National Real Estate Investor Highlights Big Barriers to Green Building Finance
I receive a steady stream of green building studies — nowadays increasingly sponsored by the mainstream real estate publications. I usually read the mainstream studies with a bit more caution since some of them seem better suited for spreading rumors than educating and offering a constructive way forward.
And there are also those studies that focus on reporting the mood of the industry in a comprehensive enough way as to be thought provoking and educational. National Real Estate Investor might have done just that with their 2007 Green Building Survey, just out and worth a deeper look. It is a “state of green building” survey, taking the pulse of thousands of developers and corporate owners in a sufficient breadth and depth to make the results more ‘real’ and therefore more credible. While NREI did not answer every burning question, I think they did a good job of illustrating some clear dichotomies between wanting to go green and actually taking on the challenge of doing so.
Green Finance Conundrum: The Money’s Everywhere But We Can’t Get Our Hands On Any Of It
Here are a couple of nuggets for Green Journey readers that highlight the present day contradictions in financing green properties:
“Among developer respondents, only 18% have found favorable loan terms for green projects.”
The lack of adequate banking products, which respond to the higher quality and performance of green buildings is clearly evident. By the way, only 20% of corporate owners found favorable loan terms for their green projects.
The Green Journey Perspective: NREI could have done a great service to the industry here by exploring in depth the favorable terms obtained by developers and corporate owners. What made them favorable? Lower pricing? More proceeds? And who is offering them?
“A large majority have not taken advantage of any government incentive for green building.”
I have known this anecdotally from my own finance practice and NREI confirms the same observation nationally. 77% of the study respondents indicated that they had not taken advantage of any sort of government incentive. One respondent highlighted the confusion when he stated that “there are different types of incentives at the federal, state and local levels and that they are hard to keep track of”.
The so called confusion is part of the early process of market restructuring. Governments and municipalities, having an interest in enforcing energy security and community sustainability, are politely pressing their way forward to their seat at the capital table. Private investors, lenders and other traditional stakeholders are not used to this and haven’t yet learned to fold in the government’s money into their analysis. However, if the current political and legal trends continue, they will.
