SmartMarket Report: Builders and remodelers need to go green for competitive edge
There's a strong market ahead for green building and remodeling, according to the SmartMarket Report: New and Remodeled Green Homes: Transforming the Residential Market from McGraw-Hill Construction, part of The McGraw-Hill Companies.
The full report was presented Tuesday at the National Association of Home Builders' (NAHB) National Green Building Conference and Expo in Nashville, Tenn.
The report includes McGraw-Hill Construction's estimate that the green homes share of the construction market was 17 percent in 2011, equating to $17 billion, and expected to rise 29 percent to 38 percent by 2016, potentially a $87 billion to $114 billion opportunity, based on the five-year forecast for overall residential construction.
The report reveals that two of the key factors driving this market growth are the fact that green homes are seen as having higher quality and that they save consumers money. A panel of industry experts at the NAHB Green Building Conference discussed the report's impact on the market.
"In the current residential market, there is an enormous need to differentiate your homes for consumers," said Harvey Bernstein, vice president of industry insights and alliances at McGraw-Hill Construction, and one of the experts who discussed the report at the NAHB session. "When builders are able to offer homes that not only are green, but also offer the combination of higher quality and better value, they have a major competitive edge over those building traditional homes."
Bernstein said, "If you're not building green homes by 2016 you'll either be out of business or your business will be relatively small compared to your competitors. Green is the way to build your business."
The report, produced by McGraw-Hill Construction in conjunction with the NAHB and Waste Management, is designed to provide key insights into product and market opportunities in the single-family home building and remodeling industries.
"NAHB builder and remodeler members were surveyed on their green building practices, which allowed us to shine a light on the state of the green market in this new report," said NAHB Chairman Barry Rutenberg, a home builder from Gainesville, Fla. "The results highlight the tremendous growth in green building, and the potential market opportunities that lie ahead. As more projects seek green certification, NAHB and the NAHB Research Center stand ready to meet the demands of this exciting and ever-changing market."
Matt Belcher, principal of Belcher Homes in St. Louis, Mo., was on the expert panel and said during the session, "It's definitely what we've seen in our business. I had an inkling this trend was happening. Even in a soft economy, I knew the penetration of green in the market was having an impact. But until we saw this report I had no idea the impact it was having, however."
"Tuning yourself to this market — by 2016 I think is key — you can see what manufacturers have done to stay tuned to this market. We're the beneficiaries of that. It keeps prices in check with competitors," Belcher said.
Greg Hardwick, a green builder and remodeler and principal of Hardwick General Contracting in Maitland, Fla., was another industry expert on the NAHB panel. "Green has differentiated us in our local market. As we start to take homes apart we have a key understanding how it's all supposed to be put back together and put back together better."
"We've grown every year since 2008. We've doubled our sales in the last two years. So that's all helped quite a bit," Hardwick said.
Jim Halter, vice president of construction solutions for Waste Management, and an expert on the NAHB panel, said, "We are going through a transformational change. I think from our business and from the business I see represented here, if you don't jump on it you will be left behind."
Factors driving the growth in the green home building and remodeling market include:
- Higher quality for both new home builders and remodelers. For those doing a high volume of green homes (at least 60 percent of the homes they build), its importance is magnified, with 90 percent who regard higher quality as an important trigger for building green, compared to 72 percent of builders overall.
- Customers are strongly value-driven — around two-thirds of builders and remodeler respondents state that customers request green homes or remodeling projects in order to lower their energy use or save money, more than twice any other factor.
- Higher first costs for building green are noted by a much lower percentage of builders as an obstacle now than they were reported in 2008.
The study also reveals the key practices and technologies taking over in the residential marketplace as a result of the shift toward green:
- More than 80 percent report that energy efficiency is making today's homes greener compared to two years ago. Use of energy-efficient features is pervasive in the market — the top practice by nearly all surveyed builders and remodelers, regardless of their level of green building activity.
- Indoor air quality is growing in importance and focus for home builders. 60 percent of home builders believe that efforts to improve indoor air quality make homes greener than they were two years ago, and 95 percent of high volume home builders report including features that impact air quality.
- More than half consider durable materials one of the most important features in their homes today. In particular, remodelers emphasize this key aspect of their projects. Durability and better materials are key reasons why green homes and remodeling projects are considered of higher quality.
"These findings confirm the shift we've seen in the market," Halter said. "Builders and remodelers are placing more emphasis on energy efficiency, increases in sustainability focused waste management practices and more products made from post-consumer materials. These important factors are pushing our industry forward."
Read more about building a green home.
Topics: Building Green
Teena Hammond Teena Hammond has published more than 2,000 articles in People and W magazines, Women's Wear Daily, and in dozens of newspapers and books. She also wrote a home improvement, remodeling and decor column that ran in Gannett newspapers nationwide. She's interested in all things green and would love to hear from you with your story ideas.