Green push stalled by weakened economy

Green push stalled by weakened economy

By Jeremy Stoltz
News Editor

As the economy slows to a near halt, environmentally-conscious initiatives across a wide spectrum of industries are being put on hold as upfront costs exceed current budgets.

For now, it seems the green push, including property design and construction, city planning, consumer products and more, will have to wait until the economy rebounds.

President Obama’s recent stimulus package includes some provisions focused on boosting sustainability, yet implementation of those initiatives may be years down the line.

“The green initiative that you’re trying to implement in your small- or medium-sized business, it’s actually costing you out-of-pocket dollars, so that might be something that you defer to 2010, 2011 or 2012,” said Craig Morse, managing director of Hilco Corporate Finance in Northbrook.

Leadership in Energy and Environmental Design (LEED), a certification program promulgated by the United States Green Building Council, has been expanding across the commercial real estate sector for more than 10 years. Yet pursuit of LEED certification can be costly, depending on the building, which is causing many property owners to balk when working at sustainability options.

“The market demands low cost at this point,” said Mark Galioto, a partner at Itasca Construction Associates, Inc.

Ensuring sustainability is not the only benefit from a LEED certification. It can also open new marketing opportunities for property owners and developers.

“It makes your product more viable because you’re following those guidelines and it certainly is important to a lot of larger corporations these days,” said Phil Van Duyne, vice president of Itasca Construction.

With this in mind, many support products for the construction industry—floors, ceilings, lighting, heating and air conditioning, and more—are complying with LEED standards.

“All of the manufacturers are jumping on board and trying to get their products certified as well, so they can add into the total LEED credits you need to be certified,” said Brian D. Smith, another Itasca Construction partner.

Additionally, most in the commercial real estate and construction industry believe that demand for green building is going to grow rapidly over the next five to 10 years, as more data supporting the benefits of environmental design become available.

Yet, even though sustainable design and construction is apparently the future of the industry, many developers and property owners just cannot afford the up-front costs at this time.

For the most part, the only commercial projects that will be LEED-certified over the next year are government buildings.

“Government is behind it,” said Galioto. “I’m not aware of any government project that is using any other standard than LEED.”

In addition, LEED certification does not enhance one’s ability to secure capital for a commercial building.

“When it comes to marketing potential, that doesn’t reduce the bank’s risk of making that loan,” Van Duyne said.

Communities attempting to go green are also being forced to curb aggressive initiatives. Last month, Elgin city officials stated that economic conditions will play a large role as to how quickly it can implement its Sustainable City Master Plan—a guideline to make Elgin a more environmentally friendly community.

The plan originally called for a $500,000 budget, but city manager Olufemi Folarin said declines in revenue from the Grand Victoria Casino will force the city to pare the scope of the project for now.

Even sustainable consumer products are feeling the brunt of the poor economy. Mintel, a Chicago-based global supplier of consumer, product and media intelligence, recently published a consumer survey showing that the number of those who regularly buy green products remains unchanged since last year, after tripling over the previous year.

“People’s priorities have changed because of economic hardship,” said Marcia Mogelonsky, senior research analyst at Mintel, in a press release. “A substantial number of shoppers are now struggling just to provide the basics for their families, so green living is no longer top of mind for many Americans.”

Mintel’s survey also found that the majority of adults are willing to pay only a little extra for green products, and 54 percent of respondents said they would buy more green products if they were less expensive. Additionally, 78 percent of those surveyed said they would buy more organic food if the products were cheaper, and 52 percent of shoppers who buy household cleaning product feel green cleaning products are too expensive.

Yet, even though the environmental push is currently stalled, Mintel forecasts 19 percent growth for green products overall through 2013. This shows that sustainability is far from a fad but rather the future for many industries, but it just won’t happen for a few more years.

Posted on Thursday, March 05, 2009 (Archive on Thursday, March 12, 2009)
Posted by jstoltz Contributed by jstoltz

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