New Green Building in SA report challenges the notion of the ‘green cost premium’

by Ofentse Sefolo
New Green Building in SA report challenges the notion of the ‘green cost premium’

The 2019 edition of Green Building in South Africa: Guide to Costs & Trends was recently launched by the Green Building Council of South Africa (GBCSA), the Association of South African Quantity Surveyors (ASAQS) and the University of Pretoria’s (UP) Faculty of Engineering, Built Environment and Information Technology. The document provides interesting trends and valuable insights on the influence of green design and construction on both capital and operational costs, and it is the second publication, following the first edition that was issued three years ago.

A perception that green building attracts a significant cost premium when compared to conventional construction emerged in the industry some time ago. To address this concern, The Cost of Green Building Study Committee was established in 2014. The 2019 edition includes the Committee’s convincing results regarding the business case for green building.

“The green cost premium appears to be progressively diminishing over time, largely because of growing maturity in the industry,” says Danie Hoffman, Senior Lecturer at the University of Pretoria’s Department of Construction Economics and lead researcher on the project.

In 2016, the first report found a strong negative correlation between green cost premium and construction size, and the new report confirmed this finding. The larger projects managed to achieve a Green Star certification at a much lower average green cost premium when compared to smaller projects. The data however also confirmed that the cost premium for buildings smaller than 5 000m² has reduced significantly from 9.3% (2009/14 data) to 4.6% (2015/18 data).

“Office buildings that were developed for single corporate tenants initially attracted much higher green cost premiums compared to buildings developed for a multi-tenant mix. Since 2015, this gap has closed. The business case for a comprehensive investment decision should include both the cost premium of constructing the building and the financial performance of the building in operation,” says Danie.

MSCI data confirmed that Green Star certified prime and A-grade offices produced a total return of 11.6% in 2017 versus 8.0% for non-green certified prime and A-grade offices. Better work environments and a lower impact on the environment have led many developers to achieve a significant return on their green building investments. “We hope the report will help guide future real estate decision making towards more sustainable, future-ready buildings in South Africa,” concludes Danie.

For more information, contact the ASAQS on +27 (11) 315 4140 or via www.asaqs.co.za.

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