Report: Green Buildings Are on the Rise in the Retail and Hospitality Sectors

More than half of retailers—and two-thirds of hoteliers—will invest in green building projects by 2015, according to a study just released by McGraw Hill Construction in partnership with Waste Management. And the percentages are even higher for green operations and maintenance.

Based on a recent survey of 79 retail site owners, 30 hospitality industry owners and 22 restaurant owners, growing levels of green building activity can be expected over the next two years. The study defined a green building project as one built to LEED or another recognized green building standard; or as one that is energy-efficient, water-efficient and improves indoor air quality and/or engages in material resource conservation.

In fact, according to the findings of the “Green Retail and Hospitality SmartMarket Report: Capitalizing on the Growth in Green Building Investments,” the number of retailers who have taken a green approach in over half of their building projects rose from 18 percent in 2011 to 38 percent  this year—and is expected to rise to 52 percent by 2015. Hotel owners show an even greater investment in environmental construction, with 28 percent going green in 2011, 48 percent, in 2013 and a projection of 64 percent by 2015.

Building owners also are committing to green operations and maintenance (O&M) practices, with nearly two-thirds (65 percent) of retail owners reporting high green O&M activity, and an even stronger 73 percent of hotel owners reporting the same.

According to the study, owners note strong business benefits from green building investments and green O&M practices, helping to drive this trend. Among the advantages are:  

• Annual operating cost reductions–Reported by 66 percent of retail owners (at an average reduction of 8 percent) and by 51 percent of hotel owners (at an average reduction of 1 percent);
• Energy usage reductions–Reported by 58 percent of retail owners and 67 percent of hotel owners, at an average reduction of 15 percent  for both;
• Asset value increases–Reported by 61 percent of retail owners (at an average  increase of 7 percent) and by 71 percent of hotel owners (at an average reduction of 11 percent); and
• ROI increases–Reported by 67 percent of retail owners (at an average increase of 8 percent) and by 85 percent of hotel owners (at an average reduction of 14 percent).

"Green building has taken such hold in the industry that even sectors with unique challenges, such as retail and hospitality, are making stronger investments," said Harvey Bernstein, vice president, Industry Insights and Alliances, for McGraw Hill Construction. "Clearly the benefits that owners are reporting are key reasons for their green building investments and—as they find better ways to measure those impacts and quantify the value to their sales velocity and to the well-being of their staff, customers and guests—we expect even more rapid engagement in green." 

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More than Money

There are many factors driving these owners toward adoption of green building investments and practices. On the business end, while operating cost reductions are the most highly reported reason for going green, building owners also are motivated by utility rebates (according to 63 percent of retail and 70 percent of hotel owners) and by the opportunity to enhance their brands (51 percent of retail and 73 percent of hotel owners).

In terms of other factors, fully 44 percent of retail owners and 50 percent of hotel owners find that human impact benefits have also been an important factor in encouraging their decision to invest in green building projects. Seventy percent of retail owners see meeting government regulations and standards as a key factor in their decisions to develop green projects in the future and, likewise, 70 percent of hotel owners consider water use reduction an important factor in their decisions. In addition, more than half of operators in both sectors report that improved environmental health and well-being has had a strong impact on their decisions to make future green investments.

While energy efficiency is a key factor behind engagement in green building investments and practices, other aspects of green building also hold weight. For retail owners, 62 percent of retail respondents cited recycling and waste management as critically important; 63 percent of hotel owners agreed. These same owners also are imposing green building requirements on their contractors and suppliers. Indeed, 77 percent of retailers and 73 percent of hoteliers said they require green waste handling practices from their contractors, and nearly the same percentages report requiring recycling and composting from their O&M contractors.

"These findings suggest that consumers feel better when they purchase a product from a company they know is contributing to a better planet," said Jane Sumner, vice president, Waste Management's Food & Retail and Construction segments. "Waste Management has been transforming its business to tap into this growing market and we are helping owners in the retail and hospitality space to do the same."

Conversely, the key factors posing challenges include higher initial implementation costs for green practices (cited by 47 percent of retailers and 43 percent of hoteliers); budgeting challenges (37 percent and 40 percent, respectively); and getting corporate leadership buy-in (30 percent and 50 percent, respectively). However, no challenge was perceived as having a high impact by more than half of the respondents.

The report also includes opinions from the construction community. In fact, contractors are reporting increased requests from their customers for green projects, reinforcing the findings reported by the owners.