The market for sustainable design and construction is beginning to accelerate again after some uncertainty and confusion over the impact of the U.S. Green Building Council’s Leadership in Energy and Environmental Design’s Version 4 (v4) sustainability standards. Concerns about v4’s costs and compliance difficulty have caused a rush among clients to register their projects under LEED’s 2009 standards before Oct. 31, 2016, when USGBC halted LEED 2009 support.

Further, the prolonged run-up to the date when LEED v4 became mandatory has caused clients, design firms and contractors to explore other sustainable design and construction options. Many owners have found some of these alternatives to their liking and have greenlighted projects under them.

ENR 2017 Top Green Buildings Design Firms Chart

ENR 2017 Top 100 Green Buildings Contractors

ENR 2017 Green Sourcebook PDF
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The market growth for green design and construction can be seen from the results of the ENR Top Green Buildings survey. As a group, the Top 100 Green Design Firms in 2016 generated $5.99 billion in design revenue from projects registered with and actively seeking certification from third-party ratings groups under objective sustainable-design standards, such as the USGBC’s LEED standards. For the group, this revenue is a healthy 11.6% increase from the $5.37 billion in 2015.

Domestically, green design revenue rose an impressive 13.1%, to $4.83 billion, in 2016, from $4.27 billion in 2015. The Top 100 had $1.17 billion in revenue from green projects outside the U.S. in 2016, up 5.6% from 2015.

Among contractors, the market did almost as well. As a group, the Top 100 in 2016 generated $57.25 billion in contracting revenue from projects actively seeking green certification. This revenue was up 8.9% for the group, from $52.58 billion in 2015. Domestically, the market was up 9.0%, to $55.06 billion, in 2016, while the international market for sustainable construction rose 5.2%, to $2.19 billion.

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Green Expectations

The market for sustainable design and construction is growing steadily. But as designers and contractors become more familiar with green products and processes, sustainable construction is rapidly losing its character as a distinct market and becoming more like the standard operating procedure for many firms.

There now is a general expectation among major clients that their projects will be built to green standards. Whether the project conforms to specific third-party rating systems is often secondary to the desire to have a high-performance building.

Many firms note that clients may wish to forego third-party registration and certification because of the perceived extra cost of project documentation and filing, particularly under the new LEED v4 standard. “Owners want sustainable elements and features in their buildings, but don’t necessarily want to pursue the registration and certification requirements inherent with the multiple rating systems options,” says Dan Osterman, preconstruction project manager and sustainability champion at Sundt Construction.

Natalie Kelly, corporate responsibility manager at Brasfield & Gorrie, agrees that certification costs may be a factor in a client’s decision to pursue third-party certification. Clients “are committed to building smart, healthy, energy-efficient buildings, but the cost to secure specific ratings and designations can be a barrier to achieving those goals,” she says.

State and local legislation are drivers that are propelling clients to seek greener buildings. “Some juris­dictions are tightening energy codes and raising the bar for building performance and reducing emissions,” says David Walsh, preconstruction sustainability manager at Sellen Construction. He says the level of sustainability and energy performance may be diverging nationally, with some states and regions realizing both business and environmental advantages with higher performance and others viewing a relaxation of regulation as a business advantage.

For example, fundamental levels of sustainable building strategies are getting integrated into code requirements, particularly around energy in various parts of the Northeast and West Coast, with California leading the way. “You can look to [the California] market to see what is eventually going to migrate to other states as well,” says Steven Burke, sustainability manager at Consigli Construction.

Burke says Massachusetts is another model green leader among states, being the No. 1 state in the country for LEED square footage per capita in 2016. He expects this strong commitment to sustainability will have a ripple effect on work in other jurisdictions.

There also are performance-based codes that are driving sustainable buildings. “On the regulatory side, the most progressive energy codes, such as in Seattle, offer an alternative path that is target-based, where a building needs to achieve an operational energy-use value set by the code,” says Tom Marseille, senior vice president and director of sustainability for the buildings group at WSP USA. This approach contrasts with building codes that require designing to an increasingly complicated and stringent checklist, he says.

Further, lenders are beginning to demand that developers produce high-performance buildings.

“Financial institutions are beginning to dictate that efficient operations are necessary to receive approval for loans,” says Amber Richane, senior associate and vice president at CallisonRTKL. She says this is an effective way of moving the sustainability discussion to the total cost of ownership, not just first costs.

One issue that has become a non-factor in the sustainability discussion is the long-term plunge in energy prices. Some in the industry expected owners’ interest in sustainability to wane if they could not see a quick return on investment in energy savings to offset any added first costs in building a high-performance building.

That does not seem to be the case, according to many industry executives. Large building projects have long concept and design periods, and reacting to minor fluctuations in energy pricing would not be advisable, says Katie Rothenberg, director of sustainable construction and corporate responsibility at HITT Contracting Inc.

Moreover, reducing energy use during periods of relatively low and stable energy prices still yields operating cost savings. For example, focusing on energy efficiency reduces equipment runtime, which prolongs equipment life and reduces maintenance expenses, says Peter Dahl, principal of the sustainability and commissioning team at HGA Architects and Engineers. “This positions our clients to be more resilient when facing the potential for increased energy rates in the future,” he observes.

“When our clients can have a more efficient building at the same or lower cost as a code-compliant building, they are smart enough to jump on the opportunity”

– Anica Landreneau, Director of Sustainability, HOK

In addition, clients are realizing that they can have high-performance buildings at no additional first costs and even under budget. Some efficient envelope, mechanical and lighting systems are cost-neutral, says Anica Landreneau, director of sustainability at HOK. “For example, these systems may reduce loads enough to decrease the number of chillers needed, identifying a first-cost-neutral trade-off. When our clients can have a more efficient building at the same or lower cost as a code-compliant building, they are smart enough to jump on the opportunity,” she says.

The USGBC’s LEED standards have been the critical driver in pushing forward the sustainable buildings agenda. The LEED 2009 standards have been incorporated into the standard procedures for many designers and contractors. Further, the costs of complying with the old standards has shrunk to the point where LEED registration and certification is almost a given on many projects.

That ended when USGBC introduced its LEED v4 standards in 2013. With its more stringent requirements and its emphasis on restricting the use of “chemicals of concern” in building materials, many owners, designers, contractors and building-product suppliers balked.

Despite all the controversy, USGBC issued its final LEED v4, and on Oct. 31, 2016, it stopped accepting registrations for the LEED 2009 standard, requiring firms to register under the new LEED v4 standard.

Brave New World

The sunset of LEED 2009 led many clients to push their projects forward to get in under the wire, rather than register under LEED v4. “As with the roll out of LEED 2009, there was a rush for many projects in design to register with USGBC-GBCI before the October 31, 2016, deadline, making LEED v4 project starts in the first half of 2017 slow,” says Rothenberg of HITT Contracting.

The new standards and requirements are proving a struggle for many in the industry. “For designers, the new materials credits with their disclosure requirements will necessitate more product research in design development and a retooling of specifications so bidders understand both compliance and documentation requirements,” says Walsh of Sellen.

“LEED v4 is tough—there’s no doubt about it,” says Richane of CallisonRTKL. She notes that it has a heavier focus on encouraging project teams to assess sustainable strategies at the beginning of a project, not just as an afterthought. “It strives to move the industry toward healthier and less environmentally detrimental material choices, and despite the tougher standards, I think that as project teams go through the process the first time, they’ll learn to adjust and adapt to the new program and it won’t seem so scary.”

However, Richane says the industry does seem to be withdrawing from LEED a bit. “LEED New Construction and Core & Shell certifications are down 35% from their peak in 2013, but LEED CI certifications are up 40%. This is similar to the dip when [LEED 2009] came out, and then the industry continued onward with LEED eventually. But we will see how the market reacts to v4.”

“LEED v4 is tough … [but] I think that as project teams go through the process the first time, they’ll learn to adjust and adapt to the new program and it won’t seem so scary.”

– Amber Richane, Senior Associate, Vice President, CallisonRTKL

LEED v4 also places more pressure on contractors to ensure that the building materials and equipment specified and accepted under the standard are, in fact, used. “During procurement, contractors will need to more carefully vet submittals and potential substitution requests, since the number of products that meet v4 requirements are limited,” says Walsh of Sellen. “LEED v4 raises the bar in product disclosure. While many manufacturers, especially in Division 9, are v4-ready, other manufacturers have yet to build out their v4 product offering and provide v4 testing documentation.”

LEED v4 may also force changes in the construction process. Because so much depends on the contractor’s input and cooperation during the construction process, LEED v4 effectively requires early input from the contractor during the design and specification process. “It is critical that the GC be included very early in the development of the scorecard. We are educating our project teams on the updated certification and ensuring that targeted credits are realistic based upon the new requirements,” says Rashmi Mehta, senior vice president for design-build at Hathaway Dinwiddie Construction Co.

Projects need a multidisciplinary approach. “All the team members are truly essential … to vet materials and make sure that a project is successfully achieving its goals, particularly when it comes to material transparency,” adds Jennifer Taranto, director of sustainability at Structure Tone.

Some designers see the three-year run-up to LEED v4 as blunting much of the negative impact of the new system. “The current version of LEED has been known for quite some time, giving designers, contractors and building-product manufacturers time to respond to new requirements,” says Greg Mella, director of sustainable design for SmithGroupJJR. The latest version may have frightened away some design professionals or caused these firms to charge more for LEED documentation until the newer requirements become more mainstream, but SmithGroupJJR has not changed its fee structure, he says.

Alternative Standards

Some firms believe that LEED v4 is not the only answer. They think that owners, designers and contractors can benefit from a more flexible approach. “LEED v4 has reached a level of complexity and cost where some have begun to question the value of certification unless mandated by local laws,” says Ken Sanders, managing principal at Gensler. “The reality is that checklists, like codes and regulations, are useful for compliance but infrequently sponsor innovation. People become too focused on the scorecard, instead of creative and holistic design solutions.”

Further, some designers see alternatives to LEED v4 becoming more prominent. “I do see lots of other options beyond LEED that are getting increased interest from clients and local authorities. WELL, Fitwel, Passive House and Living Buildings are just a few,” says Marseille of WSP USA.

“During procurement, contractors will need to more carefully vet submittals and potential substitution requests, since the number of products that meet v4 requirements are limited.”

– David Walsh, Preconstruction Sustainability Manager, Sellen Construction

The presence of alternative sustainability standards has caused some firms to rethink how to approach a building’s design. “Sustainable design is no longer reliant on LEED but shifting toward a broader range of platforms, such as green building codes and standards like IgCC and ASHRAE 189.1, as well as alternative rating systems like BREEAM, EDGE and WELL,” says Landreneau of HOK.

Further, many of the new green-building systems have become very specialized in their approach and the type of project they focus on. “We have seen the market saturated with new rating systems that relate to sustainable design. The Green Business Certification Inc. [GBCI] now certifies projects under LEED, EDGE, PEER, WELL, SITES, GRESB, Parksmart, and Zero Waste, whereas, formerly, GBCI was exclusively focused on LEED,” says Mella. He says programs—such as Active House/Passive House, Envision, BREEAM, GreenGlobes, and the International Living Futures Institute’s suite of certifications—also are viable certification options.

The growth and splintering of rating systems and sustainable benchmarks show the increased specialization within the broader topic of sustainable design, Mella says. “Design firms are struggling to understand which accreditations and certifications to maintain. The improvements in options have also diluted the industry focus that programs like LEED once had,” he says.

Some of these alternative systems may get a boost from local legislation. For example, “Net Zero design is taking center stage, as California approaches the 2030 deadline set by CALGreen, requiring all new commercial buildings be net zero,” says Mehta.

Focusing on Health

Many firms are seeing a notable increase in interest in building occupant health and wellness. Sustainable design has traditionally focused its outcomes on environmental health, emphasizing thriving ecosystems. But to some, the relationship between buildings and environmental health has been seen as being indirect, benefitting future generations, says Mella. “The focus on health and wellness is more direct, with benefits that impact today’s building occupants’ productivity and well-being. As such, it is an easier value to promote, with benefits that are more readily accessible contributing to the increase in interest within the market.”

“As we have gone through the WELL process ourselves, we frequently advocate and educate others in the AEC community.”

– Jennifer Taranto, Director of Sustainability, Structure Tone

Employee health is a major selling point to clients. “Folks doing sustainable consulting, as well as anyone who owns a building or employs people who work in a building, have long known that the real cost in the long-term operations is the people, not utilities or even the cost of the building,” says Marseille.

Marseille says firms in the tech sector are really dialing in on this. Further, as more studies emerge that show the linkages between cognitive function and improved indoor environmental quality, it only adds more fuel to drive this trend in education as well as in the workplace. “We are now doing more consulting and design of buildings that make [indoor environmental quality] the sustainable priority and seeking certification under systems such as WELL,” Marseille notes.

This emphasis on tenant health has given a major boost to the WELL Building standard. “The WELL Building standard has become increasingly popular among our client base—they’re more invested than ever before in the impact a building might have on the tenants and end users,” says Peter Ukstins, director of integrated construction at James G. Davis Construction.

“While there’s not a groundswell of demand for WELL, clients—led by CBRE and JLL in corporate projects—are pursing the WELL standard, and we are designing the building’s critical systems—lighting, air, terminal comfort, water—for occupants’ health and well-being,” says Rob Bolin, national director of high-performance solutions at Syska Hennessy Group.

Moreover, healthier spaces have become an extension of companies’ employee retention and attraction strategies. Regardless of the technical details, “there is an innate understanding that daylit spaces, views, operable windows, simple, beautiful and chemically-inert materials can contribute to health and wellness,” says Walsh of Sellen. He says his firm is now building high-rise towers with operable windows, something rarely seen a decade ago, largely in response to the desire for better and healthier environments.

Some owners still see barriers to complying with third-party wellness standards in their buildings, particularly because of the lack of supporting data to back the claims of increased productivity and the costs of “presenteeism”—that is, coming into work while sick and spreading germs to coworkers.

But healthy buildings have particular resonance for Structure Tone, says Taranto. The firm’s New York City headquarters were just renovated and became the first building in New York City to be certified under the WELL Building standards. “As we have gone through the WELL process ourselves, we frequently advocate and educate others in the AEC community, along with our owners, on the benefits of incorporating health and wellness into their projects,” Taranto says.