.
- The General Services Administration (GSA) will receive US$5.55 billion in funds, with an emphasis on green building. The breakdown is as follows: US$750 million going to federal buildings like courthouses, $300 million for border stations, and US$4.5 billion for modernising GSA facilities to meet the proposed green standards. The bill is also forming an Office of Federal High-Performance Green Buildings, a council that will be a collaboration between the GSA and the Department of Energy, to help facilitate the logistical and administrative work of greening government buildings.
- The Department of Defense (DOD) will also receive a hefty stimulus for energy-efficient improvements. ARRA will give the DOD US$4.2 billion for projects involving maintenance, repair, and energy-efficiency improvements. New projects will also be built with US$2.33 billion established for housing, hospitals and several ‘quality-of-life’ projects.
- The Department of Veterans Affairs will also get US$1 billion in stimulus funds for maintenance and energy projects.
- In other federal building projects, the Department of Housing and Urban Development (HUD) will get US$7 billion from ARRA. Out of that money, at least US$2 billion will be allocated for redevelopment of abandoned and foreclosed homes, and another US$1 billion will be for community development block grants. HUD has also devoted US$250 million for energy retrofits at HUD-assisted housing projects.
- In July 2009, President Obama detailed stricter new lighting standards and promised the release of US$346 million in Recovery Act funds to boost energy efficiency in new and existing commercial buildings and homes. The Department of Energy (DOE) released a sum of US$346 million in stimulus funds that will go toward development and deployment of more energy smart buildings – and the technology and equipment to support them.
- In the US, commercial buildings and homes account for about 40 per cent of the energy consumption – more than any other economic sector – and for a similar percentage of CO2 emissions in the country. Existing structures present a ripe target for energy efficiency efforts and retrofits, the DOE noted, with three-quarters of the 81 million buildings in stock having been constructed before 1979. The president's move soon after the House passed the climate bill, kept efforts to reduce US energy consumption in the headlines.
Global development agencies/foundations support for green building
The International Aid Development sector is also actively promoting clean energy including green building initiatives and programs, eg. The Clinton Foundation (which has signed MOUs with the Victorian Government), United Nations, the World Bank and private US foundations involved in philanthropy.
Opportunities
The highest growth opportunity is in existing buildings (EB) with a US ratio of 85:1, that is, 85 existing buildings for every new construction building project.
Austrade believes that the combination of large projects, similarity of climatic conditions in the southwest and coastal regions, and openness to Australian technologies, creates substantial opportunities for Australian suppliers of green products or services. Austrade sees a vast array of opportunities for companies in the green space.
Services:
- In engineering and design, specialised green building consultancy
- Interior decorators
- Energy, air-conditioning and water efficiency equipment
- Building monitoring and management systems
- Facility/building management
Products that help score points under the various green building rating schemes and re-engineered devices and systems to accommodate integration include:
- lighting
- solar units
- water units
- furnishing
- building materials, ie. flooring, ceilings, to improve indoor environment quality
The Recovery Act money for energy efficient structures will be allotted in five major areas:
- Advanced building systems research, US$100 million: Funding focuses on the development and design of integrated systems to control and manage the technology and equipment that enable structures to be more energy efficient. The goal is to accelerate progress toward zero-net energy buildings.
- Commercial buildings initiative, US$53.5 million: Funds are to be used for expanding and speeding formation of partnerships among major companies and organisations with large building portfolios to make that property deliver ‘exemplary energy performance.’ The DOE wants to increase the number of partnerships, now at 23, to about 75. Competitive applications for the partnerships will open in September.
- Buildings and appliance market transformation, US$72.5 million: Funding will be aimed at spurring the development of more energy efficient products through an expansion of Energy Star; preparing and educating various industries on how to implement commercial building codes that call for a 30 per cent improvement in energy efficiency; and adapting the DOE Appliance Standards program to better address innovative technology.
- Solid state lighting research and development, US$50 million: The DOE's Energy Efficiency and Renewable Energy department calls solid-state lighting ‘a pivotal emerging technology that promises to fundamentally alter lighting in the future.’ The R&D funds in this area will be channelled toward work that will bring high-performance lighting technology and products to market more quickly.
- Residential buildings development and deployment, US$70 million: The money is to be devoted to projects that will provide technical training and assistance to residential builders and the workforce handling improvement and retrofitting of existing homes for energy efficiency, as well as the construction of new, energy-saving homes. Eligible projects include those run by municipalities, states and utilities.
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