The history of the building industry has endured countless changes over the last century. From early on the materials and methods used provided a foundation for creating buildings that emphasized safety. Through trials, new enhancements to products and installation created stronger more efficient structures. Today, new programs exist to continue the challenge of building sustainable developments while protecting the environment and human health. The “Leadership in Energy and Environmental Design” (LEED) program provides a framework to encourage building with the environment as a priority. Looking at examples of current certified LEED projects and a Wal-Mart case study will provide support for implementing these types of improvements.
Sustainable Building Practices
“Where we’ve been and where we are going”
For over a century, America has been leading the world in construction technology. Innovative approaches to residential and commercial construction were applied as demand increased for larger buildings. In the twenty-first century, a new movement toward sustainable construction has lead to the introduction of energy-saving components and environmentally friendly designs. This paper will discuss the history of construction in America as well as the “green movement” that is continuing to have a major impact on how developers and builders construct residential and commercial buildings.
History of the Building Industry
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The last century has provided an array of opportunities for changes and growth for the building industry. The mid 1850’s used labor intensive methods for building using primarily wood and masonry type products. With fears of destruction by fire, other types of materials were experimented with to establish fire proofing protection. Masonry products were found to be heavy and expensive. In turn, this allowed the iron and steel industry to move into the forefront of the commercial construction industry. Beginning in the early 1900’s, wrought-iron was introduced as material for floor beams. The ability to construct a stronger building more efficiently was attractive to residential and commercial builders. The use of cast-iron facades provided a low cost alternative in constructing exterior load bearing walls. The labor for this method was less expensive and the product was manufactured in a preassembled form. However, it wasn’t discovered until later that this method caused the building’s structural integrity to be at risk. In addition, cast-iron when used in combination with other materials to fill in spaces, created walls that were too heavy during a fire. The result was the collapse of several structures from inadequate lateral strength. In the mid to late 1950’s steel became the predominant choice in commercial building. The cage system and the use of rivets made this method of building stronger and more efficient. The steel used in conjunction with concrete and wrought iron opened the door to the modern-day skyscraper. The rivet method has been modified to incorporate welding and bolts. In turn, this method has improved the strength of our modern-day skyscrapers. Over the last century, steel has become the predominate product used in commercial buildings.
The building process since the 60’s and 70’s has seen even more improvements and changes. The creation of federal oversight programs, product innovations, installation methods, and regulations are standardizing the development stages. The resource for engineers, architects, and builders provide invaluable information that help streamline the construction stages. A new project can spend months or years in the planning stages. The process of finding an adequate site, researching the best use, preparing a site plan, doing a feasibility study, engineering, design, and financing are all conducted prior to any actual site construction. These pre-planning steps help reduce unforeseen problems, establish compliance with city, state, and county regulations and reduce environmental damage. The construction stage begins with site preparation including dewatering, erosion control and excavation. The surveyors establish the site and building boundaries. There are numerous additional steps from ground breaking to completion that are included in the construction phase. The main goal is to complete the project (as outlined in the design) with safety and longevity in mind. With new sustainability, builders are focusing more on the environment, as well as the conservation of our natural resources.
Always on Time
Marked to Standard
Construction methods and products are being developed to include a growing movement toward the protection of the environment. More specifically, the use of recycled materials and the efficient use of water and energy are top priorities in this movement. In 2000, a program was established to help achieve this goal. The “Leadership in Energy and Environmental Design” (LEED) was created using a system of ratings to encourage builders to construct with the environment as a priority.
The LEED rating system has four levels using a point system. The five categories include:
Sustainable Site Development
Energy and Atmosphere
Materials and Resource Conservation
Indoor Environmental Quality
The program is nationally recognized providing a standardized method of scoring a building’s impact on the environment. These points include the implementation of how a builder uses recycled materials, innovated methods for water/energy conservation, and products that help reduce pollution when constructing a residential or commercial building. The program provides incentives and grants for companies that participate or reach certification levels.
The United State Green Building Council’s website provides statistical data on the current usage of energy and waste by buildings in the nation (USGBC, 2009). This is a breakdown of the six categories:
• 72% of electricity consumption,
• 39% of energy use,
• 38% of all carbon dioxide (CO2) emissions,
• 40% of raw materials use,
• 30% of waste output (136 million tons annually), and
• 14% of potable water consumption.
These numbers indicate that there are areas where waste of natural resources can be reduced. By using new innovation in water filtration systems, storm water management, solar power, recycled materials and other sustainable methods, a reduction in waste can be achieved.
One project reaping the rewards of LEED Gold Certification is Toyota’s Metro South Campus Headquarters in Torrance, California. The site encompasses 40 acres and includes 624,000 square feet. The shareholders needed to achieve a 10% return on investment as a benchmark to undertake the program. Two different incentives were granted to reduce the costs of the roof top solar panels installation by 50% and a 30% savings for using solar heated water in peak season. The end results provided “energy savings total $400,000 annually, and the extensive solar rooftop system is expected to pay back within 7 years. The campus also saves $12,000 per year via reduced water usage, and diverting more than 95% of construction waste from landfills saved $35,000” (Toyota, 2006). The benefits gained by Toyota are exceeding the expectations both financially and environmentally.
The Office Depot store located in Austin, Texas is the first store in their company to achieve the LEED Gold Certification. This company took the step forward in 2007 to create a store location that would focus on protecting the environment. The store was constructed with “high-efficiency heating, ventilation and air conditioning (HVAC) units, water-efficient fixtures in the restrooms, locally sourced and recycled materials throughout the space; and skylights that adjust with the sun and provide natural day lighting” (Office Depot, 2007). These improvements lead to a 37% reduction is energy, a 40% water reduction and 80% of the construction waste diverted from landfills (Office Depot). The sample store is just the beginning of environmentally friendly changes this retail company is planning for the future.
Future of LEED
However, there are arguments as to the future of LEED. According to Malcolm Lewis of CTG energies (2003), he mentions: “Different participants and market segments perceive LEED differently, and as a result, have different expectations for its development and evolution” (Lewis, 2003). More so, because the cost to go ‘green’ is significant by comparison, it’s hard to estimate the number of companies who can afford to make the transformation to use ‘green’ building as their construction method. But, companies like Chevron are already on board with the innovation of ‘green’ technology.
As the world’s largest producer of geothermal energy, Chevron’s goal is to develop and deploy renewable and alternative energy. Because there is such a need for alternative and renewable energy, Chevron, like the LEED program, has dedicated its life to understanding more about how to use and implement the use of natural resources. Chevron states, “To meet the growing energy demands of the global economy, all sources of energy — including conventional and non-conventional fossil fuels, renewable energy, and increased efficiency and conservation — will be needed” (Chevron, 2009). Therefore, the future of LEED may be determined by available resources and, the companies who consider using ‘green’ products.
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Regardless the speculations, there are those who have already implemented the ‘green’ building method set in place by LEED. Agent Owned realty, a South Carolina real estate company, has started the ‘green’ building method by becoming the first ‘green’ real estate company in the state. Both the Broker and shareholders hold ‘green’ certifications. According to Gary Bissett (2008), using products that are recyclable and renewable make it more cost effective and environmentally sound. He says,
Besides a desire to assist buyers and builders with "green" building practices, we built the actual office with sustainability in mind. All of the building products used are either recyclable or require little environmental resources to maintain. Materials such as concrete countertops, dual flush toilets, LED lighting, 30% post consumer recycled sheetrock, bamboo flooring, and office furniture made from recycled materials help make the office "earth friendly" on many levels (Bissett, 2008).
To point, using recyclable products like that of Agent Owned and concentrating on the development of new ‘green’ technologies like Chevron imply the importance of going ‘green.’ Unfortunately, unless we all join forces for a common ‘green’ goal, the ‘green’ concept and the LEED program may not survive.
Proposed Wal-Mart Solar Panel Decision
The Real Estate division of Wal-Mart is conducting research into the cost vs. benefits of adding solar panels to their proposed new smaller concept stores. Wal-Mart is planning to capitalize on the “green movement” with innovative solar panels that will hopefully reduce the overall operating expenses of the proposed concept stores. Additionally, this move by Wal-Mart will provide evidence to the general public that the company is committed to its endeavor with regard to reducing its overall environmental impact. This paper will provide an outline of the proposed cost of the solar panels as well as the projected Internal Rate of Return and Net Present Value of the project.
The proposed structure will consist of 77,000 square feet and will be located in the Southwestern United States.
A 30% equity investment will be made by the owner. The remaining balance of 70% will be leveraged through a fixed-rate mortgage of 6.50% over a twenty year period. The cost of the solar panels is $1,594,478. However, a 35% up-front tax credit will absorb $558,068 of the initial cost. In turn, putting the cost of the solar panels at $1,036,410.
The investment period will be twenty years. Vacancy rates are estimated at 0% since the owner will occupy 100% of the space. Operating expenses are expected to increase at a steady rate of 3% per year. Likewise, the annual cost of inflation is projected to rise at a steady 3%. Furthermore, a 2% increase has been applied to the energy cost inflation rate. The sales premium on the solar panels was also calculated at 2%. A positive cash flow is expected throughout the remainder of the holding period. See cash flow analysis. The property will be sold at a purchase price of $53,208,000 in year twenty-one, using the income approach that is calculated using the year twenty-one NOI and a 9% cap rate.
The net present value of the after-tax cash flows in the twenty-year holding period revealed a positive result at expected rates of return of 12%. The rate of return still outperforms many other investment vehicles. Comparatively, this investment falls within the parameters of a “safe” investment similar to those such as treasury bills or bonds. The internal rate of return calculations indicates a 37.2% after-tax IRR. This is better than the required 12%. This investment opportunity appears to be profitable over the twenty- year recommended time frame.
History provides a basis for appreciating the progress made in the building industry. Using the knowledge gained over the years to create programs that balance safety, costs, and the environment is now possible. The LEED movement provides a standard to challenge the future developers to higher levels of environment awareness. The movement toward environmentally conscience developments using the LEED program is gaining recognition. Eventually, the building industry will embrace the trend to build environmentally friendly while complimenting nature and protecting human health. This paper explores the importance of the construction process while embracing the environmental impact and affects on human health.
Charleston's 1st "Eco-friendly" Real Estate Office Opens in
Park Circle. (n.d.). Retrieved on July 26, 2009, from http://activerain.com/agentownedPark
Emerging energies. (2009). Retrieved July 26, 2009, from
Leadership in Energy and Environmental Design. (n.d.). Retrieved
July 26, 2009, from http://en.wikipedia.org/wiki/Leadership_in_Energy_and_Environmental_
Lewis, M., Howard, N. (2003). The future of leed. Retrieved
July 26, 2009, from http://www.edcmag.com/CDA/Archives/c5f7916daa697010VgnVCM
Office Depot, (2007) USBGC Project Profile, Innovative Strategies Bring Retailer to Height of
Environmental Design, retrieved on July 24, 2009 from http://www.usgbc.org/
Toyota, (2006) USBGC Project Profile, Meeting the Needs of Society, retrieved on July 24, 2009
United States Green Building Council, (2009) Green building Research retrieved on July 24,
2009 from http://www.usgbc.org/DisplayPage.aspx?CMSPageID=1718
The plagiarism detector has analyzed the following text segments, and did not find any instances of plagiarism:
Text being analyzed
These pre-planning steps help reduce unforeseen problems, establish compliance with
movement toward environmentally conscience developments using the LEED program is
Through trials, new enhancements to products and installation created stronger
sample store is just the beginning of environmentally friendly changes
construction stage begins with site preparation including dewatering, erosion control
building products used are either recyclable or require little environmental
creation of federal oversight programs, product innovations, installation methods, and
Innovative approaches to residential and commercial construction were applied as
Results: No plagiarism suspected
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