The Market for Sustainable Development Consumer Demand and the Economics of Green

Transcription

1 Photo Band: Photos go here if used Scale photos to 1.75 height and place in this area. DELETE this placeholder. The Market for Sustainable Development Consumer Demand and the Economics of Green Shyam Kannan May 2010

2 Foundations - The Green Impact Gap 2

3 GREEN BUILDINGS ARE NOT ENOUGH TRANSPORTATION IMPACT > BUILDING IMPACT Commuting by office workers accounts for 30% more energy usage than the building itself. For an average new office building built to code, transportation accounts for more than twice as much energy as building operation. 3

4 HIGH DENSITY IS TRULY GREEN HIGHER DENSITY = LESS DRIVING = LOWER IMPACT LIVING 4

5 HIGH DENSITY IS TRULY GREEN HIGHER DENSITY = LESS DRIVING = LOWER IMPACT LIVING 5

6 Growing Demand for Higher-Density Communities 6

7 > 85% GROWTH IN HOUSEHOLDS WITHOUT CHILDREN DIFFERENT HOUSEHOLD LANDSCAPE BY 2025 Absolute Change in Households, United States Married, no children, 5,476,979 Married with children, 1,376,788 Single male with children, 2,165,939 One-person households, 11,825,702 SOURCE: US Census Single female with children, 4,680,913 Other Family, 1,758,377 Nonfamily, 3,416,246 7

8 CHANGING CONSUMER PREFERENCES INCREASED PREFERENCE FOR DENSE PRODUCTS Existing and Preferred Housing Type by Household Type 35% 30% 25% 29% 33% 85% of Growth 20% 15% 10% 15% 13% 14% 12% 9% 8% 8% 7% 9% 8% 11% 10% 14% 12% 5% 0% 1-person 2-person 3-person 4-person 5-person 6-person 7-person Average 2005 American Housing Survey RCLCO Consumer Research SOURCE: RCLCO Consumer Research 8

9 DEMOGRAPHIC SHIFTS AND HOUSING DEMAND BUILT-IN DEMAND FOR HIGHER-DENSITY LIVING Projected Total Population Growth Rate by Age , Apartments and Condos: Entry-Level and First Move-Up Condos, TH First time SFD 1,000,000 1,600,000 2,600, ,500, ,900, , Luxury townhomes and condos Luxury single family TND and clustered, smaller lot single family ` 3,500,000 5,000,000 5,400, Senior Living 1,500,009 4,100, ,000 SOURCE: 85+ U.S. Census Bureau 1,300,000 9

10 GEN Y MAKING ITS MARK TODAY SHAPING POST-RECESSION PLACEMAKING EFFORTS RCLCO Consumer Research shows:! 41% of Generation Y plan to rent for at least three years! 77% of Generation Y plan to live in an Urban Core 4,200,000 4,100,000 4,000,000 3,900,000 3,800,000 3,700,000 Largest group began graduating in 2009 Greatest demand for rental housing in this period If this group rents for at least three years, there will be more first-time homebuyers in the market in than ever before 3,600,000 3,500,000 3,400, Number of 22 Year Olds Same 22 Year Olds Turn 25 NOTE: Number of 22-year olds is based upon birth rate and does not factor in death rates and migration. SOURCE: U.S. Centers for Disease Control and Prevention

11 GEN Y WILL PAY FOR WALKABLE, MIXED-USE CHALLENGE IS PROVIDING PRODUCT THEY CAN AFFORD Driven by convenience, connectivity, and a healthy work-life balance to maintain relationships 1/3 will pay more to walk to shops, work, and entertainment 2/3 say that living in a walkable community is important More than 1/2 of Gen Y would trade lot size for proximity to shopping or to work Even among families with children, one-third or more are willing to trade lot size and ideal homes for walkable, diverse communities SOURCE: RCLCO Consumer Research 11

12 PARADIGM SHIFT IN CONSUMER PREFERENCES PENT-UP DEMAND FOR HIGHER-DENSITY, WALKABLE ENVIRONS 80% 70% 60% 50% 40% Preference for Traditional Suburban Community 68% 50% 85% 80% 75% 70% 65% 60% Preference for Single- Family Detached Home 82% 68% 30% 55% 20% Current Community Future Community 50% Current Home Future Desired Home SOURCE: RCLCO Consumer Research 12

13 Consumers and the Green Building Movement 13

14 MYTH: TREMENDOUS PENT-UP DEMAND SOME DATA POINTS TO SUPPLY-SIDE CONSTRAINT Percentage of Respondents Aware of a Home/Community Marketed as Green 88.6% 11.4% No Yes 14

15 EVIDENCE FROM BUILDERS NEED EVIDENCE OF CONSUMER DEMAND!Over 60% of builders believe that there is NO consumer premium associated with sustainable development!over half of builders surveyed believe that there is a lack of consumer awareness surrounding sustainable development!one-third of builders surveyed believe that there is NO consumer preference for green building vis-à-vis traditionallyconstructed neighborhoods 70% 60% 50% 40% 30% 20% 10% 0% 63% 54% Demand Perceptions 29% No Premium for Green Lack of Consumer Awareness No Consumer Preference SOURCE: RCLCO Research 15

16 STRONG ATTITUDES TOWARDS GREEN LIVING WILL THEY TRANSLATE TO HOME PURCHASE MOTIVATIONS? National Respondents 50% 45% 40% 35% 30% 37.8% 43.3% Respondents don t automatically equate an energy saving home as being environmentally compatible. 30.0% 33.8% 32.5% 25% 20% 17.2% 15% 10% 5% 0% 4.2% We Need Big Changes in the Way we Live 1.4% My Home Should Save Energy 2.7% 2.4% 2.0% 1.6% Most People Don't Take the Environment Seriously Humans and Nature can Live Together I Want a Home that is Compatible with the Environment We Can Grow the Economy and Protect the Environment at the Same Time SOURCE: RCLCO Consumer Research Strongly Disagree Strongly Agree 16

17 RESIDENTIAL IMPACT AWARENESS GAP MOST OWNERS DO NOT CONNECT HOME, ENVIRONMENT 33% What impact do you think your home has on the environment? 29% 21% 11% 5% No Impact Some Impact Acceptable Impact Significant Impact, Nothing I Can Affect SOURCE: RCLCO Research Significant Impact, Something I Can Affect 17

18 RESIDENTIAL IMPACT AWARENESS GAP MOST RENTERS DO NOT CONNECT HOME, ENVIRONMENT 32.3% What impact do you think your home has on the environment? 21.0% 18.1% 11.1% 8.6% 4.3% 4.6% Have no Impact Some Impact, Lower than Auto Emissions Acceptable Impact Significant Impact, Unrelated to my Housing Choice Significant Impact, Related to my Housing Choice Don't Know Don't Care 18

19 BUT WHAT S IN IT FOR ME? HOOK TO SELL SMART LOCATIONS IS ME, NOT WE If their investment pays them back over time, buyers are willing to spend more money on their home if. If their investment may not pay them back over time, buyers are willing to spend more money on their home if. 80% 75% 50% 70% 60% 50% 40% 50% 46% 45% 40% 35% 30% 25% 41% 24% 30% 20% 10% 20% 15% 10% 5% 18% 0% 0% SOURCE: RCLCO Research If It Saves Energy If It Provides Health Benefits If It s Good for the Environment 19

20 VARYING IMPORTANCE OF GREEN BENEFITS ME GREEN VS. WE GREEN Minimizing the presence of mold and/or mildew in my home and/or building The quality and cleaniness of the air inside my home and/or building The purity of the w ater in the pipes of my home and/or building Saving money on utlility bills Minimizing exposure w ith potentially harmful man-made substances Minimizing my electricity consumption Conserving energy Ability to w alk more and reduce the number of trips I need to make by automible Ability to maintain/improve physical/aerobic/cardiovascular fitness Minimizing the use of automobiles for non-essential or single-rider trips Recycling programs or reuse of recycled materials Reducing my carbon footprint Promoting cleaner w ater in the outdoor environment Avoiding the consumption of non-renew able energy sources Promoting cleaner air in the outdoor environment Protecting native habitats Minimizing my consumption of non-renew able resources Promoting w ildlife Slow ing global w arming Promoting cleaner ground and soil in the outdoor environment Avoiding the consumption of nuclear energy sources 12% 17% 18% 11% 21% 20% 24% 27% 32% 31% 33% 13% 31% 33% 28% 18% 26% 38% 25% 19% 25% 18% 25% 19% 24% 19% 24% 20% 22% 22% 21% 28% 18% 68% 62% 61% 60% 55% 51% 47% 47% 46% Me Green We Green 0% 10% 20% 30% 40% 50% 60% 70% 80% Care about the issue but w ould not influence my rental decision Care about and may influence my rental decision 20

21 The Economics of Green Communities 21

22 STOP ASKING THE WRONG QUESTION As of 2010, there is little evidence that the market places a value premium on a green building. Some data emerging that suggests absorption, market share differentials Difficult to disaggregate location, age, marketing, macroeconomic factors, from any perceived green premium 22

23 AND START ASKING THE RIGHT ONE SOURCE: CEOs for Cities 23

24 AND START ASKING THE RIGHT ONE SOURCE: CEOs for Cities 24

25 AND START ASKING THE RIGHT ONE Ten years from now, do you believe that a LEED-certified building, if it were to go on the market for sale, would be valued: 70% 64% 60% 50% 40% 30% 32% 20% 10% 4% 0% Less than a comparable, traditionally-constructed, non- LEED building The same as a comparable, traditionally-constructed, non- LEED building More than a comparable, traditionally-constructed, non- LEED building SOURCE: RCLCO Research 25

26 The High Cost of Low Density 26

27 A QUESTION OF ECONOMIC COMPETITIVENESS 27

28 EVIDENCE FROM ASHEVILLE, NC Today the building is valued at over $11,000,000 an increase of over 3500% in 15 years For 40 years this building remained vacant its tax value in 1991 was just over $300,000. The lot is less than 1/5 acre Old Penneys 28

29 EVIDENCE FROM ASHEVILLE, NC PUBLIC INFRASTRUCTURE COST/DU $ 15,956 $ 28,042 Downtown/Urban Linear/Suburban The $12,086 difference in costs means more tax dollars spent on suburban households result is less money for public green space, schools, transportation networks, and basic services 29 * Florida Department of Community Affairs Study, by James Duncan AICP & Associates

30 EVIDENCE FROM ASHEVILLE, NC THE HIGH COST OF LOW DENSITY $ 50,800 Total Taxes/Acre to City $414,000 Total Taxes/Acre to City 30

31 Photo Band: Photos go here if used Scale photos to 1.75 height and place in this area. DELETE this placeholder. The Market for Sustainable Development Consumer Demand and the Economics of Green Shyam Kannan May 2010

32 CONTACT US Shyam Kannan - skannan@rclco.com ATLANTA 999 Peachtree Street, Suite 2690 Atlanta, GA (404) LOS ANGELES 1880Century Park East, Suite 250 Los Angeles, CA (310) AUSTIN 106 E. Sixth Street Suite 900 Austin, TX (512) Phone ORLANDO 100 East Pine Street, Suite 302 Orlando, FL (407) WASHINGTON, DC 7200 Wisconsin Avenue, 7th Floor Bethesda, MD (301)