Nora Knox

At first glance, the additional work and alternative materials needed to build green may seem like a burdensome cost, but closer attention reveals this perception to be misleading. If sustainability is viewed as an expensive add-on to a building, we would mistake efforts to reduce energy costs or improve indoor environmental quality as comparable to specifying a better grade of countertop or a more impressive front door. Under this approach, any improvement beyond a minimally code-compliant baseline looks like an added cost. 

If, however, we consider energy improvements part of an overall process, we often find that the added costs are balanced by long-term savings. The initial expenditures continue to pay back over time, like a good investment. The best returns on these investments are realized when green building is integrated into the process at the earliest stages rather than as a last-minute effort. For instance, specification of more costly, high-performance windows may allow for the use of a smaller, lower-cost heating, ventilation, and air-conditioning (HVAC) system. More fundamentally, if we view sustainable design as part of the necessary functional requirements for building an energy-efficient structure and providing a safe, healthful environment, we can compare the cost of the green building with that of other buildings in the same class, rather than against an artificially low baseline. 

A landmark study by the firm Davis Langdon found no significant difference between the average cost of a LEED-certified building and other new construction in the same category: there are expensive green buildings, and there are expensive conventional buildings. Certification as a green building was not a significant indicator of construction cost.

Interestingly, the public dramatically overestimates the marginal cost of green building. A 2007 public opinion survey conducted by the World Business Council for Sustainable Development found that respondents believed, on average, that green features added 17% to the cost of a building, whereas a study of 146 green buildings found an actual average marginal cost of less than 2%.

Green building is, however, a significant predictor of tangible improvements in building performance, and those improvements have considerable value. Studies have shown that certified green buildings command significantly higher rents. A University of California–Berkeley study analyzed 694 certified green buildings and compared them with 7,489 other office buildings, each located within a quarter-mile of a green building in the sample. The researchers found that, on average, certified green office buildings rented for 2% more than comparable nearby buildings. After adjusting for occupancy levels, they identified a 6% premium for certified buildings. The researchers calculated that at prevailing capitalization rates, this adds more than $5 million to the market value of each property.

Download our guide, An Introduction to LEED and Green Building, to learn more