Green Is Growing in Retail and Hospitality

According to a new report released today by McGraw Hill Construction in partnership with Waste Management, “Green Retail and Hospitality SmartMarket Report: Capitalizing on the Growth in Green Building Investments,” owners of retail and hotel establishments plan higher levels of green building activity over the next two years. The report is based on a study of 79 retail, 30 hotel and 22 restaurant owners conducted in 2013 by McGraw Hill Construction.

SmartMarket Report graphic

The study defined a green building project as one built to LEED or another recognized green building standard, or one that is energy-efficient, water-efficient, and improves indoor air quality and/or engages in material resource conservation. Notably, by this definition, the percentage of retail owners that have taken a green approach in over half of their building projects rose from 18% in 2011 to 38% this year, and is expected to rise to 52% by 2015. Hotel owners show an even greater investment in green building—the percentage of those owners that have taken a green approach in over half of their building projects rose from 28% in 2011 to 48% in 2013, and is projected to rise to 64% by 2015.

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

Owners note strong business benefits from green building investments and green O&M practices, helping to drive this growth. Most notably, they report the following when comparing the performance of their green buildings to traditional buildings:

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

There are many factors driving these owners toward adoption of green building investments and practices. While operating cost reductions are the most highly reported reason for going green (by 66% of retail owners and 73% of hotel owners), there are several other factors considered highly important in their decision-making process:

  • Utility rebates: according to 63% of retail and 70% of hotel owners
  • Protecting/enhancing brand: according to 51% of retail and 73% of hotel owners (for hotel owners, this is as important as operating cost decreases)
  • Improving ROI: according to 52% of retail and 67% of hotel owners

Business factors alone do not, however, account for the increasing commitment to green building. Forty four percent of retail owners and 50% 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 decision to do green projects in the future, and 70% of hotel owners consider water use reduction an important factor in that decision. In addition, over half in both sectors report that improved environmental health and well-being has a strong impact on their decision to make future green investments.

Key factors posing challenges to increases in green building investments include higher initial implementation costs for green practices (47% retail, 43% hotel); budgeting challenges (37% retail, 40% hotel); and getting corporate leadership buy-in (30% retail, 50% hotel). However, it is notable that no challenge was reported as having a high impact by more than half the respondents.

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% report recycling and waste management of critical importance; 63% of hotel owners report the same. These owners are also placing green building requirements on their contractors and suppliers—77% of retail owners and 73% of hotel owners say they require green waste handling practices from their contractors, and nearly the same percentages report requiring recycling and composting from their O&M contractors.

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.

Download the full report.

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