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Is there a Cost Premium for Green Buildings, Qatar Perspective?
- 1. © 2016 - Qatar Green Building Council, All rights reserved 13th November 2016 IS THERE A COST PREMIUM FOR GREEN BUILDINGS?
- 2. B.E., MBA, CEng. FIEI, CEnv. MIEMA, GSAS CGP, LEED AP(BD&C), PQP Principal Sustainability Consultant dmckenna@hilsonmoran.com Hilson Moran Qatar LLC, PO 12929, Doha Qatar D a v i d M c K e n n a e n v i r o n m e n t s f o r l i f e
- 3. • Analyse costs and benefits of Green Building (GB) rating systems in Qatar context • Advise how to minimise the GB cost premium while maximising benefits • Highlight how to avoid potential pitfalls and other factors leading to above normal costs • Analyse case studies in sustainable development from Qatar • Make recommendations for how GB rating schemes to guide future developments
- 4. Qatar’s Green Building Policies (2006-2016) • Qatar National Vision 2030, issued 2008: Qatar National Development Strategy Qatar National Masterplan • QGBC formed by decree in 2009 • GORD established GSAS rating systems in 2009 • Building Permit System • Qatar Construction Specifications
- 5. Qatar’s Green Building Policies (2016-2026) Sustainable Design & Construction QCS GSAS/ LEED Building Permit System • Coming soon - Qatar National Development Strategy, 2017-2021
- 6. Green Buildings in Qatar to date LEED® by USGBC BD&C Building Design & Construction ID&C Interior Design & Construction EB:O&M Existing Buildings: Operations & Maintenance ND Neighborhood Development Homes New Construction Commercial Interiors Existing Buildings: Operations & Maintenance Neighborhood Development Plan Homes Core & Shell Retail Schools Neighborhood Development Plan Mid-Rise Schools Hospitality Retail Retail Hospitality Hospitality Data Centers Data Centers Warehouses & Distribution Centers Warehouses & Distribution Centers Healthcare LEEDv4 Rating Schemes • Leadership in Energy & Environmental Design (LEED) • Adopted mainly in Qatar Foundation affiliated projects: • By 2012 Qatar was fifth in terms of registered projects outside the US • Slow uptake in LEEDv4 registrations
- 7. Green Buildings in Qatar to date GSAS® by GORD Construction Management Standard Building Typologies (BT) Districts & Infrastructure (D&I) Healthcare Railways Sports Construction Management (CM) Commercial Neighbourhood Healthcare Railways Sports Construction Management Single Residential Sports Group Residential Healthcare Education Industrial Mosques Entertainment Hotels Education Light Industry Transportation Workers Accommodation Parks GSAS Rating Schemes Design & Build • Global Sustainability Assessment System • Mandatory for public sector and certain mega development projects • Endorsed by the Qatar Construction Specifications • QCS2014 falls short of requiring actual GSAS certification
- 8. International studies on Green Building Cost Premiums World GBC found GB Cost Premiums tend to decrease over time 2013, World GBC Report, “The business case for Green Buildings”
- 9. Factors leading to reductions in GB Cost Premiums • Stricter codes • Streamlined processes • Better platforms for IDP • Acceptance of modelling software • Availability of experienced staff • Better planning • Proliferation of eco-labelled products.
- 10. Analysis of GB Cost Premiums and Benefits: LEED & GSAS Case Studies Included QAR GSASgate Registration (2yrs) a 2,000 Precertification Review Split Review : Design (5,000plus QR5per sq.m) a 105,000 Split Review : Construction PI CDA (15,000per visit) a 60,000 Appeals 167,000 GSAS Commercial Building (20,000m2) Totals Assuming a 20,000m2GFA Office Building US $ Included QAR Registration 1200 a 4404 Precertification Review (LEEDCS only, optional) 4250 Split Review : Design ($0.045per sq.ft) 9688 a 35553 Split Review : Construction ($0.015per sq.ft) 3229 a 11851 Appeals 800 CIRs 220 51,808 LEEDCommercial Building (20,000m2) Assuming: 1m2=10.76391sq.ft, 1US$=3.67QAR Assuming: a 20,000m2GFA Office Building Totals GB Certifying Authority Fees: • Access to online resources • Reviews by GB certifying authority • Fixed costs plus variable rates based on gross floor area
- 11. Analysis of GB Cost Premiums and Benefit: Soft Costs • Sustainability Consultant Fees • GB Additional Studies & Simulations • Independent Commissioning Authority:
- 12. Analysis of GB Cost Premiums and Benefits: Hard Costs • Additional Equipment & Systems
- 13. Analysis of GB Cost Premiums and Benefits: Hard Costs • Green materials and efforts by Contractor
- 14. GB Cost Premiums for various levels of certification (case study example) • Low-levels of certification may incur GB cost premiums from 0 to 2% • Mid-levels of certification may incur GB cost premiums 0 to 4%
- 15. GB Cost Premiums for Certification Levels (case study example) • High-levels of certification may incur GB cost premiums >5%
- 16. Factors leading to higher levels of GB Cost Premiums • One size fits all approach • Weakly enforced GB codes & permit systems • Inexperienced & difficult team members • Failure to schedule for sustainability review • Lack of coordination
- 17. Recommendations – Legislating for GBs and commonality of approach to Energy • Close gaps in current legislation • Enforce code compliance • Commonality of approach on energy modelling • Align with international standards to calibrate and refine results
- 18. Recommendations - Lowering costs and building acceptance of GB rating systems • Regional GB systems must keep fees in line with international rating systems • Programme-wide approach to achieve economies of scale • Avoid frequent changes to GB rating systems • Involve industry for piloting new versions • Fix sunset dates for future retirement of older versions.
- 19. Recommendations - Differentiating and harnessing value from certification levels • Strive to deliver a return on investment from GB Cost Premiums: Higher rental/lease rates Lower operating costs Higher occupancy rates • Remove any market barriers to ‘Brown Discounts’ for non-certified • Promote the integrity, transparency and perception of GB rating systems
- 20. Concluding notes – Qatar’s emerging case studies in urban planning • Case A: LEED Certified: Qatar Foundation’s Education City Msheireb Properties’ Downtown Doha • Case B: GSAS Certified: Lusail City New Port Project Manateq economic zones Aspire • Case C: Non-certified: West Bay Pearl 2016 2022 2026 2030 2036
- 21. Concluding notes – Steering Qatar towards sustainable development • Will areas where sustainability has been adopted from master plan level to building level will command green premiums? • Will other areas suffer from lower occupancy and a downward spiral of decline in value and rents? • What will be the average ROI achieved for GB Cost Premiums? 2016 2022 2026 2030 2036
- 22. Concluding notes: Steering Qatar towards sustainable development • “Qatar deserves the best” motto must also apply to future waves of building construction • QNV2030 issued in 2008 but further tiers of National Masterplanning documents must be issued • Authorities must close gaps in codes & regulations to steer the market toward sustainable development 2016 2022 2026 2030 2036
- 23. Concluding notes: Steering Qatar towards sustainable development • Numerous examples exist of cities that transformed in successful destinations through deliberate urban planning: London Frankfurt Chicago Singapore • For similar success Qatar must be planning led • Strengthen urban planning authorities and harness the efforts by developers and other interested parties 2016 2022 2026 2030 2036
- 24. Paradigm shift towards a virtuous circle of sustainable development
- 25. Key messages from GB Cost Premium Analysis (case studies) • Initial GB cost premium from the outset are offset by long term benefits for owners and occupants • Unsustainable construction fast-tracks asset-value depreciation and obsolescence of buildings • GBs need to focus on user satisfaction, comfort and wellbeing, as well as energy and water efficiency • GBs need to go beyond environmental & economic considerations and embrace social sustainability Source: McGraw Hill Green, Smart Market Report 2013, www.construction.com Decreaseinoperating costs. Increaseinbuildingvalue ImprovementinROI0 Increaseinoccupancy Rentincrease
- 26. Hilson Moran: Our Offices Our Middle East office locations from which we operate across the GCC are: Q a t a r a n d U A E Our UK office locations, from which we operate across Europe are: L o n d o n , M a n c h e s t e r , C a m b r i d g e a n d F a r n b o r o u g h www.hilsonmoran.com e n v i r o n m e n t s f o r l i f e
Editor's Notes
- Qatar National Vision 2030, issued 2008: Qatar National Development Strategy Qatar National Masterplan Qatar National Development Strategy, 2011-2016: Issued in an era of high oil prices now over Qatar Green Building Council formed by decree in 2009, under patronage of Qatar Foundation (QF) GORD established GSAS rating systems in 2009, GSAS adopted for public sector buildings Building Permit System and Qatar Construction Specifications lead to ad-hoc adoption of GSAS for approvals
- First infrastructure wave, now ready for second wave for construction of the buildings: Qatar’s commitment to the QNV2030 ideals will be tested Major projects must leave sustainable legacies Costs for GB certification must lead to real benefits Qatar National Development Strategy, 2017-2021: Prepared for an era of low oil prices Prepared for aligned Urban Planning and Environment Ministries (i.e. MME)
- Leadership in Energy & Environmental Design (LEED) Adopted mainly in Qatar Foundation affiliated projects: Education City (QSTP, HBKU, QNCC, etc.) Msheireb Properties By 2012 Qatar was fifth in terms of registered projects outside the US: Slow uptake in LEEDv4 registrations although cut-off for LEEDv3 only just expired
- Global Sustainability Assessment System No data published on registered or certified projects Mandatory for public sector and certain mega development projects (Lusail, NPP, Economic Zones…) Only GB rating system endorsed by the Qatar Construction Specifications (QCS2014, Sect. 7) QCS2014 requires public buildings and commercial buildings >10,000m2 to comply with certain GSAS criteria But falls short of requiring GSAS certification
- 2013 World GBC Report: “The business case for Green Buildings” showed: “design & construction costs for building green does not necessarily need to cost more” 2012 results found majority of GB cost premiums between 0 to 4%; compared to conventional code compliant buildings 2012 results found higher (i.e. >5%) GB Cost premium generally only associated with top level certifications WGBC found GB Cost Premiums tend to decrease over time
- GB Cost Premiums tend to decrease over time Stricter codes & building regulations closing the gap Refinement and streamlining of the processes and systems for implementing GB rating systems Acceptance of building modelling software, providing platforms for all designers to integrate and collaborate Availability of experienced, qualified staff using integrated design processes to deliver projects Factor in costs of GB strategies early in design stage to avoiding expensive and risky ‘bolt on’ options later Proliferation of eco-labelled materials and suppliers adopting standards for environmental products
- Soft Costs: GB Certifying Authority Fees Direct fees for project registration and access to online resources. These fees will cover authority costs for resources required to review and evaluate your project. As well as authority overheads for developing, administering and marketing their GB rating systems. Potential Benefits: Positive marketing value and potential green premiums for rent/sale of building or units. Potential Pitfalls: Decide which rating system is most applicable. Special price arrangements may exist depending on location.
- Soft Costs: Sustainability Consultant Fees Direct fees for qualified & licensed GB professionals to focus the project teams to achieve targets and manage submissions to certifying authorities. Indirect fees that Consultant offices must pay annual license or membership fees in order to qualify as GB administrators. Also, other overheads from training, salary and resources of their licensed GB professionals. Potential Benefits: Improved competition due to the level playing field with approved lists of licensed consultants and professionals. Potential Pitfalls: Consultants passing their office costs onto first few GB clients each year, rather than equally across their projects. Soft Costs: GB Additional Studies & Simulations: Additional studies to establish baseline noise, groundwater and other site conditions Dynamic simulation modelling for energy, daylight, shading and wind comfort Benefits (if any): Further studies and surveys can ensure the project is better integrated within its environment and community Simulations allow designers to test different options to cost effectively, allowing for improved constructability and performance Pitfalls (if any): Studies & simulations must be integral to the design process Studies & simulations may verify non-conformance Soft Costs: Independent Commissioning Authority: Going beyond normal commissioning, an ICA on GB projects must implement a Cx Plan from design stage onward to check the OPR and BOD are met. As well as managing an independent review & verification of all Contractor’s commissioning. Additional GB performance targets and GB equipment & systems may require an enhanced levels of commissioning. Potential Benefits: Independent assurance that commissioned systems meet design requirements. Better handover and transition to O&M stage. Potential Pitfalls: Commissioning activities may verify non-conformance.
- Hard Costs: GB Additional Equipment & Systems: Equipment and systems (e.g. HVAC, Lighting...) in GBs rely on smart technology to get better performance, which requires investment beyond the level found in conventional buildings Innovative technologies, such as renewable energy systems (PV), greywater treatment systems, sensors, controls, metering and automation Potential Benefits: Improvements in indoor environmental quality, water & energy savings and carbon emission reductions Potential Pitfalls: Innovative technologies can become obsolete or can prove difficult to operate and maintain
- Hard Costs: Green Materials and Efforts by Contractor: Contractors must invest extra time and money into responsibly sourced materials and/or recycled materials Potential Benefits: Improvements in indoor environmental quality, water & energy savings and carbon emission reductions Potential Pitfalls: Green materials often limit contractor’s procurement options. Other procurement issues, such as preferred vendor lists or green material distributors being affiliated to the trading arm of a rival contractor
- Low-levels of certification may incur GB cost premiums from 0 to 2% GSAS 1 & 2 Star, LEED Certified, Estidama 1 Pearl or BREEAM pass Generally attempting only the prerequisite credits for energy, water, commissioning, recycling and certain other criteria that required little or no extra effort Mainly soft costs for certification and licensed professional fees to manage the certification process May perform only marginally better than conventional buildings, especially in areas such as indoor environmental performance Mid-levels of certification may incur GB cost premiums 0 to 4%, including: GB Cost Premium 0 to 3% for GSAS 3 Star, LEED Silver, Estidama 2 Pearl or BREEAM Good GB Cost Premium 0 to 4% for GSAS 4 Star, LEED Gold, Estidama 3 Pearl or BREEAM Very Good Increased GB cost premiums to cover additional hard and soft costs accruing from additional studies, simulations, equipment and systems to comply with additional credits being attempted
- Projects attempting high levels of certification will incur cost premiums typically up to 6%, as they go beyond the prerequisites and incur extra hard costs, as well as soft costs. Extra soft costs for simulating energy and environmental performance, as well as extra hard costs for better performing materials, equipment, automation and control systems.
- One size fits all approach: Unified approach may be useful in some cases, but past solutions are no guarantee of success on future projects Selection of the credits based on earlier projects can waste project specific opportunities or lead to the wrong equipment/ technologies installed on a project Local Regulations and Permitting Systems: Confusion about master-developer DCRs and QCS2014 (Section 7 – Green Construction) can create risks Project delays can occur if the approvals process from authorities are not managed properly Designers can be reluctant to innovate in their designs out of fears that it could cause delays in project approvals Inexperienced and un-cooperative team members: If key project team members are inexperienced on GB rating systems, they are often reluctant to consider any strategies that may incur a GB cost premium Some scepticism is healthy for debate, but there must be a buy-in from senior professionals in the project team Failure to schedule time for Sustainability Reviews: Leave time for sustainability reviews after each discipline completes their design Integrated design approach mitigate the risk of late changes to the design impacting sustainability targets Lack of coordination: Team members must understand the implications of their decisions on other related disciplines Lack of coordination leads to wasted opportunities
- Close gaps in current legislation has gaps leaving an open-door for developers to avoid building green Legislation for minimum GB regulations should make clear whether GSAS or LEED is a viable method for compliance Commonality of approach on energy modelling required for GB rating systems to allow comparison of energy performance between different certified buildings and decrease cost of dual certification Except GSAS, all other international GB rating systems rely on whole building energy simulations from software, which have been tested for compliance against applicable standards (e.g. ASHRAE Standard 140-2011)
- Regional GB systems must keep fees in line with international rating systems Large developers should take a programme-wide approach to their development portfolios, in order to achieve economies of scale with respect to their development projects Large developers may be able to reduce the soft costs associated with GSAS by adopting common approaches to GB certifications Frequent changes to GB rating systems prevent decreases in GB costs Integrity of GB system falls when too many changes occur New versions of rating systems must involve industry consultation and sunset dates for fully retiring earlier versions should be set for a period of not less than 2 years
- Marginal GB Cost Premium can still deliver a very high return on investment to the developer/ owner over the life of the building or upon sale of the building. Such ROI’s can arise from: Higher rental/lease rates Lower operating costs Higher occupancy rates With >90% of time spent indoors, healthier buildings in Qatar should easily command a premium in terms of rental or sales value GB rating systems need to strive for ‘Green Premiums’ for each level of certification and encourage ‘Brown Discounts’ for non-certified Emphasis needed to promote the integrity and transparency of any GB rating system, to harness value for each level certification
- The next 10 to 20 years will see some very interesting case studies playing out in terms of the link between quality, GB certification levels and property values. Case A: LEED Certified: Qatar Foundation’s Education City Msheireb Properties’ Downtown Doha Case B: GSAS Certified: Lusail City New Port Project Manateq economic zones Case C: Non-certified: West Bay Pearl
- Will areas where sustainability has been adopted from master plan level to building level will command green premiums? As more become available will other areas suffer from lower occupancy and a downward spiral of decline in value and rents? Will developers that embraced green buildings have the additional GB cost premium returned within the first five years and continue to see value added from therein?
- ASHGHAL’s mantra “Qatar deserves the best” should not be only for the first wave of infrastructure construction but also apply to future waves of building construction QNV2030 issued in 2008 but next tier of National Masterplan documents not issued beyond draft format Planning authorities must close the gaps and issue development regulations to steer the market toward sustainable development
- On a city-wide level Doha, the next 10 to 20 years will see some very interesting case studies playing out in terms of the link between quality, GB certification levels and property values. It will be interesting to see how the LEED and GSAS GB certified buildings perform against each other and against conventional buildings with respect to the nexus between property prices, location, quality and GB certification levels.
- Ref: Adapted from “Breaking the Vicious Circle of Blame – Making the Business Case for Sustainable Buildings “ (www.rics.org.eu ) Investors “We invest in sustainable buildings because that’s what occupiers want and because they give better returns and have higher value growth potential.” Owners/ End-users “We demand and occupy sustainable buildings because they are cheaper to run, increase our well-being and improve our image.“ Designers & Contractors “We design and construct sustainable buildings and environments because that’s what our clients want & expect.” Developers: “We develop sustainable buildings because they are easier to sell, achieve higher prices and are much more resistant to obsolescence.”
- Green buildings may incur an initial cost premium to build from the outset, but have long term benefits for investor/owners and occupant/users Unsustainable construction, investment and management practices tend to fast-track asset-value depreciation and building obsolescence Green buildings need to focus on user satisfaction, comfort and wellbeing, as well as energy and water efficiency Green buildings need to go beyond environmental and economic considerations and also embrace social sustainability