NOT WASTING THIS RECESSION
by Thor Kerr

In tough economic times, will the industry forgo expenses associated with Green development and build cheaply?

The context through which Green buildings are created is changing rapidly. It is no longer sufficient for Green buildings to be functional while mitigating climate change and other ecological threats; they must now also account for the threat of a deep, lasting recession emanating from the world's largest economy.

"The economy is in a crisis not seen since the Great Depression," Chairman of the United States House of Representatives Committee on Appropriations, Dave Obey, said in summarising the American Recovery and Reinvestment Act of 2009. "Credit is frozen, consumer purchasing power is in decline. In the last four months the country has lost 2 million jobs and we are expected to lose another 3 to 5 million in the next year."

This recession will severely test the appropriateness of our urban development models. It has proven already that new housing estates outside pre-existing urban boundaries far from public transit, services and employment are unsustainable. The motor car has failed to overcome the tyranny of distance from home to employment and services. People living on the margins of urbanity and economy in new houses now face the greatest risk of falling property values and loss of homes through foreclosure. Ghost-town housing estates, common in Bangkok and other Southeast Asian cities in the aftermath of the 1997 regional financial meltdown, are appearing in the United States and across the developed world along with self-generating tent cities accommodating those hardest hit by recession.

Green building advocates could easily say: "I told you so." But the picture downtown is also frightening. Office vacancy rates in the United States are expected to reach 20 percent this year, according to Jones Lang LaSalle, and real office values are 40 percent below their peak. A similar picture is appearing in Asia with Beijing's office vacancy rate expected to rise from 23 percent to 36 percent this year. This is terrible news for anyone thinking of developing another Green office building, once the driving force for Green-building certification. Gone may be the days when it made perfect environmental, economic and cultural sense to spend up to 25 percent more constructing an iconic Green building that said of its corporate owner, "despite our brilliance we are good guys, really."

Planned Green commercial, industrial and condominium buildings are being shelved while the economy sorts itself out. In Australia, 9 percent of the 1,549 Green building projects that BCI Australia reported last year have been put on hold compared to 5 percent of the standard buildings. This is not surprising given that client demand has been a key driver for Green building while higher upfront costs have been seen as the key obstacle (see diagram). Demand for premium space is disappearing but, at least for now, additional upfront costs remain.

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