Green Real Estate Predictions for 2011

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In less than 24 hours 2010 will be over and a new year of real estate investment opportunities and challenges will begin. In regards to green real estate, here are my predictions for 2011 (in no order):

  1. Green Value will replace Green Hype.  2010 was the last year we’ll see people largely  add green elements to their projects just for the heck of it.  Value is starting to trump hype (even in California) and that trend will continue on 2011. Investors/buyers/homeowners won’t pursue green unless they have a fairly accurate prediction of the ROI.
  2. In green building certification circles, Energy Star overtakes LEED.  LEED has always been the 800 pound gorilla in the green building certification market.  However the actual value to the end user/buyer of a LEED certified building is beginning to wane.  LEED costs more, takes longer and is more paperwork intensive than Energy Star.  LEED is a clunky old PC running Windows 3.1. Energy Star is an iPad.
  3. ROI measurement becomes easier for investors.  New technologies and data on recent projects make it much easier for an investor to project the return on any green building method/equipment.  For example, a few years ago it was difficult to quantify the true cost savings on utility bills (and thus value to an end buyer) of blowing closed cell insulation into walls. You’d get a range, say between 30-70% savings.  Not exactly a great way to forecast. Now with a few quick calculations and a cursory knowledge of building envelop design you can get to a very accurate projection, often within 10%.
  4. Opportunity is rapidly becoming obligation.  I’ve written about this before but it is getting more prevalent now.  Sellers/Property Owners (investors or not) are getting squeezed by 2 distinct groups.  First, City/State/Federal legislators who are increasingly enacting green building codes for new AND existing buildings. Second, buyers/renters who are becoming more ‘green’ educated and are demanding more green features.  Both groups are putting added pressure on investors to address green in their projects.
  5. Green products-faster, cheaper, more abundant.  More than ever there are a plethora of green building products on the market.  These products are often higher quality and lower priced than their non-green competitors.  For real estate investors this couldn’t have come at a better time. You can now green a project without having to overspend on materials or equipment.
  6. In 2010, approximately 40%* of your target market (buyers/renters) understood the value of paying more for green homes/apartments and were willing to pay a premium for those amenities.  That number should double in 2011.  It has become much easier for buyers/renters to see the quantifiable difference in value of buying/renting a green home vs. a traditional home. It now makes more sense to get a green home than not.

*Based on a very unscientific study of what I’ve observed in the last year as I’ve worked on projects all over the US.

2010 was an amazing year.  Many people reading BiggerPockets every week made a ton of money even though our economic times have been challenging.  Most investors who are successful see the opportunities before others, act on them and then reap the rewards.  In 2011 green real estate is arguably the single greatest advantage you have.  Here’s to a great 2011 for all of us!

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About Author

I help real estate investors increase profits and property values through a variety of green strategies. I help clients find hidden rebates, tax incentives and credits to maximize returns on any property. www.JimSimcoe.com

10 Comments

  1. Great post Jim,
    I’m 100% in agreement with your predictions. The only part of the market, in my opinion that Investors need to be concerned with the most is in finding skilled and licensed contractors to do all the work. Your handyman rehab skills won’t past the mustard anymore. The out of work sub-contractors who are back in school getting a certification are not only few and far between, but they are going to work for major construction firms already established in the market place. Right now-even a simple removal of lead based paint (pre-78), requires a certified licensed contractor. All those costs involved need a specialist like yourself to determine the real ROI, long before any offer is on the table.

    • Thanks, Matt, I agree with you completely. Typical handymen are going to be in a tough spot soon if they aren’t’ up to speed on green rehab trends. Great comment, thanks again..Jim

  2. it seems like #3 will be the big important one, for sure. glad to hear that you guys had a good year – love reading the bigger pockets blogs. At movoto we had a pretty good year too – seemingly against all odds! feels awesome, no?

    • MH,

      Thanks for the comment. Yep, #3 is crucial-without that the investor is in the dark. Glad you guys had a good year-very inspiring to hear. Funny, I’m heading up your way (Bay Area) to see clients tomorrow. Take care…

  3. I understand your issues with LEED certifications, but LEED involves more than just energy issues addressed by Energy Star. LEED can be rather tedious and can be costly, but it can be a really good way to coordinate all disciplines involved in construction and operation of buildings, especially the very large projects. The USGBC asks for member opinions, especially those about building performance, and LEED standards are frequently reviewed and revised in order to improve them. I don’t think it makes economic sense for investors to meet LEED standards when rehabbing homes, but I think it is helpful to know what the standards are. Please check out the schedule of events of the Inland Empire chapter (usgbc-ie.org) and if you can attend any of them I would be happy if you would be my guest. Also, what do you think about Passive House (PassivHaus ?) standards. Hasn’t caught on in U. S. yet, but could be a future trend.

  4. Pingback: My Magic Eight Ball’s Green Forecasts for 2011

  5. great article! I agree with Matt. I don’t think right now there is a good pool of qualified contractors to do the job. Well, at least not here in Florida. I read a piece about a group of luxury and eco friendly group of homes been built in McLean, VA. The homes were modern, functional, beautiful and certified eco friendly. I would be interested in buying this type of home even if is a bit more.

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