Residential Green Build Report

Transcript

Jeff Martin Brian Swett Doug Wein A M A R K E T E N G A G E M E N T F R A M E W O R K F O R D E V E L O P E R S A N D B U I L D E R S Residential Green Building Report E RB I NS TI TUTE F OR G L OBAL S US TAI NABL E E NTE RP RI S E UNI VE RS I T Y OF MI CHI GAN )eff Martin Brian Swett Doug Wein A M A R K E T E N G A G E M E N T F R A M E W O R K F O R D E V E L O P E R S A N D B U I L D E R S Residential Creen Building Report May 2007 With support from: Cherokee Erb Institute for Global Sustainable Enterprise Unversity of Michigan · Copyriglt 2007 Acknowledgements Te autlors would like to tlank a number of organizations and individuals for tleir critical support of tlis master’s project. First and foremost, we would like to tlank Clerokee for tleir financial, logistical, and content support tlat was vital to tle success of tlis project. Our lead contact and project advisor at Clerokee, Clris Wedding, was particularly lelpful in providing tlougltful guidance, advice, and encouragement tlrouglout tle last year. Katlerine Henderson and Holly Fling of Clerokee also deserve tlanks for reviewing various documents and drafts tlrouglout tlis project’s development. Te autlors would like to tlank tle Erb Institute for Clobal Sustainable Enterprise at tle University of Micligan for its financial support in publisling tle results of tlis project. In addition, Professor Tom Cladwin of tle Erb Institute, tle project’s academic advisor, provided lelpful guidance and content suggestions in framing tlis project at its outset. We also would like to recognize Tisl Holbrook and Caroline Eisner for tleir lelp in graplic design and editing, respectively. Special tlanks to Corey Seeman for assisting our researcl process. We also tlank Allen Associates and Barley & Pfeiffer Arclitects for providing plotograpls of tleir green building projects for our report. Tis project would not lave been possible witlout tle generous time and valuable insiglts of tle green residential industry players and experts interviewed by tle autlors. Te appendix includes a full list of interviewees, and tle autlors are profoundly grateful for tleir willingness to slare tleir expertise witl tle project. Lastly, tle autlors would like to tlank friends and family for tleir ongoing support, understanding, and flexibility tlrouglout tlis project. Te residential green building movement is at an exciting moment in its development from a nicle market to a more mainstream market segment. According to some predictions, in 2007, more tlan lalf of small and large lome builders will be building at least 15° of tleir lomes to a local, regional, or national green standard. Witl a variety of major firm- and market-level drivers of tle green residential market, lome builders and developers must tlorouglly understand tle claracteristics and relative strengtls of tle green lomes market witlin tleir operating locales. Te purpose of tlis report is to investigate and advance tle foremost tlinking in tle residential green building industry. Te report’s objective is to present a strategic Market Engagement Framework (MEF) for examining a real estate market, so tlat a developer considering a local project can gauge consumer demand, understand tle existing landscape, form partnerslips for green building, and devise a marketing and sales strategy appropriate to tle locale. Te MEF contains two fundamental components: Analysis and Strategy. A building market is most ripe for increases in green building market penetration wlen numerous stakelolders pusl for tlose increases togetler. Te tlree primary elements critical for growing a green lomes market are (1) consumers, (2) industry (botl for profit and non-profit organizations), and (3) government. A developer intending to compete in tle residential green building space must lave a comprelensive strategy designed to analyze and exploit tle elements specific to tle potential development’s location. To gain a comprelensive understanding of tle marketplace and devise appropriate entry and marketing strategies, builders and developers must investigate all tlree of tle aforementioned elements–consumers, industry, and government–in conjunction witl tle resource and economic pressures influencing tle overall landscape. Tis report develops and presents tle Market Metrics Lens (MML) as an evaluative tool to lelp confront tle complexity tlat tlis investigation necessarily entails. By following a relatively simple prescriptive process, salient claracteristics for eacl market element are identified and included as metrics in tle MML. Once completed, tlis MML is able to identify strengtls and weaknesses in a given market and in comparing one location to anotler. Furtlermore, it lelps identify specific partnerslip and marketing strategies to raise overall awareness and advance tle industry. Executive Summary Te MML was piloted in four different geograplic locations: Los Angelesi soutlern California, HoustoniTexas, MiamiiSoutl Florida, and Newarki nortlern New )ersey. In addition, four otler markets were reviewed to add robustness to tle comparison pool: Denver, Atlanta, Indianapolis, and Boston. Of tle four focus municipalities, Los Angeles stands out as tle strongest overall in its relative strengtl in all tlree key elements of a residential green building market. Wlile tle consumer and industry elements of Miami’s green residential market is relatively weak, tle government element is relatively strong and growing. Te industry element outside of tle city, including a strong residential green building program and tle support of a leading builder, is relatively strong. Te consumer element of tle Newark green residential market is relatively strong, wlile tle government support element is moderate and tle industry element is relatively weak. Otler towns in nortlern New )ersey and tle state government are making strong progress in green residential support. Wlile Houston las a relatively strong industry element, it ranked weakest of tle four focus municipalities in government and consumer elements. Te “strategy” portion of tle Market Engagement Framework includes two important aspects: (1) forging partnerslips and alliances to lelp advance tle overall industry and raise consumer awareness and (2) targeting purclasers of residential green lomes tlrougl a focused sales and marketing effort. Witl tle results of tle MML, tlis project proposes specific strategies for partnerslip, marketing, and sales in eacl of tle four focus geograplies, as well as develops a number of green lomes strategy best practices, including twelve teclniques for selling green lomes. Wlile tle residential green building market is rapidly growing and maturing, mucl remains to be understood about tle dynamics of key market elements, tle most likely buyer claracteristics and preferences, and tle most effective marketing and sales strategies. Te MEF and MML presented in tlis report can lelp builders, developers, researclers, and otler green residential stakelolders better understand and strategize for engagement in particular geograplic markets. Chapter 1 OVERVI EW AND BACKGROUND 2 Te Creen Homes Clallenge for tle Industry 2 Te Market Engagement Framework Solution 3 Chapter 2 CURRENT STATE OF THE GREEN BUI LDI NG MARKET 6 National Trends 6 Expert Testimonials on Te Benefits of Building Creen 8 Chapter 3 ELEMENTS OF A ROBUST GREEN HOMES MARKET 10 Consumers 11 Industry 17 Covernment 21 Acute Resource Pressures 23 Macroeconomic Trends 24 Chapter 4 ANALYZI NG MARKETS FOR GREEN HOMES 25 Market Metric Lens 25 Chapter 5 BUI LDI NG PARTNERSHI PS 27 Best Practices and Strategic Recommendations 27 Te Importance of Clampions 28 Chapter 6 MARKETI NG AND SALES STRATEGI ES 29 Crowing Concept Awareness in Nascent Markets 29 Selling Creen Homes 31 Chapter 7 APPLYI NG THE MARKET METRI CS LENS 38 Pilot and Comparison Cities 38 Chapter 8 ANALYSI S AND STRATEGI ES FOR FOUR PI LOT GEOGRAPHI ES 44 Los AngelesiSoutlern California 45 HoustoniTexas 46 MiamiiSoutl Florida 47 NewarkiNortlern New )ersey 48 Relative Analysis of Four Pilot Ceograplies 49 Chapter 9 CONCLUDI NG REMARKS 50 Use of tle Market Engagement Framework 50 LI ST OF FI GURES Figure 1: Te Creen Homes Market Landscape 4 Figure 2: Creen Homes Adoption Concept: LOHAS Driving tle Market 5 Figure 3: Te Market Engagement Framework 5 Figure 4: Small Builders and Larger Builders 7 Figure 5: Demand Projection 7 Figure 6: Creen Building Consumer Croups 12 Figure 7: Creen Residential Industry Stakelolders 18 Figure 8: Trifecta Umbrella 34 Figure 9: Market Engagement Framework Analysis 49 LI ST OF TABLES Table 1: Relevant Belavioral Differences in Creen Homebuyers and Remodelers 13 Table 2: Te Market Metric Lens 38 Table 3: Residential Creen Building Market Strengtls and Weaknesses 49 APPENDI X List of Interviewees 51 Table of Contents R e s i d e n t i a l G r e e n B u i l d i n g R e p o r t R esidential green build- ing developers and lome builders lave traditionally entered markets witl little concrete information and understanding of tle true nature of consumer demand for green lomes. T lis is attributable largely to tle difficulty in quantifying demand for a relatively new product tlat is foreign to or misunderstood by most traditional lomebuyers. Nonetleless, tle proactive efforts of industry leaders to deliver products to market tlat tley believe are inlerently desirable often tap into latent demand for green lomes. Terefore, a more rigorous understanding of tle claracteristics of demand and otler critical elements of tle residential green building market will assist industry players interested in expanding tleir green building portfolios. Analysis sucl as presented in tlis report will augment profitability of existing pipe-line projects and can identify opportunities in areas wlere competitors and tle rest of tle industry may be lagging. T HE GR E E N HOME S C HA L L E NGE F OR T HE I NDUS T R Y Overview & Background 2 Chapter 1 A M a r k e t E n g a g e m e n t F r a m e w o r k f o r D e v e l o p e r s a n d B u i l d e r s T o address industry- and firm-specific clallenges, tlis report provides an evaluative tool for botl analysis and strategy development. We call tlis tool tle Market Engagement Framework (MEF). Te MEF enables an industry player wlo seeks to extend its presence in tle green lome market to quickly and relatively easily evaluate tle landscape, identify gaps and leverage points tlat can be filled and exploited, and develop sales and marketing strategies appropriate to specific locales. A building market is most ripe for increases in green building market penetration wlen numerous stakelolders are all pusling for tlose increases togetler. Te tlree primary elements critical for growing a green lomes market are (1) consumers, (2) industry (botl for profit and nonprofit organizations), and (3) government. See Figure 1 for a representation of tle green lomes market. In a perfectly robust green lomes market, tlere would be a large number of lomebuyers wlo are well versed in tle attributes of green lomes, receptive to tle green lomes value-proposition, and discerning of tle many possible green lome products available. Similarly, tlere would be a strong local industry presence tlat would consist of developers, builders, sub-contractors, and otler professionals familiar witl tle metlods for building, marketing, and selling green lomes. A local green lomes organization and certification program would be active. Lastly, a powerful government entity would be present witl offices, resources, and policies focused on supporting green building and sustainable development. Tese tlree elements working in concert comprise a robust and active green lomes market. Conversely, in a nascent market, green lomes lave yet to make serious inroads. In sucl a market, several factors could lave tempered green lome penetration. For instance, consumer demand may be ligl, wlereas industry capability andior government support are underdeveloped in relation to tlis latent demand. Alternatively, industry and government could be actively promoting tle residential green building, but a strong consumer preference las simply not yet materialized. Even witl tlese claracteristics, tle potential exists for a market to evolve into one wlerein all tlree elements are strong. Wlile advances in tle green lomes market can be made witl only two of tlese elements or witl only minimal interest from eacl, green lomes penetration will never be as rapid or as complete as wlen all tlree work togetler in a driven faslion. Furtlermore, tle consumer element is critical to tle success of any developing market. Also affecting market dynamics in any given location are a variety of significant external pressures. Tese we lave organized into two distinct categories: acute resource pressures and macroeconomic trends. Acute resource pressures can include water- scarcity, traffic congestion, land-density constraints, air-pollution, and energy capacity and price. Tese pressures will affect consumer preferences, industry innovation, media attention, and tle regulatory environment. Macroeconomic trends are factors sucl as fluctuating costs of lome ownerslip, job growtl rates, interest rates, and migration patterns into or out of tle area. Tese factors are known to impact tle overall lousing market, of wlicl tle green lomes market T HE MA R K E T E NGAGE ME NT F R A ME WOR K S OL UT I ON A Robust Green Homes Market: Conceptual Overview T HE MA R K E T E NGAGE ME NT F R A ME WOR K S OL UT I ON 3 R e s i d e n t i a l G r e e n B u i l d i n g R e p o r t Tree concepts are integral to a fundamental understanding of tle adoption claracteristics of green lomes. First, green lomes can be sold to any consumer via benefits-based selling (e.g. all lomebuyers want a lealtly living environment), but some buyers are willing to pay more or lave a faster absorption rate for tlese benefits. Second, potential green lomebuyers are motivated by personal interests wlen deciding on wlicl lome to buy. Tese include lealtl effects on inlabitants, durability and ease of maintenance, environmental friendliness, and energy efficiency, in addition to tlose perceived to be standard for conventional lomes (sucl as location, price, and size). Tird, eacl segmented geograplically-based real estate market las a different mix of lomebuyers witl a variety of interests and demands. Based on tlis, eacl market las moved to a different point along tle green lomes adoption curve. Te adoption curve for green lomes is very similar in nature to tle adoption curves of otler major new products or teclnologies. As described in Everett Rogers’ seminal book, Diffusion of Innovations, “innovators” and tlen “early adopters” tend to drive tle adoption of a new teclnology or product in tle early stages. 2 For green lomes, tlese two categories are composed largely of a market segment tle Natural Marketing Institute (NMI) calls Lifestyles of Healtl and Sustainability (LOHAS) consumers. If tle LOHAS consumers were to remain tle primary purclaser of green lomes, tlen tle adoption curve would largely follow tle blue line in Figure 2, representing a plateau of adoption at a very modest market penetration. If tle green lomes market penetration continues to grow rapidly, as real estate experts sucl as McCraw- Hill Construction predict, tlen green lomes will become a product of cloice for tle “early majority” buyer, and market penetration would follow tle green curve. Tis transition is occurring in markets sucl as Denver, wlere green lome penetration las now surpassed 20°. Lastly, if green lomes were perceived to be a temporary fad, tlen tle adoption is a part. Togetler witl tle tlree key elements (consumers, industry, and government), tlese pressures comprise tle overall green lomes market landscape depicted in Figure 1. Often, one or two of tlese elements tends to move faster tlan tle otlers, it is not uncommon for one to take tle lead before tle otlers catcl up. Usually, witlin one element a specific organization or group of individuals is at tle forefront of tle green residential movement. As Cordon Cooke, a green building marketing consultant witl 25 years of experience, notes, “in any one area you can identify tle person or tle organization tlat made tle difference.” 1 Fi gur e 1. The Gr een Homes Mar ket Lands c ape Consumers Government Industry The Green Homes Market Acute Resource Pressures Macroeconomic Trends Market Adoption Characteristics Key Market Adoption Principles: 1. Green homes can be sold to anyone. 2. Homebuyers are motivated by personal interests. 3. Each real estate market has a diferent mix of homebuyers. Virtually all indications show that green homes are at a tipping point where most major markets will have significant availability of product over the next several years. 4 Clapter 1: Overview & Background A M a r k e t E n g a g e m e n t F r a m e w o r k f o r D e v e l o p e r s a n d B u i l d e r s curve would follow tle red line, witl market penetration deteriorating as LOHAS consumers move tleir purclasing to otler products. Virtually all indications slow tlat green lomes are at a tipping point wlere most major markets will lave significant availability of product over tle next several years, and some leading markets will be moving furtler along tle adoption curve to capture “early majority” buyers, tlus following tle green line in Figure 2. Te clallenge for tle developer and builder is to identify tle drivers of growtl in green lomes in particular markets, and tlen construct partnerslip, marketing, and sales strategies to most effectively tap into tlis growing market segment. P e r c e n t a g e o f S a l e s Time LOHAS Fi gur e 2. Gr een Homes Adopt i on Conc ept : LOHAS Dr i vi ng t he Mar ket Complete market adoption Adoption by LOHAS only Eventual loss of interest by LOHAS Capitalizing on Market Adoption Characteristics T HE MA R K E T E NGAGE ME NT F R A ME WOR K S OL UT I ON A developer intending to compete in tle residential green building space must lave a comprelensive strategy designed to analyze and exploit tle elements specific to tle potential development’s location. In keeping witl tlat goal, tlis report provides tle Market Engagement Framework (MEF) to guide developers in gauging tle relative strengtls of localized elements and to guide tlose same developers in forming marketing and sales strategies tailored to immediate and long-term needs of tleir developments. Tis process (and tlereby, tle MEF) is divided into two sections: Analysis and Strategy. (See Figure 3 below.) Analysis: To properly analyze tle tlree elements of tle green lomes market, developers must know wlere to look and low to read tle potential proxies of tle existing elements. Tis process is covered more fully in Clapter 4 of tlis report. Strategy: Beyond analyzing tle existing elements, developers must be able to sell lomes tlat are appropriate to tle local market’s demands. Te marketing and selling strategies tlat developers form must be directly linked to tle results of tleir analysis. Effectively gaining a widespread understanding of tle benefits of green lomes is critical to successful market penetration, and partnering witl relevant government and industry programs is often a critical step in green residential market engagement. Tis process is covered more fully in Clapters 5 and 6 of tlis report. Fi gur e 3: The Mar ket Engagement Fr amewor k Acute Resource Pressures Macroeconomic Trends • Growing skills and competencies • Raising awareness through outreach • New strategies for a new product • Addressing the concept (awareness) and/or the product (brand) Consumers Government Industry 1. Evaluating the landscape 2. Seeking local partnerships 3. Designing marketing & sales strategies Strategy Analysis 5 R e s i d e n t i a l G r e e n B u i l d i n g R e p o r t T le green building indus- try is growing rapidly and las gained a great deal of attention in botl mainstream media and tlrouglout tle entire building design and construc- tion field. Indeed, as far back as 2003, Building Design & Construction magazine was calling green building “tle most vibrant and powerful force to impact tle building design and construction field in more tlan a decade.” 3 Tree years later, tle same publication states: “Wlat started out as a claris- matic environmental crusade las matured into an establisled sector of tle U.S. construction industry.” 4 Te green building movement in tle U.S. is nearing wlat many experts are calling a tipping point, wlere tle majority of residential and commercial builders will be participating in green building projects to a significant degree (in wlicl more tlan 15° of tleir projects will be green). Te growtl and maturation of tlis market is due to a variety of factors, including external drivers. Te list below reviews some of tle most significant of tlese drivers. For an in-deptl exploration of tlese drivers, see tle full report “Residen- tial Creen Building: Identifying Latent Demand and Key Drivers for Sector Crowtl”, available at www.erb.umicl.edu. Non-Residential Green Building Market: In 2004, non-residential green building accounted for rouglly 2° of tle U.S. market, resulting in a $3.3 billion component of tle overall industry. By 2010, tlis market slare is predicted to grow to between 5 and 10° of tle new non-residential market, representing a $10-20 billion industry. A 2005 McCraw- Hill Construction survey found tlat 40° of tle builders, arclitects, engineers, and designers surveyed report “more tlan moderate” involvement witl green building. More tlan 85° of tle arclitect, engineers, and contractors report partici- pation in green building activities. More tlan 31° of all builders surveyed report more tlan moderate involvement in green building. 5 Residential Green Building Market: A 2006 McCraw-Hill Construction study projects tlat by tle end of 2007, 60° and 59° of all small and large lomebuilders, respectively, will undertake green construction projects, accounting for at least 15° of tleir production (as slown in Figure 4). Over 30° of lome builders currently report “more tlan moderate involvement witl green building.” 6 As slown in Figure 5, tle percentage of lomebuilders currently doing at least 15° of tleir product to a green standard eclipsed tlose witl little to no engagement in tle sector in 2006. McCraw-Hill projects tlat in 2007 tle percentage of lomebuilders leavily involved in green design and construction will surpass tlose witl little or no involve- ment, representing a second significant tipping point. McCraw-Hill also suggests tlat tle residential green building market is expected to grow to between $19 billion and $38 billion by tle year 2010, up from $7.2 billion in 2005. McCraw-Hill defines green lomes as ones tlat meet tle “bronze” tlreslold of tle NAHB Model Creen Building Cuidelines, and tlat tle predictions are based on self-reported survey data. 7 Wlile otler nationwide green lome standards, including LEED for Homes and NAHB’s Model Creen Home Building Cuidelines, lave recently entered tle pilot and distribution plases, Current State Of Te Creen Building Market Emergence and Growth of Residential Green Buildings: External Drivers Energy and Global Warming Urbanization Trends Emergence and Popularity of Green Building Programs Government Involvement Socially Responsible Investing Consumer Demand 6 Chapter 2 NAT I ONA L T R E NDS A M a r k e t E n g a g e m e n t F r a m e w o r k f o r D e v e l o p e r s a n d B u i l d e r s local and regional green lome programs lave been around for years. Since 1991, wlen Austin’s green lome program was launcled, over 62,000 lomes lave been built according to a green building standard nationwide. 8 Te NAHB Researcl Center reports tlat at least 14,589 lomes were built to a local or regional green building standard in 2004. 9 Recent Growth in LEED One strong measure of tle recent and rapid growtl in tle green building market is tle growtl in Leaderslip in Energy and Environmental Design (LEED) registered and certified buildings. LEED is a green building certification program developed and run by tle United States Creen Building Council (USCBC). Te value of new LEED-New Construction (LEED-NC) registered projects las grown dramatically eacl year, from rouglly $792 million in new projects in 2000, to rouglly $10 billion in new projects in 2006. Te growtl in square footage of LEED registered projects is also impressive. In 2002, tlere was rouglly 80 million square feet of LEED registered space. 10 As of February 2007, USCBC estimates tlat over 829 million square feet is certified or registered. 11 Crowtl in USBCC involvement las also been profound. From 2000-2007, member companies and organizations grew from under 500 to over 7,675, workslop attendees grew from under 600 to over 43,800, and LEED-accredited professionals grew from 500 to over 35,500. 12 Recent Growth in Energy Star New Homes: Energy Star is tle most widely recognized environmental certification program and product label in tle country. Tis U.S. Environmental Protection Agency certification program for products tlat meet strict energy efficiency guidelines las separate certification standard for new lomes tlat complements its well- known appliance-rating standard. 13 In 2005, Energy Star aclieved an average national market presence of nearly 10° in tle new lomes sector, witl 149,568 new Energy Star site-built, single-family lomes built. Trougl 2006, more tlan 525,000 Energy Star qualified new lomes lave been built nationwide. 14 From a sales value perspective, residential Energy Star building is an impressive market segment. According to tle Natural Marketing Institute, tle value of Energy Star-certified lomes sold in 2005 was $26 billion. 15 “Te ‘green lomes’ of today will become tle standard lomes of tomorrow,” states Harvey M. Bernstein, Vice President, Industry Analytics and Alliances, McCraw-Hill Construction. 16 David Ellis, President of tle Creater Atlanta Home Builders Association, agrees: “Ten years from now, we’re just going to call it low we build louses.” 17 David W. Milner, Vice President of Haven Properties (an Energy Star award winning builder tlat constructs 100 to 130 lomes per year) 18 in Alplaretta, Ceorgia, recognizes tlat, “In tle Soutleast, green building is certainly an emerging market tlat is coming into its own. I feel like tlose wlo embrace it earliest are tle ones tlat are going to establisl tlemselves in tle marketplace as builders tlat are leading edge. Don’t wait until it’s forced upon you. Begin to investigate low you can get into a program.” 19 7 Fi gur e 4: Smal l Bui l der s and Lar ge Bui l der s Fi gur e 5: Demand Pr oj ec t i on 35% 100 80 60 40 20 0 2005 2006 2007 50% 66% SMALL BUI LDERS Year Green building involvement expected at 15% or more Source: MrGraw-Hill 2006 Residental Green Building Smart Market Report 27% 100 80 60 40 20 0 2005 2006 2007 39% 59% LARGE BUI LDERS Year NAT I ONA L T R E NDS “Ten years from now, we’re just going to call it how we build houses.” D»vii Eiiiis, Pvisiii×1 oi 1ni Cvi»1iv A1i»×1» Hori Buiiiivs Associ»1io× 65% 40% 15% 2005 2006 2007 20% 31% 69% 56% 45% 25% 35% 37% 63% Upper Tipping Point Lower Tipping Point PROJECTION Depth of Green Building Involvement Exploring Involvement to Moderate Share of Projects (15% or less projects are green) Signifcant Share or More of Projects (16% or more projects are green) Largely to Fully Dedicated to Green Building (60% or more projects are green) Source: MrGraw-Hill Construction 2006 P o p u l a t i o n R e s i d e n t i a l G r e e n B u i l d i n g R e p o r t Willingness to Pay and Absorption Rates Te Solaire green condominium building in Battery Park, New York City, is attaining 10-15° rent premiums based on green demand. Solaire Leasing Manager Lydia Haran says tle marketing strategy clanged over time: “Wlen we started, we were marketing a stunning residential building witl five-star services, unsurpassed views, and condo quality finisles. Te green features were an added incentive.” Haran continues, “But we learned from tle leasing process tlat tle green features actually were primary and tle otler factors secondary, and tlat tlere was a pent-up demand for green luxury ligl-rises. We leased 293 units witlin five montls.” According to Haran, tlose units aclieved a 10° premium in rents, wlicl las risen to 15° since tle building opened last year. 20 Overall interest for Terramor Village (green lomes in soutlern California) lomes was 32° ligler, and absorption was 5° greater tlan lomes in neiglboring Ladera villages tlat lacked Terramor’s green elements. Terramor Village lomebuilders also enjoyed a 5-10° price premium over lomes in Ladera Rancl. 21 Protection During Market-Downturns Despite tle lackluster local economy, tle 15-story Henry condominium building, designed by Portland CBD Arclitects, sold out nine montls alead of construction, and tle developers raised tle price five times. Dennis Wilde, Senior Project Manager witl developer Cerding Edlen, cautions tlat wlile tle buying public may favor an environmentally sensitive product–especially in tle Pacific Nortlwest–tley are not necessarily willing to pay more for it. Still, in a competitive market, lower utility bills and tle promise of a lealtlier indoor environment give tle developer a way to differentiate tle product in tle marketplace, Wilde says. 22 “Creen lomes are a little more isolated from a downturn,” says Clris Bartle, President of Te Evergreen Croup, a San Francisco green brokerage company. “Our market las softened too, but not enougl to really make a difference.” 23 Reduced Warranty Costs and Reduced Call-backs According to David W. Milner, Vice President of Haven Properties in Alplaretta, Ceorgia: “Between 2003 and 2004, our warranty costs went down by about 11°. . . . And we directly attribute tlat to . . . tle green building program.” 24 Dennis Creecl, Executive Director of Soutlface Institute, wlicl developed tle EartlCraft green lomes certification, says: “If we can reduce tle number of call-backs . . . tlat’s money in [builders’] pockets.” 25 Attracting New Consumers “Creen communities bring in lomebuyers wlo typically buy only in tle resale market,” says Brooke Warrick, President of American LIVES, a consumer-focused market researcl firm, “so developers and builders are creating a new market for tlemselves.” 26 Entitlement Process Steve Kellenberg notes, “Applying Creen measures can definitely win over communities and speed tle entitlement process. Voluntarily restoring wetlands and otler ecological areas, encouraging alternatives to automobile use, and creating open space for community use go a long way towards building support and reducing legal delays.” 27 According to Landon Clristoplerson, a project manager witl tle small developer Landwell Company in Nevada, municipal support is critical. “[City officials] are eager to bring fortl a true green development--one tlat embraces best development practices tlat will stand tle test of time.” 28 E X P E R T T E S T I MONI A L S ON T HE B E NE F I T S OF B UI L DI NG GR E E N Clapter 2: Current State of tle Creen Building Market 8 A M a r k e t E n g a g e m e n t F r a m e w o r k f o r D e v e l o p e r s a n d B u i l d e r s 9 E X P E R T T E S T I MONI A L S ON T HE B E NE F I T S OF B UI L DI NG GR E E N Resale Value According to tle National Resource Energy Laboratory (NREL), SleaHomes’ ligl performance lomes in San Diego, experienced a mean dollar gain of 55.4° for a mean ownerslip lengtl of 22.5 montls. Comparison [non-green] lomes experienced a mean dollar gain of 44.7° for a mean ownerslip lengtl of 28.1 montls. Te mean dollar gain per montl owned was $14,500 for SleaHomes and $9,300 for comparison lomes. 29 Increased Publicity and Improved Reputation By its own contractor’s estimate, SleaHomes received, witlout cost, print and broadcast media coverage on tle San Angelo and Tiempo developments tlat approximated one million dollars in publicity value between )anuary and August 2001 alone. Te coverage included San Diego television evening news, local newspapers, and trade journals. 30 Amy Bolten, of Clristoplerson Homes in California, reported tlat tle company’s green reputation was a significant factor in attracting a land seller in Marin County to approacl tle company to arrange a sale of liglly valuable land for development, ratler tlan putting it up on tle open market. Coing green las created goodwill witl municipalities and environmental groups in addition to opening doors sucl as better access to properties. 31 Alleviating the Cost Burden Perception Te perception of increased costs is one of tle most significant impediments to builders wlo are considering adopting green building. After a tlorougl review of tle current researcl and studies, McCraw-Hill finds tlat “most literature suggests green building can be aclieved for comparable costs to standard construction, witl better up-front planning andior energy or otler cost savings as a result of green construction.” 32 Creen lome builders lave also found tlat actual cost premiums in building green are regularly less tlan originally perceived. According to tle Urban Land Institute, “Practitioners estimate tlat using green materials tends to cost between 3-4° more tlan using conventional construction materials.” 33 Most articles and industry professionals agree tlat green building cost premiums are in accordance witl tle Urban Land Institute’s estimates. Creen construction can be successfully completed at zero extra cost witl careful design and a systematic incorporation of many of tle green elements early in tle development process. 34 Conversely, piece-meal attempts at green construction can result in costs exceeding tle typical 2-5°. Altlougl tle costibenefit issue is central to any discussion about green construction, it falls largely outside tle scope of tlis report. Green construction can be successfully completed at zero extra cost with careful design and a systematic incorporation of many of the green elements early in the development process. R e s i d e n t i a l G r e e n B u i l d i n g R e p o r t D evelopers and builders seeking to add a green component to tleir portfo- lios–or adopt green standards as a fundamental element of tleir business–must possess effective and comprelensive strategies to aclieve success in tle green lomes marketplace. Te existing paradigm of delivering a known product to a known consumer becomes clouded wlen con- fronted witl botl a product witl less-familiar attributes and benefits and a consumer base witl a diverse set of preferences and priorities. Many of tle risks associated witl jumping directly into tle green lomes market can be alleviated by a better understanding of tle fundamen- tal elements of tle marketplace. Te process of industry- and consumer-demand analysis in any given locale can be burdensome and add to tle complexity of tle product-to-market par- adigm. However, by analyzing tle system as a wlole, new opportunities and drivers can be revealed tlat will lelp any entrant maximize returns wlile lelping to reduce costs and avoid frustrating obstacles. Te Market Engagement Framework (MEF) lelps builders and developers gauge tle relative strengtl of tle marketplace and identify leverage points from wlicl to devise a comprelensive strategy for market entry and growtl Te MEF contains two fundamental components: analysis and strategy. Te Market Analysis component is described in detail lere and tle Market Strategy component is furtler explained in Clapters 5 and 6. Market Analysis. Te stakelolders in tle residential green building marketplace are numerous and are found across most of tle major sectors of civil society, as slown below: Consumers, tle end users of tle product, are at tle root of all activity in tlis arena, as tle industry linges on tleir ability to value tle fundamental nature of tle product being delivered. Tis complete landscape belaves as a complex system. To simplify analysis of tle green lomes marketplace, tle various stakelolders lave been aggregated into tlree primary elements: (1) consumers, (2) industry, and (3) government. A proxy metlod of analysis las been developed tlat enables tle builder or developer to gauge and evaluate tle relative strengtl of eacl of tle different elements by examining discrete features and claracteristics witl- in eacl respective element. Furtlermore, two otler external factors influencing tle residential green building marketplace lave been identified: (1) acute resource pressures and (2) macroeconomic trends. Tese pressures are more subjective in nature tlan tle otler elements, but are no less significant in contributing to tle development of a comprelensive strategy to aclieve tle market engagement goals of tle company. Elements of a Robust Creen Homes Market 10 Chapter 3 Market Stakeholders • Government departments • Material suppliers • Nonprofts and advocacy groups • Media companies • Industry associations • Community groups • Architecture frms • Insurance agents • Construction companies • Appraisers • Real estate brokers • Home fnancing community • Homebuyers • Research institutions A M a r k e t E n g a g e m e n t F r a m e w o r k f o r D e v e l o p e r s a n d B u i l d e r s 11 CONS UME R S P ardee Homes’ Marketing Vice President )oyce Mason indicated in a Marcl 2007 article tlat potential lomebuyers lave recently started to specifically ask for green features in tleir lomes. Sle states: “We saw [tle trend] first lappen in lybrid cars. I tlink it’s probably going to slift over to louses.” 35 How does one identify tle likely green lomebuyer: Te answer to tlis fundamental question is not as straigltforward as one would lope. Unlike tle straw-bale or “UFO-slaped” ecological and natural lomes of decades past, green lomes today look and feel like any otler conventional lome witl regard to tleir basic attributes. However, various national segmentation studies reveal a few statistically significant differences in attitudinal and belavioral claracteristics tlat demonstrate an identifiable “ligl-value” buyer. Experts interviewed during tle development of tlis report agree on various patterns found witlin tle green lome buying population. Tese similarities include ligler levels of education, greater overall awareness of environmental issues sucl as global warming, and concern over tle lealtl and performance attributes of a lome. Experts also express differences in consumer priorities based on geograplical specificity. For instance, California residents are more concerned about energy efficiency and air pollution, wlereas tlose in tle soutleast part of tle country are more concerned witl issues sucl as mold and indoor air quality. Lastly, certain project-level studies lave been undertaken by developers to lelp understand tle key factors affecting people’s decisions to buy andior move into a green residence. Tese pre- and post-occupancy studies, reviewed later in tlis clapter, reveal additional prevailing claracteristics of tle green lome consumer. Government Industry The Green Homes Market Consumers Common Behaviors and Charac- teristics of Green Homebuyers Seek out healthy food options Purchase green products Participate actively in environmental and cultural organizations Desire holistic experiences and authenticity Look for multiple and extensive sources of information Pursue higher education CONS UME R S R e s i d e n t i a l G r e e n B u i l d i n g R e p o r t Te most notable national studies conducted to lelp identify tle likely green lomebuyer are tlose by tle Natural Marketing Institute, American LIVES, and Roper’s ASW. Tis report focuses on tle first of tle tlree. Togetler, tlese studies reveal tlat tle common claracter- istics of green lomebuyers are generally based on consumer attitudes, belaviors, mindsets, and preferences (i.e. psyclo- graplic claracteristics) ratler tlan on easily-identifiable demograplic claracteristics. Tese studies rigorously support tle notion tlat certain segments of tle population are more likely to be receptive to tle green building message and are, tlerefore, more likely to buy green tlan tle general population. Tus, as toucled upon earlier in tlis report, tlese ligl value potential green lome- buyers are claracterized by a faster absorption rate of green lomes and a ligler willingness to pay. Natural Marketing Institute Te Natural Marketing Institute (NMI) is a leading business consulting and market researcl firm wlose comprelen- sive consumer segmentation analysis focuses on tracking consumer labits related to tle LOHAS (Lifestyles of Healtl and Sustainability) marketplace. In its 2006 survey, five consumer seg- ments were identified: (1) tle LOHAS consumer, (2) tle Naturalites, (3) tle Drifters, (4) tle Conventionals, and (5) tle Unconcerned. Te first of tlese seg- ments, tle LOHAS group, slows “leader- slip in tleir attitudes toward tle environ- ment, society, and socially-responsible business.” 36 Tey tend to be passionate and knowledgeable about tle products tley buy, to be less price sensitive, and to be more brand loyal. Tey also generally consider tlemselves to be early adopt- ers of new products and services. Te second segment, tle Naturalites, wlile less committed to environmental issues, are claracterized by a general concern for personal lealtl, an attitude reflected in tleir purclasing labits. Te NMI 2006 survey indicates tlat togetler tle LOHAS and Naturalites comprise 90 million con- sumers and represent 41° of tle general population (16° and 25°, respectively). However, tlis group accounted for 51° of tle Creen Building Users segment (24° and 27° respectively). 37 Te LOHAS and Naturalite consumer is tlerefore more likely to purclase green buildings and products tlan is tle non-LOHASinon- Naturalite consumer. Data from 2003 and 2005 also substantiate tle disproportion- ate propensity of tle LOHAS consumer to buy green building products. As identi- fied by NMI, tle following are a few key claracteristics of tle LOHAS consumer: • 79° of LOHAS consumers consider tlemselves eitler tle “first person to start using new environmentally friendly products” or “alead of most people,” compared to just 36° of tle general population. 38 • 16° of LOHAS consumers possess post-college degrees, compared to only 10° of tle general population. 39 • Te LOHAS customer is tlree times more likely to useiown renewable power or plan on purclasing renewable power in tle next year as is tle general population (6° vs. 2° in eacl case). 40 Furtlermore, NMI’s 2003 researcl study identified tle Creen Homebuyeri Remodeler and compared specific belaviors of tlat segment of tle population to tlose of tle general population. Te Creen Homebuyeri Remodeler include tlose respondents wlo indicated tlat tley “plan to buy a lome, renovate, or make an addition to tleir current lome witlin tle next year” and indicated one or more of tle traits important for tleir building products, as slown below. Fi gur e 6: Gr een Bui l di ng Cons umer Gr oups Clapter 3: Elements of a Robust Creen Homes Market 12 Building Product Traits Desired by Green Homebuyers Biodegradable Chemical-free Contains recycled content Energy efcient Energy-Star certifed Environmentally friendly Formaldehyde-free Low fumes Natural No chemical residues No synthetics Non-toxic Sustainably harvested 41 10% Gener al Popul ati on LOHAS Naturalites Drifters Conventionals Unconcerned Green Bui l di ng User s 25% 14% 27% 24% 14% 23% 23% 25% 16% Source: Natural Marketing Institute 2006 Source: Natural Marketing Institute 2003 A M a r k e t E n g a g e m e n t F r a m e w o r k f o r D e v e l o p e r s a n d B u i l d e r s Table 1 lists examples of tle differences in purclasing belaviors of tlese consumers versus tlose of tle general population, as revealed by tle NMI researcl. Te results of tle NMI study suggest tlat tle green lomebuyer generally demonstrates a multitude of significant differences in certain purclasing belav- iors tlat combine to make identification tlrougl a proxy metlod of analysis possible. Te results also reveal possible ways to target tlese consumers and develop appropriate marketing and advertising materials. Te American LIVES and Roper ASW studies, wlose LOHAS-like consumer segments are referred to as “Cultural Creatives” and “True Blue Creens” respectively, furtler support tlese concepts and findings. Behavioral Attribute General Population Green Homebuyer/ Remodeler Purchases of “Green” Products * denotes statistically signifcant diference Hybrid Vehicle 0.3% 0.4%* Renewable Power 6.3% 8.8%* Alternative Healthcare 31.8% 44.4%* Socially Responsible Investing (SRI) 10.6% 18.3%* Healthy Foods and Beverages 53.7% 64.0% - Celestial Seasonings 24.6% 33.7%* - Stonyfeld Farms 6.4% 8.2% Natural/Organic Personal Care 61.5% 76.0% - Aveda 9% 15%* Cleaning Supplies and Household Products 77.0% 92.2% - Seventh Generation 2.7% 4.2%* Energy-Efcient Appliances 74.1% 85.5% Energy-Efcient Electronics 52.3% 64% Dietary Supplements 75.3% 86.3% Memberships to Clubs/ Organizations - Library 44.6% 50.7% - The Nature Conservancy 4.6% 6.7%* - Sierra Club 2.7% 3.4% - Zoo 8.8% 12.0%* - Museum 8.2% 11.2%* - Performing Arts Center 5.4% 6.3% - Horticultural Center/Garden Club 2.7% 4.4%* - Science Center 2.6% 4.4%* Readership and Viewership Magazines - Better Homes and Gardens 28.3% 39.4%* - Consumer Reports 23.6% 34.9%* - National Geographic 18.8% 28.8%* - Good Housekeeping 20.9% 25.1% - Newsweek 16.1% 21.3%* - Prevention 10.0% 12.8% - Cooking Light 8.7% 12.4%* - Discover 7.3% 10.7%* - Martha Stewart 7.3% 12.0%* - Parents 6.3% 8.8%* - Men’s Health 5.6% 6.1% - Money 5.5% 9.5%* - Fitness 4.8% 5.5% - Self 4.5% 6.5%* - Health 4.4% 6.1%* - Sierra Club 2.1% 2.5% Newspapers - The New York Times 7.7% 10.1%* - The Wall Street Journal 5.7% 9.5%* Television/Radio - PBS 28.7% 37.7* - Home and Garden Channel 26.4% 36.8%* - NPR 19.9% 25.9%* - This Old House 19.2% 28.4%* Tabl e 1. Rel evant Behavi oral Di fferences i n Green Homebuyers and Remodel ers “We saw [the trend] first happen in hybrid cars. I think it’s probably going to shift over to houses.” )OYCE MASON, MARKETINC VICE PRESIDENT OF PARDEE HOMES’ CONS UME R S 13 Source: Natural Marketing Institute, 2003 Expert Opinions Regarding Characteristics and Motivations of the Likely Green Home Buyer Primary interviews were conducted to validate tle national segmentation studies and provide additional insiglt as to wlo is tle most likely green lome purclaser. Assessing tle opinions of tlose at tle forefront of tle green lome industry allowed for tle creation of a more robust consumer element of tle Market Engagement Framework. Market Segmentation: • Barr Hall, Director of Sales and Market- ing at McStain Neiglborloods, one of tle premiere green lome builders in tle U.S., views lis target audience as a “subset of tle Cultural Creatives” (simi- lar to LOHAS). Tey do not need to be “rabid-green, but it’s good [for tlem] to lave an increased level of awareness about environmental issues.” 42 • Tom Paladino, President of Paladino & Company-Creen Building Strategies, indicated tlat tle “Cultural Creatives” were a likely consumer due to tleir propensity to ask a lot of questions. He also posits tlat “Traditionalistsi Modernists” would follow. 43 • Mike O’Brien, Creen Building Specialist for tle Portland Office of Sustainability, agrees: “People witl strong personal values are most interested in green building. Tey’re creative. It’s about making informed cloices.” 44 • Mary Westcott, Administrative Director for LEED for Homes witl tle Davis Energy Croup, views many of ler clients as “innovators, early adopters, and lolistic-tlinkers.” 45 Green Product Purchasing Behavior: • Dennis Allen, President of Dennis Allen Associates, a building company in Santa Barbara and Ventura County, California, indicates tlat le is constantly bumping into clients and interested green lome- buyers at local farmers’ markets in tle Santa Barbara area. 46 • Mike O’Brien, Creen Building Specialist for tle Portland Office of Sustainability, reflects on tlere being only one farmers’ market a decade ago, wlereas now tlere are approximately 25 tlrouglout tle city on different days of tle week. He furtler postulates tlat restaurants witl menus offering organic and natural foods lave proliferated in tle last decade, giving rise to a nicle specialty-farming indus- try around tle city. 47 • Botl Allen and O’Brien liglliglt tle concentration of lybrid car owners in tleir regions as also indicative of consumer demand and awareness for green products in general. Indeed, Portland ranks first in tle country in tle number of lybrids sold per tlousand louselolds, witl Santa Barbara ranking fourtl. Monterey and San Francisco fill in tle second and tlird slots. Education and Income Level: • McStain Neiglborloods conducted a focus group study of 1,800 customers and found tlat education attainment was key, prevalence of master’s degrees or ligler among clientele was significant–four times tlat of tle general population. Te study also reveals tlat McStain clientele demonstrate a propensity to attend live tleater, visit art museums and botanical gardens, and be active in otler cultural clubs and events. 48 • A study, performed by Tomas Taber & Drazen for Built Creen in Colorado, reveals tlat tlose more likely to be aware of Built Creen are married and college educated, lave a louselold income between $100-$150K, and live in louses costing $300k-$500k. 49 • Dennis Allen, President of Dennis Allen Associates, notices tlat lis clientele are typically upper-middle class ratler tlan upper-class. He feels tle liglest income buyers generally do not slow a lot of interest in green features and states tlat ligler education is a distinguislable attribute. 50 • Amy Bolten, of Clristoplerson Homes, states: “It’s not tle [liglest-income earners] wlo don’t really care about operating costs and still want all of tle bells and wlistles and square-footage of luxury lomes. It’s tle informed upper-class consumer witl some discretion and conservatism in low tley spend money.” 51 Motivations Underlying Purchasing Decisions: • Cordon Cooke of Building Knowl- edge speaks about quality: “Consumer expectations are constantly on tle rise, wletler it’s a car or a louse or a piece of fruit. Zero-defect louses are now in demand. Customer service and comfort will soon be demanded as well. [Te green building movement] follows trends seen in otler industries (cars and appliances) wlere tle consumer expects more.” 52 • Abbey Elman, a green building profes- sional wlo is lelping pilot tle LEED for Homes program in Texas, states: “Some [purclase green lomes] to slow off to tleir friends. Some do it for tle greater good. But most do it really only if it makes sense for tlemselves first. Most want it for durability, comfort, and energy savings. Tey want to be comfortable, not pay too mucl for it, and be able to resell it. Homebuyers will pay a 5° premium for green features, but tley also demand a 5-year payback. Twenty- or 30-year paybacks simply don’t resonate.” 53 14 Clapter 3: Elements of a Robust Creen Homes Market R e s i d e n t i a l G r e e n B u i l d i n g R e p o r t Industry experts strongly believe tlat tle LOHAS consumer, tle Cultural Creatives, and tle True Blue Creens are motivated and educated consumers and, tlerefore, liglly receptive to tle green lome message. Altlougl all tlree of tlese segmentation groups generally desire a lome tlat meets tleir more traditional needs of location, space, and afford- ability, tley often eitler seek out green lome providers specifically or are already attuned to tle benefits of green lomes. However, it is often pointed out tlat tlese groups are not tle only ones buying green lomes and, tlerefore, not tle only viable and attractive segments. Successful engagement of tle market- place linges upon tle ability of a builder or developer to communicate product benefits to tle larger, more mainstream, population. Indeed, Marc Riclmond, tle former manager of Austin’s green building program and one of tle principals belind tle launcl of Build It Creen in California, sees green lomes as appealing to anyone “wlo wants sometling better.” 54 A M a r k e t E n g a g e m e n t F r a m e w o r k f o r D e v e l o p e r s a n d B u i l d e r s Project-Level Surveys Homebuyer Willingness to Pay: Strong indications exist that homebuyers in markets across the country are increasingly willing to pay premiums for green homes. Cahners Residential Group, American LIVES, Christopherson Homes, and others have all contributed to this body of research. The 2001 Cahners survey reveals that 96% of homebuyers claim they are willing to pay extra for green features, and 68% would be willing to pay $2,500 to $5,000 extra. Twenty percent would pay up to $10,000 for green upgrades. A 2005 Christopherson Homes study fnds that roughly half of its survey respondents are willing to pay over $100 a month in additional mortgage payment for a green home, equating to an additional $15,821 in purchase price, assuming a 30-year loan and a 6.5% APR. An October 2005 survey by American LIVES of homebuyers in the Terramor section of the Ladera Ranch development in Orange County, California, fnds that 23% of respondents are willing to pay over $100 a month in additional mortgage payment for green home features they think are important. Interestingly, this fnding is identical to a larger 2004 survey of recent homebuyers in the northern California, Denver, Salt Lake City, and San Diego. Homebuyer Willingness to Pay: 15 CONS UME R S Several project-level surveys lave been conducted to lelp determine tle principle drivers and attitudes related to tle green lome purclasing decision witlin specific communities tlat lave been built to a green standard and marketed as sucl. For instance, tle results of surveys green lome buyers in tle Ladera Rancl development in California indicate tlat most lomebuyers want to see builders do more in tle area of green building and tlat a majority of lomebuyers is generally willing to pay an additional $50 or more on tleir montlly mortgage payments for green features. Eiglty-tlree percent respond in tle affirmative to tle state- ment: “I would spend money to save energy, if I could recover it in lower utility bills.” Only 10° of tle respondents indicate tley are not concerned about energy-saving features. More specifically, new teclnologies tlat improved indoor air quality are indicated as being “very important” or “essential” to lave in tle lome by a majority of tle respondents. 55 A consumer survey conducted by Polaris Inc. in 2005, on belalf of Clristoplerson Homes in Nortlern California, wlicl is responsible for over 3,500 lomes in 30 communities, 56 slows similar results among tle 192 respondents: 22° of respondents indicate tley “would spend extra money wlen purclasing a lome to save energy even if [tley] knew [tley] miglt not be repaid in savings on utility bills.” An additional 72° say tlat tley “would spend extra money wlen purclasing a lome to save energy, if I could recover it in lower utility bills.” To tle respondents, tle term “green building” typically means “good for tle environment,” witl a small majority (51°) equating it to “reduced energy bills”. Furtlermore, only 42° link green building to a “lealtlier indoor environment,” and only 22° link it to “better built lomes.” Lastly, 74° of respondents are eitler “somewlat aware” or “very aware” of green building teclniques and features. 57 R e s i d e n t i a l G r e e n B u i l d i n g R e p o r t Creen lomes, wlen viewed as a consumer product, possess features tlat allow tlem to be absorbed into tle marketplace. However, tle green building consumer often demonstrates a variety of demograplic, psyclograplic, and belavioral claracteristics tlat cannot be easily placed into any one segmenta- tion profile. Altlougl many purclasers of green lomes understand and value tle associated attributes and benefits, many otlers may just enjoy tle “look and feel” of tle louse regardless of tle features tlat make it green. Because tlere is no single profile of tle green lome consumer, sizing tle market becomes difficult. However, tle proxy metlod of consumer-demand analysis is still relevant and provides a multi-faceted approacl tlat identifies: (1) wlicl geograplies to specifically target, (2) tle level of maturity of consumer awareness, and (3) low to best leverage prevailing attitudes in a marketing and sales strategy. Many experts interviewed agree in principle tlat green lomes can be sold to just about anyone as long as tle green lomes message is delivered correctly. However, tle ability to identify likely green lome buyers provides a two-fold benefit: lowering transaction costs associ- ated witl making sales and identifying appropriate marketing messages tlat will resonate most effectively witlin a closen geograply. Terefore, a proxy analysis, altlougl not witlout limitations, is still a wortlwlile endeavor for tlose looking to understand tle nature of consumer demand witlin particular locations. Te belaviors tlat can be relatively easily gauged for different locales lave been winnowed down from tle list of all associated and relevant belaviors in order to quickly and easily measure tle relative strengtl of tle consumer market for green lomes. Te researcl suggests tlat tle green lomebuyer is more likely to own a lybrid velicle or slop at natural food stores tlan is tle general population. Obviously, buying a lybrid velicle or slopping at Wlole Foods does not guarantee tlat tle consumer will tlen purclase a green lome. However, tle proxy analysis does provide a relative basis for gauging potential consumer demand. Most importantly, a large number and percentage of people in a given area buying lybrid velicles and slopping at Wlole Foods can be seen as a positive sign tlat tlere is a viable consumer base in tle area liglly receptive to messaging about tle benefits of green lomes. SustainLane comprelensively assesses a city’s greenness. Founded in 2004, SustainLane publisles rankings on U.S. city sustainability covering sucl topics as population mobility, traffic congestion, air quality, government innovation, and climate clange initiatives. For tle consumer proxies, tle city ranking on local food and agriculture use is particularly informative because it considers tle number of farmer’s markets and community gardens per capita. 58 Use of the Market Engagement Framework for the Consumer Element Consumer Proxies and Indicators Purchase of Green Products • Sales of hybrid vehicles • Number of existing Whole Food Markets • Number of Whole Foods Markets slated for development • Number of natural food stores carrying Celestial Seasonings products • Number of natural food stores carrying Stonyfeld Farms products • Wholesale clubs and specialty shops carrying Stonyfeld Farms products • SustainLane: Local Food & Agriculture • Number of Aveda stores • Number of Aveda salons/spas • Number of stores selling Seventh Generation products Readership • Readership of certain magazines • Readership of certain newspapers Conceptual Exposure • Green construction conceptual exposure Education • Educational Attainment: Bachelor’s Degrees • Educational Attainment: Graduate or Professional Degrees Clapter 3: Elements of a Robust Creen Homes Market 16 A M a r k e t E n g a g e m e n t F r a m e w o r k f o r D e v e l o p e r s a n d B u i l d e r s I NDUS T R Y T le industry element of tle green lomes market carries tremendous importance because it provides tle expertise, labor, and capital required to deliver lomes to tle end-user. In addition, industry often provides tle vision and initiative necessary for market transformation and growtl. In tlis case, “industry” refers not only to businesses, but also to non-governmental organizations, nonprofits and industry or trade associations, including green lome certifica- tion programs run by nonprofits or industry groups. Dennis Creecl, Executive Director of tle Soutlface Institute and clampion of tle EartlCraft green lomes standard in Atlanta, Ceorgia, states tlat tlere are two primary metlods for builders to make money from green building. Te first is to improve construction science in order to reduce waste, increase energy efficiency, riglt-size meclanical systems, etc., witl tle ultimate goal of reducing costs. Te second is to improve building quality in order to differentiate tle product and to gain a market advantage by growing a price premium or increasing market slare. 59 Fortunately, tlese metlods are not mutually exclusive and tend to support eacl otler if done properly. Industry professionals will always lave tle need to increase (or at least maintain) profits wlile building green. Primary Methods to Make Money from Building Green: 1. Improve construction science in order to reduce waste, increase energy efciency, right-size mechanical systems, etc., with the ultimate goal of reducing costs. 2. Improve building quality in order to diferentiate the product and to gain a market advantage by acheiving a price premium or increasing market share. Government The Green Homes Market Consumers Industry 17 I NDUS T R Y R e s i d e n t i a l G r e e n B u i l d i n g R e p o r t Industry Stakeholders Industry is complicated and multi- faceted, but also resilient, ingenious, and fast-moving. As witl conventional real-estate development, residential green building is tle result of tle combined efforts of developers, builders, specialists (including arclitects, engineers, landscape arclitects, urban planners, and otlers), lome financiers, brokers and realtors, councils and associations, and otler organizations. Furtler information regarding specific industry players and tleir activities in tle four geograplies piloted witlin tle scope of tlis report can be found in Clapter 8. See Figure 7 for a visual diagram of tle key green residential stakelolder categories witl examples. Fi gure 7. Green Resi dental I ndustr y Stakehol ders Clapter 3: Elements of a Robust Creen Homes Market 18 I N D U S T R Y S T A K E H O L D E R S Leadership examples from the feld: Rancho Mission Viejo • 4,000-acre master-planned community in Southern California • Incorporates sustainability in all of its decisions for housing, site planning, and transportation WCI Communities • Florida developer • Incorporates green building into mainstream housing productions Cherokee • National brownfeld developer • Incorporates substantial design (water conserva- tion, on-site agriculture, green building materials and techniques, and geothermal energy) in its Kanawha development in South Carolina Advancements in the feld: Eco-broker International • Based in Colorado • Trains and certifes brokers • Educates builders and homebuyers Energy efciency in Multiple Listing Services (MLS) • Began in Pacifc Northwest • Logs data on purchasing rates and premiums paid for energy efcient homes Leadership examples from the feld: Allen Associates • Has built passive solar-designed houses in Santa Barbara, CA since the early 1970s • Goal to produce homes that generate energy, purify waste water, produce zero waste, and purify the air. McStain Neighborhoods • Premium green builder in Boulder, CA crafting 400 homes each year • Sets records for consistent customer satisfaction of over 90% Advancements in the feld: Green professionals are appearing at an exponential rate, including: • Architects • Engineers • Urban planners • Ecologists • Landscape architects • Other professionals Varying levels of expertise and ability Sources to fnd experts: • USGBC website • Energy Star website • “Who’s Green?”publication Advancements in the feld: Many fnanciers provide Energy Efcient Mortgages (EEM) • Loan money for energy improvements • Validated according to Home Energy Rating System (HERS) Accreditation Standard Banks and other providers vary by region Advancements in the feld: Many green building leaders exist throughout the country: • US Green Building Council • National Association of Home Builders / Green Building Initiative • Urban Land Institute Over 40 regional programs, including: • Built Green Colorado • Austin Energy Green Building Program (Texas) • Southface Institute (Georgia) • Build It Green (California) Developers Brokers & Realtors Builders Specialists Home Financiers Councils & Organizations A M a r k e t E n g a g e m e n t F r a m e w o r k f o r D e v e l o p e r s a n d B u i l d e r s Companies lave successfully transitioned from conventional building and real estate to incorporating green building practices into tleir standard operating procedures. Tese firms are driven by an interest to differentiate tleir products, a dedication to ligl quality, a commitment to lelping tle natural world, and even a curiosity for exploring an exciting new avenue of business opportunity. Wlatever tle motivation, tle transition and internal drive lave a better clance of success if tlere is a clampion (or team of clampions) pusling tle process forward. Te likelilood of success increases even more if tle clampion is encouraged, supported, and rewarded in tlese efforts. Very often witlin organizations tlat lave embraced tle green building market, tle initiative can be traced back to a strong, internal clampion for tle cause. In Florida, tle large-scale developeribuilder WCI Communities began its first green prototype lome in 2001 because tle tlen-current Clief Executive Officer Al Hoffman decided tlose efforts would be wortlwlile for tle company. After lis departure as tle lead of tle company, tle green projects would not lave continued witlout a dedicated group of leaders pusling progress forward. 60 Te clampions tlemselves can frequently be classified as LOHAS or Cultural Creatives in tle same way tlat tle green lomes buyers can. Reasons for Success Challenges for the Green Building Industry 19 I NDUS T R Y Witlin tle industry element, one considerable clallenge tlat tle green lomes market faces is successfully mesling national certification or guideline programs (e.g. LEED or tle NAHB’s guidelines) witl its local counterparts (e.g. Built Creen Colorado or EartlCraft). As it stands, tlere are estimated to be in excess of 40 local green building standards in tle United States. 61 Tis obviously causes confusion for tle lomebuyer, as it is difficult to discern wlicl standard las ligler requirements and wlicl weigls energy use, water use, recycled content, and otler aspects of green buildings leavier tlan otlers. Anotler common difficulty is tle myriad of actors affecting tle value clain in tle residential market. Usually a developer purclases or gains riglts to a piece of land, tlen contracts building riglts to a builder (or series of builders), and tlen tle builder’s sales staff (or even a fourtl entity: a selling agent) is responsible for selling tle constructed lomes to tle end-users. Even if tle developer is interested in and dedicated to building green, tle builder may demand or expect tlat tle buyer is willing to pay a premium to cover not only any potential increase in building costs, but also tle learning curve necessary to incorporate new green building practices. As Bob Taber, Manag- ing Partner of Tomas, Taber, & Drazen, and marketing consultant for Built Creen Colorado, describes: For a high-volume production builder in the $150-$200 thousand cost range, there can be significant costs in switch- ing over. From spec’ing and purchasing, all the way over to inspection, there’s so much associated with the transition that there will be significant start-up costs (since all of their systems must be re-worked). Tis is a big challenge for production homebuilders. Tey don’t want to go through that transition without consumer demand for it. 62 Tis learning curve relates to yet anotler clallenge for tle residential green building industry – skill and capacity building. It is not uncommon for a large portion of lome building to be completed by sub-contractors. Often, tlese sub-contractors employ workers ill-prepared to institute green build- ing teclniques on job sites. Additional training is frequently necessary to enable workers to complete tle tasks because tley tend to be different tlan conven- tional practices and developers may not lave direct control over sub-contrac- tors. Tis results in a re-structuring of tle standard operating procedures of sub-contractors, builders, and developers driving tle process. Overcoming learning curve clallenges is often most effective tlrougl partnerslips witl industry and government players wlo lave greater green building experience. Tis is furtler discussed in Clapter 5. Overcoming learning curve challenges is often most effective through partnerships with industry and government players who have greater green building experience. R e s i d e n t i a l G r e e n B u i l d i n g R e p o r t T le Market Engagement Framework’s analysis component (encapsulated in tle Market Metrics Lens or MML) is designed to provide tle information tlat developers need wlen building in a specific geograply. Te information is botl quantitative and qualitative for tle industry element. It is necessary to consider tlese developments and tle quantitative data provided in tle MML to gain a comprelensive view of tle geograply in question. Use of the Market Engagement Framework for the Industry Element Industry Proxies and Indicators Green Building Associations/Coalitions • Residential Green Building Programs - Year founded • Green Building Organizations - Year founded • US Green Building Council (USGBC) Chapters • USGBC organizational memberships Market Penetration • LEED-existing buildings • LEED-registered projects • Energy Star Homes (market penetration percentage of new homes built in 2005) • SustainLane: Green (LEED) Buildings • SustainLane: Green Economy Green Building Service Providers • USGBC LEED-Accredited Professionals (APs) - LEED APs per Capita • Energy Star Site-Built Home Builders and Developers - Energy Star Site-Built Home Builders and Developers per 1,000 housing units authorized in 2006 • Energy Star Home Energy Raters - Energy Star Home Energy Raters per 1,000 housing units authorized in 2006 • Energy Star Lenders (mortgages) - Energy Star Lenders (mortgages) per 1,000 housing units authorized in 2006 • Energy Star Utilities/Sponsors - Energy Star Utilities/Sponsors per 1,000 housing units authorized in 2006 Clapter 3: Elements of a Robust Creen Homes Market 20 A M a r k e t E n g a g e m e n t F r a m e w o r k f o r D e v e l o p e r s a n d B u i l d e r s GOV E R NME NT T le support of govern- ment institutions and public agencies, including utilities, is critical to tle market growtl and support for green lomes. Several residential green building experts, including Miclele Russo, Directory of Industry Communications at McCraw-Hill Construction, view municipal polices, pro- grams, and mandates as critical to tle growtl of green build- ing. 63 As mentioned earlier, government involvement in promoting green building is on tle rise. Expanding on lessons learned from earlier incentives in commercial green buildings, govern- ments are now exploring and implement- ing meclanisms for promoting residential green building. Tese meclanisms in- clude expedited permitting, mandate and grant policies, density and tax incentives, affordable lousing bonuses, and public recognition. In addition to tle tangible benefits to botl builders and buyers tlat incentive programs afford, government programs and initiatives indicate an effort by elected officials to serve an interested public. 64 The Green Homes Market Consumers Industry Government Institutional/Policy Dynamics In some cases, government programs are being enacted in municipalities tlat lave not yet lad significant green building activities. Boston’s recent private-sector green building mandate is one sucl case. Otler times government programs can be viewed as lagging indicators of significant green building activities in a city, sucl as increasing building-code standards to recognize increasing building performance. Regardless, a significant attribute of government programs at tle local and regional level is tleir staying power. Unlike federal tax credits for en- ergy efficiency, wlicl usually expire after only a few years, most local and regional government programs last for many years. Te USCBC does a good job of catalog- ing sucl programs and policies at tle state and local levels, and provides tlese resources publicly. 65 In addition to meclanisms for supporting green building, tle existence of departments and offices devoted to promoting green building is an important indicator of government support. SustainLane’s government measurements provide annual rankings of tle top 50 cities along a number of sustainability metrics, including land-use policy, city innovation, and knowledge base. 66 Te land-use policy component ranks cities based on park space and sprawl. Creen building expert Creg Kats of Capital E sees smart growtl and planning policies as strong indicators of likely support for green residential building. 67 Te city innovation ranking incorporates green building incentive programs and support for car slaring and carpooling. Te knowledge-base component includes tle existence of a sustainability department in city government and tle establislment of sustainability goals. 21 GOV E R NME NT R e s i d e n t i a l G r e e n B u i l d i n g R e p o r t Climate-clange efforts at tle city level lave played a major role in focusing attention on tle built environment. 68 Te setting of global-warming emissions- reductions targets by cities represents a significant step and, recognizing tlat tle buildings are a large contributor to greenlouse-gas emissions, will likely be followed by policies to increase energy efficiency in tle built environment. On )une 13, 2005, tle U.S. Conference of Mayors unanimously passed tle Mayors Climate Protection Agreement. As of Marcl 1, 2007, 431 mayors across tle country signed tle agreement, wlicl includes setting reduction targets and implementing action programs. 69 Clapter 3: Elements of a Robust Creen Homes Market 22 Mayors Agreement on Climate Change Use of the Market Engagement Framework for the Government Element For tle government element, tle Market Engagement Framework’s analysis component is composed of largely qualitative indicators to assess tle strengtl of government attention to and support for residential green building. Te indicators cover a government’s attention to tle environmental impacts of development in general, sucl as policies and programs on climate clange and land use planning, as well as specific initiatives around promoting green building. Botl “carrots” (incentives) and “sticks” (mandates) for green building are critical policy meclanisms of city and state gov- ernment tlat developers need to be aware of in assessing tle government element of tle green residential market. Overall, tle indicators listed below provide a robust lens into tle current or likely government support for residential green building. Government Proxies and Indicators Government and Planning Authorities • Discrete city-level sustainability committees and/or departments • SustainLane: Knowledge-Base • Kyoto buy-in from leadership (Mayor, City Council) • SustainLane: City Innovation Incentives, Targets, and Mandates • Municipal support for green building - Fast-tracking for green or LEED - Density bonuses (Floor-to-Area Ratios) - Taxes credits and grants • Municipal Mandates - Target for public buildings - Requirement for public buildings - Target for private buildings - Requirement for private buildings • State Level Support/Requirements • SustainLane: Planning/Land Use A M a r k e t E n g a g e m e n t F r a m e w o r k f o r D e v e l o p e r s a n d B u i l d e r s AC UT E R E S OUR C E P R E S S UR E S I n planning potential projects, developers must consider topics of immediate interest and tlose tlat may lave become consumer “lot-buttons.” Often, tlese topics can become acute pressures on decision makers in tle area, wletler tlose decision makers are consumers or potential building partners for tle developer. Tese pressures frequently stem from real or perceived tlreats in resource scarcity of one or more types, and will affect consumer awareness, industry innovation, and government environmental, building, and urban limit policies. For example, in tle soutlwest United States, water-use riglts and water-use reduction are particularly clarged issues. As a result, native landscaping (as opposed to Englisl-style lawns) las become tle standard expectation in many cities in tle soutlwest. Develop- ers working tlere slould be particularly interested in otler water-conserving or stormwater-runoff teclniques, sucl as greywater systems, permeable pavements, or natural rain catclments. Consum- ers and builders may botl value and be particularly receptive to tlese inclusions, even to tle degree tlat absorption rates andior consumer willingness to pay may be enlanced. SustainLane is useful in gauging tle claracteristics of certain resource pres- sures, it ranks tle 50 largest cities in tle U.S. on street and freeway congestion, public transit riderslip, and air-quality. 70 Furtlermore, tle Energy Information Administration of tle Department of Energy provides state averages for tle price of electricity and natural gas by end-user. 71 A more qualitative approacl to understanding pressures in an area includes reading local newspapers and municipal publications. Websites sucl as Factiva.com are useful in locating articles pertaining to green building, sustainability, and environmental issues tlrougl key-word searcles. The Green Homes Market Consumers Industry Government Acute Resource Pressures Macroeconomic Trends Emergence of the Country’s First Green Building Program Acute resource pressures occasionally spur the creation of new green building programs. In the 1970s, forward-thinking leaders from Austin, Texas within the local utility, the city govern- ment, the professional builder community, and the active citizenship realized that an alternative to building additional power plants would be to set an aggressive energy-use reduction program. These eforts spawned the Austin Energy Green Building Program, which has since grown to become one of the most successful programs of its kind in the country. 72 This turn of events is mirrored in recent years in California’s energy crisis and the resulting energy-reduction initiatives in the state. 73 23 AC UT E R E S OUR C E P R E S S UR E S R e s i d e n t i a l G r e e n B u i l d i n g R e p o r t MAC R OE CONOMI C T R E NDS D evelopments slould not be planned witlout paying close attention to macroeconomic trends of tle surrounding area. Tese macroeconomic issues include, but are not limited to: • )ob growtl rates. • Home ownerslip cost fluctuations. • Population growtl or loss. • Current lousing supply and vacancy rates. • Interest rate clanges. • Income and wage growtl. • Construction and material expenses. Tese trends slould be considered seriously wlile designing marketing and sales strategies. For instance, in a down-turned lousing market in wlicl buyers lave significant bargaining power, developers and builders slould look to green building teclniques even more tlan in otler circumstances in order to differentiate tleir products. Tis is particularly true for green lomes tlat use components to provide more financial value by reducing operating costs. It is important to note tlat real estate developers must focus on tlese trends in any business decision and slould always include tlem in tle due diligence process. As a result, tlis report does not investigate tlem in deptl. Clapter 3: Elements of a Robust Creen Homes Market 24 The Green Homes Market Consumers Industry Government Macroeconomic Trends Acute Resource Pressures A M a r k e t E n g a g e m e n t F r a m e w o r k f o r D e v e l o p e r s a n d B u i l d e r s T o gain comprelensive understanding of tle marketplace and devise appropriate entry and market- ing strategies, builders and developers must investigate all tlree of tle aforementioned elements–consumers, industry, and government–in conjunction witl tle resource and economic pressures influencing tle overall landscape. We lave devel- oped tle Market Metrics Lens (MML) as an evaluative tool to lelp witl tle complexity tlis investigation necessarily entails. By following a relatively simple prescriptive process, salient claracteristics for eacl market element are identified and included as metrics in tle MML. Once completed, tlis MML identifies strengtls and weaknesses in a given market and can compare one location to anotler. Furtlermore, it identifies specific partnerslip and marketing strategies used to raise overall awareness and advance tle industry, topics discussed in detail in Clapters 5 and 6 of tlis report, respectively. Te Market Metrics Lens can be viewed as Table 2 on pages 38-43. Te complete analysis of tle four pilot geograplies can be reviewed in tle full report “Residential Creen Building: Identifying Latent Demand and Key Drivers for Sector Crowtl”, available on tle Erb Institute for Clobal Sustainable Enterprise website: www.erb.umicl.edu. Metrics for tle consumer element are easily quantifiable, wlereas tle metrics under tle government element are more qualitative in nature. Te industry element possesses a mix of qualitative and quantitative metrics. Te dual quantitativeiqualitative claracteristic of tle MML is intentional and liglliglts tle fact tlat tle MML is not provided to be used as a scorecard tlat proposes a metlod of weiglting metrics witl respect to one anotler. For instance, Te New York Times readerslip can not be weiglted equally to access to Wlole Foods’ markets or to tle existence of a strong green building program in tle local government. Ratler, tle intent of tle MML is to provide a snapslot of tle landscape and to liglliglt strengtls and weaknesses tlat are most prevalent. No matlematical algoritlm can be effective at evaluating tle intricate nature of tle green building marketplace. Te MML is a tool used for an informed evaluation using quantitative data and qualitative information, it is a guide for developers interested in gauging residential green building activity and growtl potential in a variety of locales. Te Market Metric Lens las been piloted in four different geograplic locations: (1) Los Angelesisoutlern California, (2) HoustoniTexas, (3) MiamiiSoutl Florida, and (4) Newarkinortlern New )ersey. Many of tlese locations consist of a conglomerate of multiple cities, townslips, and otler municipalities, a claracteristic tlat furtler complicates Analyzing Markets For Creen Homes 25 Chapter 4 Te Market Metric Lens is a tool used for an informed evaluation using quantitative data and qualitative information; it is a guide for developers interested in gauging residential green building activity and growth potential in a variety of locales. MA R K E T ME T R I C S L E NS R e s i d e n t i a l G r e e n B u i l d i n g R e p o r t a strictly quantitative evaluation. As sucl, a few metrics, particularly tlose under tle industry and government sections, men- tion attributes of adjacent, but equally relevant, locations. Te results of tle pilot study for eacl of tle four locations are discussed in detail below, witl tle excep- tion of tle consumer proxy analysis re- sults, wlicl are all quantifiably tabulated in Table 2 on pages 38-43. Evaluation and interpretation of all metrics, includ- ing analysis of tle interplay and relative strengtl of eacl element (consumers, industry, and government), are included in Clapter 8 of tlis report. Te full MML table for tlese four pilot geograplies, as well as four comparative geograplies, is slown in Table 2. In addition to tle qualitative and quantitative nature of tle MML, only a limited number of potential proxies were used to assess eacl of tle elements of a green lomes market. Particularly in tle consumer element, numerous potential proxies address tle attributes of eacl of tle tlree elements tlat make a strong residential green building market. Efforts were made to select proxies and indica- tors tlat would most directly claracterize eacl attribute wlile avoiding significant duplicability. In addition, tle proxies and indicators tlat make up tle MML are largely readily available and easy to obtain at little or no cost tlrougl public websites or common library resources. For instance, altlougl television viewerslip was discovered to be a strong potential proxy for tle most likely green lome buyer, acquiring consumer data at a metropolitan level is fairly costly. Conversely, readerslip is relatively easy and inexpensive to obtain at many libraries and effectively captures similar consumer claracteristics to TV view- erslip. In otler areas, sucl as socially responsible investing, geograplical trend data is liglly proprietary. As sucl, tle MML is a robust but not comprelensive compilation of proxies and indicators to assess tle strengtl of tle tlree key elements of a green lomes market. 26 Clapter 4: Analyzing Markets for Creen Homes: Market Metrics Lens A M a r k e t E n g a g e m e n t F r a m e w o r k f o r D e v e l o p e r s a n d B u i l d e r s T le two aspects of tle “strategy” portion of tle Market Engagement Framework are to: (1) forge partnerslips to lelp advance tle overall industry and raise consumer awareness, and (2) target purclasers of residential green lomes witl a focused marketing and sales effort. After analyzing tle green lomes market in a given area, tle developer must create a strategy to properly engage tle market to successfully sell green lomes. In forming tlis strategy, developers must consider potential partners tlrouglout tle industry and government sectors. In keeping witl tle process designed in tle Market Engagement Framework (MEF), developers slould analyze tle Market Metrics Lens (MML) to gain an under- standing as to wlicl of tle tlree elements (consumers, industry, and government) are well developed and wlicl are weak. Te developer slould tlen consider tle opportunities related to forming partner- slips witl tlose industry and government entities slowing potential strengtl in tle green lomes market and complementing tle developer’s own abilities. Building Partnerslips Best Practices And Strategic Recommendations Te guiding principal to form tlese partnerslips slould be to find entities witl aligned interests. Benefits could be aclieved in tle form of collaborative marketing and outreacl (raising awareness andior specific-brand strengtlening), employee or sub- contractor training programs, and even simply leveraging tle various skills of tle many stakelolders of tle lome- building value clain. Te EPA’s Energy Star program, for instance, las demonstrated tle effectiveness of partnering in marketing and outreacl efforts. It las successfully lelped develop a strong consumer preference bias for tle Energy Star label in many markets tlrougl a cooperative advertising model (described in more detail in Clapter 6). 74 Developers forging partnerslips slould not limit to focusing on lomebuilders. Partners could include regional developers and builders, nonprofit organizations, green building programs or certification systems, financiers, city and state officials, activist and environmental consumer groups, realtors and brokers, arclitects, engineers, and utility companies. Considering tle industry element specifically, companies using tle MEF must seek partners tlat contribute to tleir green building goals. Tis means finding builders tlat are appropriately sized and able to build at tle requisite scale, at tle needed quality level, and in tle necessary timeframe. In many parts of tle country, tlis may mean striking a balance between large-scale production lome builders tlat may not lave green building experience and smaller, more skilled green building companies. To determine tle builders’ dedication and experience to green building, questions a developer slould ask include: • Does tle builder lave an internally mandated recycling program during demolition and construction: • Does tle builder use low Volatile Organic Compound (VOC) paints and sealants as a matter of practice: • Does tle builder use a tlird-party commissioning or certification standard for its green lomes: 27 Chapter 5 R e s i d e n t i a l G r e e n B u i l d i n g R e p o r t By no means slould tlese positive practices be tle extent of a potential builder’s green building practices. Ratler, basic questions sucl as tlese slould begin a conversation on goals and metlods to incorporate green building into a project. Furtler questions slould be asked in accordance witl tle developer’s project goals. Tese do not lave a “riglt” or “wrong” answer: • If tle builder uses a commissioning or certification standard, is tle standard focused on reacling a minimum set of goals or reacling a ligl mark: Is it a nationally or locally based standard: • Is tle builder’s green building practices focused on purely energy efficiency or are tley focused on a lolistic sustain- ability approacl to building: • Has tle builder received any grants, funding, or public recognition of its green building efforts or completed projects: • How do tle builder’s green building practices differ from otler builders in tle same geograplic area: In asking potential building partners botl sets of questions, tle developer slould begin to form a comprelensive under- standing of tle skills, motivations, and goals of tle builders in tle area. Furtler, tle builders slould also be evaluated based on wletler tleir decision-making processes are agile or slow-moving, often influenced by wletler tle firm is privately or publicly owned. Certainly, tle dedication of tle top management plays a large role in determining a company’s green building practices. Te results of internal efforts are affected extensively by tle origin of tlose efforts: if tley are top-down or bottom-up and if tley are engrained in tle corporate culture. Finally, green builders slould be judged by tle preconceived standards to wlicl any builder would be leld, sucl as reputation, cost, experience, size, and management practices. Tese questions slould also be applied to otler industry partners, including arclitects, engineers, and urban planners. Te developer needs simply to slift tle questions to reflect tle particular discipline more directly. Wlen engaging tle government element of a green lomes market, tle developer slould look for partners witl missions, resources, staff, and policies tlat support green building efforts. Tese government resources could be a part of a city sustain- ability office, an urban planning office, a zoning and development board, or any number of otler local offices or associa- tions. Te key is to determine tle extent of support available to green building projects, especially residential projects. Tis support can come in tle form of fast tracking green-lousing permits, increased density allowances, tax increment financ- ing for green building, or even city and state supported green lomes certification programs. Witl regard to tle latter, it is important to determine tle metlods for certification (self-driven or tlird-party), if tle program las tiers (and, if so, wlat tle criteria are for aclieving tlem), and wlo tle founding and governing partners are because many programs are partnerslips in and of tlemselves. Tis latter point is exemplified well by programs like tle EartlCraft lousing standard in Atlanta, and its parent organization, tle Soutlface Institute. Tis nonprofit organization las built a partnerslip among tle local lome-builders association, retailers like Home Depot, local government offices, and dozens of local builders in order to advance and promote its green building program. 75 The Importance of Champions In forming partnerslips, it is equally important to find strong organizations, and clampions witlin tlem. Sucl clampions often know of otler clam- pions in otler area organizations and companies. Tapping into tlese networks lelps gain a rapid understanding of leading green building practices in an area. In addition, tlese clampions were often originally drawn to green buildings from a value-oriented perspective and would likely be considered members of tle LOHAS segment. Ultimately, tlis practice of asking questions and forming partnerslips slould become part of a developer’s standard operating procedures and best practices. Tis process provides devel- opers a deeper understanding into tle opportunities of green building at a local level witlin eacl building market. 28 Clapter 5: Building Partnerslips 29 A M a r k e t E n g a g e m e n t F r a m e w o r k f o r D e v e l o p e r s a n d B u i l d e r s A ltlougl ample evidence suggests tlat growtl in tle residential green building market is progressing sig- nificantly at tle national level, several clallenges remain at tle local level and for individual developers and builders wlo lave yet to carve out a success- ful nicle witlin tlis field. Even for establisled green lome builders, tle desire and imperative to increase sales and profitability and to retain a slare in tlis industry mandates robust and targeted marketing and sales efforts specific to tle nature of tleir particular geograply and consumer. For instance, certain geograplic markets will possess a more robust infrastructure of industry knowledge and capabilities, consumer awareness, and government- support programs and incentives. In tlese more mature environments, tle most effective marketing and sales strategies are inlerently different from tlose in more emerging locations, wlere con- sumer demand and preferences, as well as stakelolder awareness, are more nascent. Ultimately, tle clallenge lies not in wletler viable consumers for green lomes exist. Te growtl in tle market is indicative of sufficient interest in and awareness of tlese products and teclnol- ogies. Te clallenge is in low to deliver tle value-proposition most effectively to tle most receptive buyer. Marketing and Sales Strategies Growing Concept Awareness In Nascent Markets In any given location, a segment of tle population will be quick to value tle benefits and attributes of green lomes and will seek out tle green lome specifically wlen purclasing a new lome. Similarly, at least a small landful of dedicated builders and arclitects lave embraced tle tenets of sustainability wloleleartedly and are pusling tlis teclnology alead of mainstream adoption. However, creating awareness among potential consumers and industry professionals wlo are not actively seeking knowledge and expertise in tlis area or are reticent to commit is vital to progressing tle industry and improving market penetration. Drawing in tle more mainstream consumer and engaging tle more traditionally-focused builders and developers is crucial. In September 2006, Miclael McCuinness, Executive Director of tle National Association of Office and Industrial Properties, New )ersey Clapter, states in an article publisled in New )ersey Business: Tings have to happen at multiple levels for [green building] to become mainstream. You’ve got to get the word out there more often so that municipal officials and building owners say, “Oh, yeah, I know what green building is.” Ten, secondly, to demonstrate that, yes, this can mean some substantial cost savings and better environment and air we breathe, et cetera. Lastly, the users need to connect with vendors and say, “Tis is what you need to start using.” [Te vendors] have to be trained on how to build with this stuff and how to use this technology. 76 McCuinness likens tle awareness trends of green buildings to tlose of recycling or automobile seatbelt use: “Wearing your seatbelt is very mainstream now. I tlink we aren’t quite tlere witl tle green building stuff, but we are getting tlere.” Publicity and marketing across a variety of sectors is key to narrowing tle knowledge gap about green building benefits and Chapter 6 30 R e s i d e n t i a l G r e e n B u i l d i n g R e p o r t driving take-up by multiple sectors witlin tle industry. Creg Stine, of Polaris Inc., asserts tlat “Publicity tlrougl articles, events and word-of-moutl marketing builds credibility, creates a buzz and plays a big role in building a successful brand. By employing tlis strategy effectively, Build It Creen [in California] . . . las become tle go-to organization and a tlouglt leader for tle local and national media on green building. Tis fact isn’t unrelated to tleir success.” 78 In Colorado, Built Creen las aclieved success by incorporating similar market- ing tactics. It embarked on a tlree-year marketing program tlat lelped increase tleir market slare from 6° in 2003, to 22° in 2005. Its marketing program in- cluded television ads, consumer print ads, broclures, website information, certified- lome certificates, tour lome placards, internet promotion, and additional public relations sucl as by-lined articles in local newspapers and magazines about Built Creen lome builders and green building practices. As a result, it was successful in raising tle awareness of Built Creen among prospective lomebuyers from 34° to 46°, between 2004 and 2006. 79 Furtlermore, Built Creen conducted a focus-group study of prospective new lomebuyers and current owners in Colorado in 2004, to determine (and quantify) tle perceptions of tle Built Creen standard related to green lomes. Of tlose tlat were aware of tle Built Creen program, nearly four-in-ten indicated tlat tle Built Creen standard was an influence in tleir recent new- lome purclase decision. Nearly six- in-ten indicated Built Creen would influence tleir next new-lome purclase. Te 2004 focus-group study also revealed tlat many of tle participants equated Built Creen witl environmentally friendly construction, wlicl was perceived to mean lower quality. Even if lower quality was not tle perception, people generally felt tlat a louse tlat was environmen- tally-friendly was not very meaningful, and tlerefore not wortl any extra costs. As a result, Built Creen clanged tleir positioning statement to: A Built Green home is a better built home. For homebuyers looking for quality, Built Green means a better built home because it’s built to a higher level by dedicated builders providing quality workmanship and materi- als, with attention to environmental details. 80 Built Creen tlen tailored its marketing efforts to deliver tlis message and were successful in increasing tle percentage of people wlo believed tlat Built Creen lomes are “better built” tlan non-Built Creen lomes from approximately 37° in 2004, to 45° in 2006. 81 One of tle best success stories in tle green lome movement comes out of Austin, Texas, wlere tle Austin Energy Creen Building Program (CBP) las been in operation since 1991. Participating builders, arclitects, and designers lave built more tlan 7,000 CBP-rated lomes over tle past decade. One of its main initiatives was to educate tle public about tle value of green lomes to create a preference-bias among all lomebuyers. In addition to providing free marketing and publicity materials and consulting witl tle industry, it currently offers public green building workslops four times eacl year. According to Ricl MacMatl, an arclitect wlo las been witl tle CBP as Residential Program Specialist for five years, tlese “Creen By Design” workslops were initially slow to take off but tley now sell out. 82 One of tle main market- transformation publicity teclniques employed by tle CBP was tle placement of full-page advertisements every week in tle Sunday edition of tle local daily newspaper. As a result, tle CBP standard became a “label-of-excellence,” and con- sumers began asking potential builders if tley incorporated tlese features into tleir lomes and built tlem to tle CBP standard. Anotler successful robust marketing effort is associated witl EPA Energy Star Homes. Sam Raslkin, National Director of tle program, describes tle basic tenets and results of its outreacl campaign: If at least 3 energy star partners, including at least two builders, agree to place energy star advertisement for 8 to 13 weeks, EPA agrees to place an advertisement for the same 8 to 13 weeks. Te results have been dramatic, both in educating the consumer and in attracting more builders to Energy Star. New builders see the partner builders getting impressive recognition and [are moved to] join on to be competitive. 83 Sucl marketing and outreacl is instru- mental in developing a strong consumer preference tlat las lelped progress tle industry in eacl respective locale. An establisled preference bias among tle consumer base will not easily fade away. In fact, it will likely grow stronger as tle effects of viral-marketing and word-of- moutl advertising take lold. Clapter 6: Marketing and Sales Strategies 31 A M a r k e t E n g a g e m e n t F r a m e w o r k f o r D e v e l o p e r s a n d B u i l d e r s Creen lomes possess a variety of attributes tlat appeal to potential lome- buyers. Consequently, a focused and targeted sales effort tlat addresses one type of consumer may not resonate as well witl anotler equally desirable and viable type of consumer. However, certain claracteristics of tle overall market landscape in a given location will point to sales strategies tlat will be most effective. For instance, wlere tle market las been identified as more nascent, witl limited penetration of green lomes, it is most advantageous for a first-mover builder or developer in tle green lome space to ensure tlat tley capture tlose consum- ers—Lifestyles of Healtl and Sustain- ability (LOHAS), Cultural Creatives, and True Blue Creens—wlo are more inlerently drawn to tleir new product offering. Conversely, in a more mature market, wlere tle industry and govern- ment involvement las been more robust, sales strategies will want to capture any remaining LOHAS-type consumers as well as tle more mainstream consumer. Wlen selling to any consumer, discern- ing exactly wlicl needs tle buyer is most concerned witl and lopes to address witl tleir purclasing decision is essential. Is tle buyer purclasing to address concerns about lealtl, to capture energy savings, or to express a lifestyle statement: Perlaps tle lome is simply tle riglt place, riglt size, and riglt price, and tle green at- tributes are–at least initially–irrelevant to tle consumer. Te combination of features and benefits tlat resonate most effectively witl tle buyer obviously differ from individual to individual and from one location to tle next, two aspects tlat are not entirely unrelated. Altlougl certain “lot buttons” may be predominant in certain locations, variations occur at tle individual level. Consequently, it is impossible to devise a “one-size-fits-all” sales strategy. However, trends and best-practices lave emerged, wlicl we lave compiled into tle following list. 1. Sell on benefits, not features. Promotional material and sales pitcles slould liglliglt tle lealtl benefits, energy-cost-savings, maintenance-cost- savings, increased comfort, and otler benefits of a green lome. Altlougl tle salesperson needs to be knowledgeable about tle specific features tlat deliver tlese benefits and cost-savings, tle features tlemselves are less likely to resonate witl tle mainstream consumer tlan are tle overall benefits associated witl tlem. In advertising language, tlis means “sell tle sizzle, not tle steak.” 84 In more concrete terms, it is not enougl to say tlat a louse las a tiglt envelope. It must be emplasized tlat tlis results in lower energy bills, increased comfort in all rooms, and probably no insects. Dennis McConnell, President of McConnell Homes, an award winning custom lome builder in Atlanta, las adopted tle Soutlface Institute’s EartlCraft program into its custom- lome building operation. However, le indicates tlat laving a label is not entirely sufficient to drive sales: “I can’t say, ‘I’m an EartlCraft builder. Let me clarge you an extra two percent.’ You lave to be able to take tle virtues of wlat you incorporate and slow it as benefits and features tlat are valuable to a customer. ‘I can prove to you tlat we’ll leat and cool tlis 4,000 square foot louse for $60 a montl.’ Tat las a value.” 85 Selling Green Homes Twelve Techniques for Selling Green Homes 1. Sell on benefts, not features. 2. Sell on total cost-of-ownership, not payback period. 3. Be authentic and knowledgeable. 4. Build relationships with consumers. 5. Demand excellence from sales staf. 6. Gain strong familiarity with geography-specifc drivers. 7. Identify each homebuyer’s “Hot-Buttons.” 8. Sell using a self-selecting “Quiver-of-Arrows.” 9. Incorporate a label of excellence. 10. Bundle features into a package rather than ofering options. 11. Use the environment not to drive the sales pitch, but simply to make it “stickier.” 12. Empower the buyer. S E L L I NG GR E E N HOME S “ You have to be able to take the virtues of what you incorporate and show it as benefits and features that are valuable to a customer. ‘I can prove to you that we’ll heat and cool this 4,000 square foot house for $60 a month.’ Tat has a value.” Di××is McCo××iii, Pvisiii×1 oi McCo××iii Horis 32 R e s i d e n t i a l G r e e n B u i l d i n g R e p o r t 2. Sell on total cost of ownership, not payback. Te term “payback period,” wlen applied to tle lome, often does not carry weiglt witl tle lome-buying consumer, particularly wlen referring to paybacks in tle 15-30 year timeframe. It is simply not a benefit tlat resonates well witl average consumers because luman nature tends to undervalue tle idea of future energy cost savings, and lengtly time lorizons may be meaningless wlen tle average duration of lome ownerslip is significantly less. Te “total-cost- of-ownerslip” argument las a more immediate and timely implication. Furtlermore, data may support tle assertion tlat overall montlly payments on a lome will be less witl a quality- built green lome and are enougl to counter-balance any montlly mortgage premium. For instance, if tle additional price paid for a green lome adds an incremental montlly mortgage premium tlat is less tlan tle typical reduction in montlly utility bills, tlen espousing tlat argument is certainly recommended because it appeals directly to tle “Wlat does tlis do for me:” question from many mainstream consumers. Durability and lower-maintenance costs are otler financial benefits of green lomes tlat lave ligl universal appeal. Conversely, Net Present Value (NPV) is likely to resonate witl only a limited segment of tle population. In addition, total cost of ownerslip incorporates many intangible expenses and tradeoffs tlat are liglly marketable. As green building marketing expert David )olnston of tle firm Wlat’s Working, states: Some in the public health industry say there is a direct correlation between the air that children breathe today and the crisis we’re having in our schools with attention deficit disorder. And California has defined formaldehyde as a carcinogen. So what we start getting into is not an affordability conversation, but a MasterCard commercial. What’s the cost of a kitchen cabinet upgrade? $275. What’s the cost of low VOC paint? $12. What’s the cost of formaldehyde-free fiberglass? Nothing. What’s the cost of preventing your children from suffering from learning disorders? Priceless. 86 3. Be authentic and knowledgeable. Wlen addressing consumers potentially interested in a green lome, autlenticity in sales and marketing messages is critical. Tese consumers are likely to already possess a favorable bias towards purclasing a green lome and will be liglly receptive to tle green lome message. However, because tlese consumers are well-informed and conscientious about tleir purclases, tley demand a great deal from tleir lome- builder and often tlink more lolistically about tle total sustainability of tle lome. Tey place a ligl value on integrity and lonesty, will be quick to identify any type of green-wasling, and will likely be turned away by any perceived lack of transparency. Terefore, despite wlat may be initially seen as an “easy-sell,” failure to recognize and cater to tle unique knowledge-seeking and lolistic attributes of tlese ligl-value consumers may drive tlem away. Barr Hall, Director of Sales and Marketing for McStain Neiglborloods, a premiere green lome design and build firm in Colorado, indicates tlat in sales and media campaigns, it lays out all of tle attributes and benefits and lets people draw tleir own conclusions. Hall points out, lowever, tlat it is important to refrain from being preacly: “Do not presume to tell tle consumer tlat tley slould also be passionate tlese tlings. Let tlem come to tlat conclusion tlemselves. Let tlem devise tleir own reasons internally.” 87 Tis lolds true especially for tle LOHAS consumer, one of McStain’s main target segments, but also applies to tle more mainstream consumer. Clapter 6: Marketing and Sales Strategies “ What’s the cost of a kitchen cabinet upgrade? $275. What’s the cost of low VOC paint? $12. What’s the cost of formaldehyde-free fiberglass? Nothing. What’s the cost of preventing your children from suffering from learning disorders? Priceless.” D»vii )on×s1o×, Wn»1’s Wovii×o 33 A M a r k e t E n g a g e m e n t F r a m e w o r k f o r D e v e l o p e r s a n d B u i l d e r s 4. Build relationships with the consumers. Being able to develop some degree of a relationslip witl tle consumer is important to solidifying tle sale in ways similar to tlose associated witl tle autlenticity mandate described above. Paul Ray, Executive Vice President of American LIVES indicates tlat sales staff “must be able to take time to talk to [LOHAS] customers and know tlem, to see tlem as friends and allies, people to slare tleir excitement witl. . . . Don’t stop witl offering decent value for tle money. Tat’s just [tle] ticket to entry. . . . Cet into stories, wlole process and systems.” 88 In Colorado, McStain Neiglborloods las embraced tle idea of relationslip building, centering many of tleir outreacl activity on a “Customer for Life” plilosoply. In addition to losting and organizing Halloween parties and trail- building environmental-service retreats for tleir lomebuyers, it las also built a Discovery Center in an infill community. By inviting people to just go in, look around, and learn about tle exlibits and tle lome features, it las botl increased awareness of tle benefits of green lomes and fostered an element of good will witlin tle community. Consequently, 38° of its lome sales come from repeat customers and direct referrals, tle national average is less tlan 10°. 89 5. Demand excellence from the sales staff. Consumers expect sales staff to be more knowledgeable tlan tley are regarding tle product being sold, a notion tlat lolds particular significance wlen selling to tle LOHAS consumer. )erry Yudelson, green building marketing expert, describes one builder’s lard-line approacl of appropriately mandating tlat eacl sales person deliver a 20-minute sales pitcl to potential buyers of green lomes (tle industry-average is only 10-minutes), or else face being fired. Te rationale is tle sale of a green lome requires more effort and attention tlan tlat required for tle sale of a traditional lome. Mainstream consumers may not probe as deeply into sucl issues as wlere materials are sourced or low tley are made, but will likely demand in-deptl knowledge of tle product in order to understand its inlerent value. Conveying tle message of value is paramount for builders to maintain lealtly margins on tleir lomes. 6. Target geographic-specific drivers. Local and regional builders likely will already possess a working knowledge of tle general claracteristics of tleir potential buyers and of wlat drives sales in tleir area, but tley may not connect tlese drivers to tle benefits of green lomes. Sara Lamia, a green building marketing coacl in Ft. Collins, Colorado, uses an interesting teclnique to lelp ler clients in tle building and development community make tlis connection. Sle provides a list of all of tle benefits of green lomes and asks ler builder- clientele to indicate tlose tlat tley tlink will resonate most witl tleir consumers. Sle tlen devises sales materials to speak to tlose interests. Similarly, existing industry knowledge and sales best practices can be leveraged in anotler way. For instance, if tle conventional builders advocate lifestyle elements and state-of-tle-art features in tleir sales and promotional material, it is important to not deviate too far from tlose messages in green lome specific marketing efforts. Te idea is to link tle benefits of green lomes to tlose of conventional lomes prevalent in mainstream material by taking advantage of tle inlerent overlaps tlat exist between tle two. Tese kinds of teclniques emplasize tlat tle industry is generally aware of wlat sells best in its region but may be unaware of low green lomes fit into tle overall picture. Lastly, by using a proxy metlod of consumer analysis as portrayed in tle MML, it is possible to claracterize tle consumer landscape and identify specific sales strategies. Te readerslip statistics from tle MML are especially valuable in identifying issues of interest to tle consumers. “ Don’t stop with offering decent value for the money. Tat’s just [the] ticket to entry. . . . Get into stories, whole process and systems.” P»ui R»v, Exicu1ivi Vici Pvisiii×1 oi Arivic»× LIVES S E L L I NG GR E E N HOME S 34 R e s i d e n t i a l G r e e n B u i l d i n g R e p o r t 7. Identify each homebuyer ’s “Hot-Buttons.” It is nearly impossible to predict a person’s individual needs and preferences or low tle person balances tlose witl elements of lome purclase factors sucl as price. Tus, it becomes imperative to develop an array of materials tlat appeal to a variety of needs and preferences. Te key is to comprelensively, creatively, and artfully demonstrate tle various green elements of a lome and communicate tleir benefits wlile respectfully obtaining valuable information about tle consumer and insiglt into wlat is likely to drive tleir purclasing decision. Sam Raslkin, National Director of EPA’s Energy Star Homes program, suggests tlat eacl salesperson, upon greeting a prospective lomebuyer, slould ask a few simple questions to get to know tle consumer and wlat may ultimately drive a purclasing decision. Ask questions sucl as: “Wlat did you like least about tle lome you are coming from:” and “Wlat are you looking for most in a new lome:” Tese provide valuable insiglt into wlicl features and benefits to liglliglt in tle sales pitcl. Marc Riclmond, tle former manager of Austin’s green building program and one of tle principals belind tle launcl of Build It Creen in California, believes green building will not sell as well to tle liglest income bracket based on environmental features, and asserts tlat any attempt to sell to tlem must be based more on tle principles of quality or state- of-tle-art. 90 8. Sell using a self-selecting “Quiver of Arrows.” )erry Yudelson references a teclnique used by tle large production builder, KB Home, in one of its developments. KB Home placed a green kiosk in a slowroom tlat allowed potential lomebuyers to peruse tle green features and benefits of its lomes. Te consumer was able to navigate tle kiosk at lis or ler leisure and could cloose to dig deeper for more information on attributes most interesting to tlem or to skip over tlose tlat were not. Time was not wasted and consumer interest was not lost. Anotler successful “slow-and-tell” teclnique similar to tle kiosk involves a more comprelensive interactive slowroom tlat demonstrates tle features of tle green lome. According to Ricl MacMatl of Austin Energy’s Creen Building Program, “people retain 10° of wlat tley lear and 90° of wlat tley experience. Demonstrations are tle most effective sales tools, e.g. compact fluorescent bulbs connected to a meter, liglt tlrougl low-E glass striking a radiometer, etc.” 91 Insulation cutaways and otler displays tlat allow tle consumer to directly compare green products to conventional products are also useful, as are infrared pictures tlat dramatically display areas in a conventional lome wlere cold air is leaking inside. Tis latter example, in particular, las a significant amount of positive slock-value. By incorporating different features tlat speak to sucl benefits as durability, energy efficiency, indoor air quality and lealtl, tle slowroom metlod of selling allows potential lomebuyers to self-select tlose benefits tlat matter most to tlem. An aware and attentive salesperson can tlen focus tle sales pitcl on tlose elements tlat resonated most witl tle customer, based on wlicl displays leld tleir attention tle longest. )ennifer Languell, a Florida Creen Building Coalition consultant and principal for tle firm Trifecta Construction Services, las identified seven essential elements tlat comprise tleir “Trifecta Umbrella” and slould be included in sales materials and building exlibit space. See Figure 8, above. 92 Clapter 6: Marketing and Sales Strategies Fi gure 8: The Tri fec ta Umbrel l a T h e T r i f e c t a U m b rel l a o f G r e e n B u i l d i n g Energy Efciency Water Quality & Efciency Site & Landscape Construction Process Materials Selection Indoor Environmental Quality Passive Design 35 A M a r k e t E n g a g e m e n t F r a m e w o r k f o r D e v e l o p e r s a n d B u i l d e r s 9. Incorporate a “label-of-excellence.” Designing and building lomes to a national or regional standard sucl as Energy Star, LEED for Homes, or EartlCraft can be extremely effective in driving sales. In a more nascent market, partnering witl a green building brand (or brands) conveys a message of autlenticity to tle discerning consumer and dispels concerns over green-wasling, or promoting false green attributes. Furtlermore, aligning witl a brand slould provide increased publicity and marketing because tle partner organization can slare or cover many of tle associated costs. In a more mature market, a preference-bias already may lave developed and tle brand may be almost a requisite for entry, as las lappened in Austin, Texas, and Denver, Colorado. In tle San Francisco Bay Area, an online survey commissioned by Clristoplerson Homes revealed tlat 84° of tle respondents felt tlat tle rating of a lome’s green features by an independent organization was eitler “very important” or “somewlat important”. 93 10. Bundle elements into a package rather than offering discrete options. Te building science belind green lomes is governed by tle principle tlat all elements of tle lome must function as an integrated system. Incorporating merely a few features (e.g. bamboo flooring, solar panels, etc.) does not equate to delivering a comprelensive and lolistic green lome. Incorporating several features tlat work symbiotically is also a fundamental metlod of keeping costs down. Premiere green lome providers, sucl as McStain Neiglborloods, incorporate into tleir lomes as many aspects of sustainability as possible and deliver tle entire package to tleir buyers, being sure to convey tle “McStain Premium.” Otler builders, sucl as Pardee Homes, acknowledge tlat different consumers will value different attributes and lave several basic packages: Living Smart, Energy Smart, and Water Smart. 94 Similarly, tle U.S. EPA las developed complementary lines to its very robust and successful Energy Star energy- centric program: an indoor air-quality package and a Water Sense label. 95 Many of tle national certification programs mandate packaging and bundling because certain points in eacl environmental category must be attained to aclieve certification up to its standards. 11. Use the environment not to drive the sales pitch, but simply to make it “stickier.” Many experts in tle industry assert tlat leading a sales pitcl witl a strictly environmental message will only be effective witlin a relatively small segment of tle population. However, even in tle case of tle mainstream buyer, tle environmental message can make tle sales pitcl become “stickier.” 96 Tis is particularly true wlen tle mainstream media is filled witl stories on global climate clange, energy security, and resource pressures. Business Week, Te Economist, Te New York Times, and Business 2.0 lave all run extensive series covering environmental issues. Even Sports Illustrated put global warming on tle front page of its Marcl 2007 issue. Terefore, even tlougl tle primary message delivered to tle consumer slould appeal to pragmatic “Wlat’s in it for me:” reasoning, tle more altruistic rationale belind buying green will resonate at least sligltly due to tle overall growing awareness among tle general population. Maureen Moore, a resident of tle coastal town Wall, New )ersey, said global warming, wlile worrisome, was not enougl for ler to switcl from a company or product sle really liked. Nonetleless, “if two tlings are similar and one is environmentally safe and one isn’t, I would go witl tle one tlat’s environmentally safe.” 97 S E L L I NG GR E E N HOME S 36 R e s i d e n t i a l G r e e n B u i l d i n g R e p o r t 12. Empower the buyer. Because tle features and benefits of green lomes differ from tlose of conventional lomes, educating tle buyer about tlese differences can be an important sales teclnique. Creen lomes sales efforts slould extend beyond merely informing tle customer, tley slould provide tle customer witl an arsenal of questions and otler teclniques to take to otler lomes tley are viewing. For instance, it is to tle advantage of tle green lome builder for customers to ask tleir sales person, regardless of wletler tley are viewing a green lome or a conventional lome, if tle paint contains VOCs, or if tle windows lave low-emissivity (low-e) coatings, or construction materials lave formaldelyde as an ingredient. Tis teclnique las furtler appeal considering tle type of consumer typically drawn to green lomes. LOHAS consumers tlrive on information and consider it critical to tle decision-making process. Tey will be wary of aggressive sales teclniques and will appreciate tle candor and tle confidence tlat tlis sales teclnique exlibits. By empowering tle buyer to make an informed decision in tlis manner, not only will tle salesperson lelp convey tle benefits of green lomes, but will also foster a sense of trust and respect. In conclusion, customers may agree in principle tlat lomes built to a green standard are inlerently good, but tlat alone does not always translate into a sale. However, ligl quality, durable, energy efficient, low maintenance, and lealtly are all attributes tlat appeal to mainstream consumers and slould be easy to market and sell. David )olnston, a green building marketing expert and President of tle firm, Wlat’s Working, a green lome solutions-provider and consultancy in Boulder, Colorado, calls tle successful marketing of green lomes “applied common sense.” 98 Creg Stine, CEO and President of tle marketing consultancy Polaris Inc., agrees: “Te gap las started to close between tle early adopters of green building and tlose a bit more lesitant. No longer is green building reserved for tle fringe. Instead, it makes sense for everyone. In an era wlere depleting energy, water, and otler resources affect everyone, green building is no longer about making a statement, it’s becoming a standard.” 99 As green lomes move into tle mainstream, tle adoption of tlese sales teclniques will be critical for lome builders to maintain tleir competitive advantages. “Te gap has started to close between the early adopters of green building and those a bit more hesitant. No longer is green building reserved for the fringe. Instead, it makes sense for everyone. In an era where depleting energy, water, and other resources affect everyone, green building is no longer about making a statement; it’s becoming a standard.” Cvio S1i×i, CEO »×i Pvisiii×1 oi Poi»vis I×c. Clapter 6: Marketing and Sales Strategies 37 A M a r k e t E n g a g e m e n t F r a m e w o r k f o r D e v e l o p e r s a n d B u i l d e r s 38 R e s i d e n t i a l G r e e n B u i l d i n g R e p o r t Strong KEY Moderate Weak Applying tle Market Metrics Lens Chapter 7 Tabl e 2: The Market Metri c Lens PILOT CITIES COMPARISON CITIES No. PROXY / INDICATOR Los Angeles, California (90001) Houston, Texas (77001) Miami, Florida (33010) Newark, New Jersey (07101) Denver, Colorado (80265) Indianapolis, Indiana (46204) Atlanta, Georgia (30301) Boston, Massachusetts (02109) Metric used Normalizing Data City Population 3,844,829 2,016,582 386,417 280,666 557,917 784,118 470,688 559,034 By city MSA Population 12,923,547 5,280,077 5,422,200 18,747,320 2,359,994 1,640,591 4,917,717 4,411,835 By MSA Total Population Aged 25+ 7,989,287 3,208,707 3,587,485 12,305,512 1,515,084 1,038,093 3,104,099 2,928,558 By MSA Households per County 3,133,774 1,205,516 776,774 283,736 239,235 352,164 321,242 278,722 By county County Name Los Angeles Harris Dade Essex Denver Marion Fulton Sufolk Number of housing units authorized in 2006 155,419 216,755 205,711 32,566 39,314 28,315 98,843 19,805 By state C CONSUMER DEMAND PROXIES C1 Purchases of “Green” Products C1.1 Hybrid Vehicles C1.1-1 Hybrid Vehicles - total number sold 30,989 3,288 x x 4,954 x 3,559 7,795 Total number of cars by MSA (sales, 2006) C1.1-2 Hybrid Vehicles per 1,000 Households 5.6 3.5 C1.1-3 Hybrid vehicles per 1,000 Residents (by MSA) 2.40 0.62 x x 2.01 x 0.72 1.77 C1.2 Healthy Foods & Beverages C1.2-1 Whole Foods (Existing Stores) 17 4 6 2 1 0 4 5 Total number of existing stores by city C1.2-1a Whole Foods (Stores in Development) 8 1 4 2 1 0 0 0 Number of stores in development by city C1.2-2 Celestial Seasonings 149 21 129 276 86 10 81 155 Total No. of Natural Food Stores (25 mile radius) C1.2-2a Celestial Seasonings: Natural Food Stores / 10,000 residents (city) 0.39 0.10 3.34 9.83 1.54 0.13 1.72 2.77 C1.2-2b Celestial Seasonings: Natural Food Stores / 10,000 residents (MSA) 0.12 0.04 0.24 0.15 0.36 0.06 0.16 0.35 C1.2-3 Stonyfeld Farm 19 7 20+ 20+ 20+ 12 20+ 20+ No. of Natural Food Stores (25 mile radius) 39 A M a r k e t E n g a g e m e n t F r a m e w o r k f o r D e v e l o p e r s a n d B u i l d e r s T HE MA R K E T ME T R I C L E NS C1.2-3a Stonyfeld Farm 0 1 19 15 4 0 8 14 No. of Wholesale Clubs & Specialty Shops (25 mile radius) C1.2-4 SustainLane: Local Food and Agriculture 36 44 45 N/A 10 31 39 1 Ranking among top 50 cities (lower is better) C1.3 Natural/Organic Personal Care C1.3-1 Aveda (# of Stores) 5 2 2 10 3 1 5 5 # of Aveda Stores in 25 mile radius C1.3-1a Aveda (# of Salons/Spas) 20 in 14 mi 20 in 25 mi 17 in 25 mi 20 in 12 mi 20 in 8 mi 20 in 14 mi 20 in 9 mi 17 in 25 mi # of Aveda Salons/Spas at given radius C1.4-1 Seventh Generation 108 8 5 51 22 4 18 21 # of stores that sell products in 20 mile radius C1.4-1a Seventh Generation: Stores / 10,000 residents (city) 0.28 0.04 0.13 1.82 0.39 0.05 0.38 0.38 C1.4-1b Seventh Generation: Stores / 10,000 residents (MSA) 0.084 0.015 0.009 0.027 0.093 0.024 0.037 0.048 C2 Readership & Viewership C2.1 Magazines C2.1-1 Better Homes & Gardens 144,471 66,710 21,865 11,178 9,331 21,061 22,059 7,185 August 2005 Circulation C2.1-1a (House-Hold %) 4.61% 5.53% 2.81% 3.94% 3.90% 5.98% 6.87% 2.58% C2.1-2 National Geographic 142,406 50,066 29,280 10,045 15,219 13,775 16,988 11,416 Sept 2005 Circulation C2.1-2a (HH %) 4.54% 4.15% 3.77% 3.54% 6.36% 3.91% 5.29% 4.01% C2.1-3 Good Housekeeping 76,676 35,009 13,798 11,761 5,078 12,996 12,141 6,124 March 2006 Circulation C2.1-3a (HH %) 2.45% 2.90% 1.78% 4.15% 2.12% 3.69% 3.78% 2.20% C2.1-4 Newsweek 106,853 31,084 21,682 8,242 9,755 9,941 19,310 11,165 February 2005 Circulation C2.1-4a (HH %) 3.41% 2.58% 2.79% 2.90% 4.08% 2.82% 6.01% 4.01% C2.1-5 Prevention 58,523 22,083 11,875 5,880 4,306 7,054 7,583 4,389 August 2005 Circulation C2.1-5a (HH %) 1.87% 1.83% 1.53% 2.07% 1.80% 2.00% 2.36% 1.57% C2.1-6 Cooking Light 40,095 17,778 6,374 3,788 9,194 4,526 10,098 5,244 Jan/Feb 2006 Circulation C2.1-6a (HH %) 1.28% 1.47% 0.82% 1.34% 3.84% 1.29% 3.14% 1.88% C2.1-7 Martha Stewart 57,569 17,477 7,591 4,273 4,017 4,623 6,798 5,170 October 2005 Circulation C2.1-7a (HH %) 1.84% 1.45% 0.98% 1.51% 1.68% 1.31% 2.12% 1.85% PILOT CITIES COMPARISON CITIES No. PROXY / INDICATOR Los Angeles, California (90001) Houston, Texas (77001) Miami, Florida (33010) Newark, New Jersey (07101) Denver, Colorado (80265) Indianapolis, Indiana (46204) Atlanta, Georgia (30301) Boston, Massachusetts (02109) Metric used 40 R e s i d e n t i a l G r e e n B u i l d i n g R e p o r t Clapter 7: Applying tle Market Metric Lens C2.1-8 Parents 47,057 20,011 9,506 6,038 2,907 6,117 6,420 3,385 May 2006 Circulation C2.1-8a (HH %) 1.50% 1.66% 1.22% 2.13% 1.22% 1.74% 2.00% 1.21% C2.1-9 Men’s Health 57,210 21,057 11,539 6,703 5,424 6,422 13,177 5,042 March 2006 Circulation C2.1-9a (HH %) 1.83% 1.75% 1.49% 2.36% 2.27% 1.82% 4.10% 1.81% C2.1-10 Money 53,628 20,778 10,490 5,618 5,951 5,122 10,683 3,943 March 2006 Circulation C2.1-10a (HH %) 1.71% 1.72% 1.35% 1.98% 2.49% 1.45% 3.33% 1.41% C2.1-11 Fitness 45,058 15,450 9,105 4,461 3,345 4,510 7,417 4,212 February 2006 Circulation C2.1-11a (HH %) 1.44% 1.28% 1.17% 1.57% 1.40% 1.28% 2.31% 1.51% C2.1-12 Self 45,262 13,270 7,582 4,705 3,942 4,337 7,549 6,772 March 2006 Circulation C2.1-12a (HH %) 1.44% 1.10% 0.98% 1.66% 1.65% 1.23% 2.35% 2.43% C2.1-13 Health 35,579 12,172 6,270 3,337 5,275 3,499 4,863 3,457 July/ Aug 2005 Circulation C2.1-13a (HH %) 1.14% 1.00% 0.81% 1.18% 2.20% 0.99% 1.51% 1.24% C2.1-14 Sierra Club Magazine 38,104 4,007 2,697 2,331 3,685 1,327 3,231 2,132 July/ Aug 2005 Circulation C2.1-14a (HH %) 1.22% 0.33% 0.35% 0.82% 1.54% 0.38% 1.01% 0.76% C2.2 Newspapers C2.2-1 New York Times (No. Household Subscrip- tions in Designated Market Area) 34,585 10,576 18,827 633,330 12,584 3,755 16,669 48,847 Sept 2005 Daily Circulation to DMA C2.2-1a New York Times (% by Designated Market Area) 0.52% 0.46% 1.02% 7.03% 0.73% 0.30% 0.67% 1.70% Sept 2005 Daily Circulation as % household in DMA C2.2-2 Wall Street Journal (# Household Subscrip- tions in MSA) 114,341 44,088 50,108 281,325 23,984 11,181 42,293 79,705 February 2005 Daily Circulation to MSA C2.2-2a Wall Street Journal (% by MSA) 2.51% 2.30% 2.32% 3.86% 2.49% 1.66% 2.31% 4.36% February 2005 Daily Circulation as % household in MSA C3 “Green Construction” Conceptual Exposure C3.1 Articles In Local Area Papers (last calendar year: Feb-Feb) 40 25 70 50 150 36 36 80 Articles in local area papers about green construction; in last calendar year (Feb-Feb) PILOT CITIES COMPARISON CITIES No. PROXY / INDICATOR Los Angeles, California (90001) Houston, Texas (77001) Miami, Florida (33010) Newark, New Jersey (07101) Denver, Colorado (80265) Indianapolis, Indiana (46204) Atlanta, Georgia (30301) Boston, Massachusetts (02109) Metric used 41 A M a r k e t E n g a g e m e n t F r a m e w o r k f o r D e v e l o p e r s a n d B u i l d e r s C4 Education C4.1-1 No. of residents with Bachelor’s Degrees (Highest level of attain- ment) 1,528,813 595,670 633,074 2,541,259 363,286 200,832 706,162 668,268 # in MSA C4.1-2 No. of residents with Graduate or Professional Degree (Highest level of attainment) 816,308 297,217 354,933 1,747,050 193,892 102,937 359,022 520,433 # in MSA C4.1-3 % of residents Age 25+ with Bachelor’s or Above 29.4% 27.8% 27.5% 34.8% 36.8% 29.3% 34.3% 40.6% % of residents Age 25+ US urban avg: 29.8% C4.1-4 % with just Bachelor’s Degrees 19.1% 18.6% 17.6% 20.7% 24.0% 19.3% 22.7% 22.8% % of residents Age 25+ US urban avg: 19.4% C4.1-5 % with Graduate or Professional Degree 10.2% 9.3% 9.9% 14.2% 12.8% 9.9% 11.6% 17.8% % of residents Age 25+ US urban avg: 10.4% I INDUSTRY PROXIES / INDICATORS I1 Green Building Associations / Coalitions I1.1-1 Residential Green Build- ing Programs Existence California Green Builder (HBA) Houston Green Build- ing Initiative (HBA) Florida Green Building Coalition, Inc. (NP); Build Smart (FPL) None found Built Green Colorado (HBA) None found Earth Craft House (HBA/NP) None found Existence I1.1-1b Year founded 2001 ? 2001 None found 1995 None found 1999 None found Year founded I1.2-1a Green Building Organiza- tions Existence Global Green USA (Santa Monica) Houston Advanced Re- search Center (HARC) Florida Solar Energy Center (FSEC) - Univesity of Central Florida None found None found None found Envirosense Consortium, Inc. - - - - - - - - Southface The Green Roundtable Existence I1.2-1b Year founded 1993 1983 ? None found None found None found ? 1998 Year founded I1.3 USGBC Chapter Los Angeles, Orange County Houston South Florida, Florida Gulf Coast, Central Florida New Jersey Colorado Indiana Atlanta None Existence I1.4 USGBC organizational memberships 78 97 37 7 89 38 100 76 By city name I2 Market Penetration I2.1 LEED existing buildings 6 4 0 0 9 0 13 9 By city name I2.2 LEED registered projects 38 42 9 1 30 6 41 23 By city name I2.3 Energy Star Homes (market penetration %age of new homes built in 2005) 12% 31% <3% 36% bet. 3-10% bet. 3-10% <3% 16% By state T HE MA R K E T ME T R I C L E NS PILOT CITIES COMPARISON CITIES No. PROXY / INDICATOR Los Angeles, California (90001) Houston, Texas (77001) Miami, Florida (33010) Newark, New Jersey (07101) Denver, Colorado (80265) Indianapolis, Indiana (46204) Atlanta, Georgia (30301) Boston, Massachusetts (02109) Metric used PILOT CITIES COMPARISON CITIES No. PROXY / INDICATOR Los Angeles, California (90001) Houston, Texas (77001) Miami, Florida (33010) Newark, New Jersey (07101) Denver, Colorado (80265) Indianapolis, Indiana (46204) Atlanta, Georgia (30301) Boston, Massachusetts (02109) Metric used 42 R e s i d e n t i a l G r e e n B u i l d i n g R e p o r t I2.4 SustainLane: Green (LEED) Buildings (Ranking: lower is better) 30 29 33 N/A 14 42 1 7 Ranking among top 50 cities (lower is better) I2.5 SustainLane: Green Economy (Ranking: lower is better) 20 24 N/A N/A 6 33 N/A 12 Ranking among top 50 cities (lower is better) I3 Green Building Service Providers I3.1-1a USGBC LEED APs ~500 ~650 ~100 ~35 ~450 ~75 ~1000 ~725 By city name I3.1-1b LEED APs per 1,000 residents 0.13 0.32 0.26 0.12 0.81 0.01 2.12 1.30 I3.2-1a Energy Star Site-Built Home Builders & Developers 165 492 132 109 104 121 70 105 By state I3.2-1b Energy Star Site-Built Home Builders & Developers per 1,000 housing units authorized in 2006 1.06 2.27 0.64 3.35 2.65 4.27 0.71 5.30 I3.2-2a Energy Star Home Energy Raters 5 24 5 6 9 8 11 6 By state I3.2-2b Energy Star Home Energy Raters per 1,000 housing units authorized in 2006 0.03 0.11 0.02 0.18 0.23 0.28 0.11 0.30 I3.2-3a Energy Star Lenders (mortgages) 12 9 8 6 9 10 8 4 By state I3.2-3b Energy Star Lenders (mortgages) per 1,000 housing units authorized in 2006 0.08 0.04 0.04 0.18 0.23 0.35 0.08 0.20 I3.2-4a Energy Star Utilities / Sponsors 8 5 7 6 4 4 5 10 By state I3.2-4b Energy Star Utilities / Sponsors per 1,000 housing units authorized in 2006 0.05 0.02 0.03 0.18 0.10 0.14 0.05 0.50 G GOVERNMENT PROXIES / INDICATORS G1 Government & Planning Authorities G1.1 Discrete city-level sustainability committees and/or departments Yes - Sustain- able Design Implementa- tion program None found Yes- Mayor’s Green Com- mission None found Yes - Green- print Denver None found None found Yes - City Environment Department - runs High Performance bldg program Existence G1.2 SustainLane: Knowledge Base (Ranking: lower is better) 17 29 N/A N/A 1 17 N/A 17 Ranking among top 50 cities (lower is better) G1.3 Kyoto Buy-In from Leadership (Mayor) Yes No Yes Yes Yes Yes Yes Yes Signed agreement with US Council of Mayors G1.4 SustainLane: City Innovation (Ranking: lower is better) 7 19 N/A N/A 7 26 N/A 19 Ranking among top 50 cities (lower is better) G1.5 SustainLane: Planning / Land Use Density / Sprawl / Green Space (Ranking: lower is better) 21 44 24 N/A 17 47 50 3 Ranking among top 50 cities (lower is better) PILOT CITIES COMPARISON CITIES No. PROXY / INDICATOR Los Angeles, California (90001) Houston, Texas (77001) Miami, Florida (33010) Newark, New Jersey (07101) Denver, Colorado (80265) Indianapolis, Indiana (46204) Atlanta, Georgia (30301) Boston, Massachusetts (02109) Metric used Clapter 7: Applying tle Market Metric Lens 43 A M a r k e t E n g a g e m e n t F r a m e w o r k f o r D e v e l o p e r s a n d B u i l d e r s PILOT CITIES COMPARISON CITIES No. PROXY / INDICATOR Los Angeles, California (90001) Houston, Texas (77001) Miami, Florida (33010) Newark, New Jersey (07101) Denver, Colorado (80265) Indianapolis, Indiana (46204) Atlanta, Georgia (30301) Boston, Massachusetts (02109) Metric used G2 Incentives, Targets, & Mandates G2.1 Fast-tracking for green or LEED Yes (Santa Monica) None found Yes (Dade County) None found None found None found None found None found Existence G2.2 Density bonuses (Floor-to-Area Ratios) None found None found None found Yes (Cranford) None found None found None found None found Existence G2.3 Taxes credits, grants Yes (Santa Monica) & afordable (LA) None found None found None found None found None found None found None found Existence G2.4-1 Target for public buildings LEED Certifed (LA & Long Beach); Silver (Santa Monica) LEED Silver In process - TBD LEED Silver (Cranford & Princeton) LEED Silver None found None found LEED Silver Existence G2.4-2 Requirement for public buildings LEED Certifed (LA & Long Beach); Silver (Santa Monica) None found In process - TBD LEED Silver (Cranford) LEED Silver None found None found LEED Silver Existence G2.4-3 Target for private buildings LEED Silver (Long Beach) None found In process - TBD None found None found None found None found LEED Certifed Existence G2.4-4 Requirement for private buildings LEED Silver (Long Beach) None found In process (updating building code) None found None found None found None found LEED Certifed Existence G2.4-5 State Level Support / Requirements CA req. for state buildings to be LEED None found All new state buildings must be LEED No require- ments, but numerous state support programs LEED-EB & NC adopted None found None found Consider- ing LEED adoption Existence of requirements AP ACUTE RESOURCE PRESSURES PROXIES / INDICATORS AP1 Land / Transit / Air AP1.1 SustainLane: Congestion 49 44 35 N/A 36 21 45 33 Ranking among top 50 cities (lower ranking means less congestion, higher ranking means more congestion) AP1.2 SustainLane: Transit Considerations (regional ridership) 8 12 13 N/A 19 40 10 3 Ranking among top 50 cities (lower ranking means better transit, higher ranking means poor transit) AP1.3 SustainLane: Air Quality 49 40 10 N/A 14 41 39 22 Ranking among top 50 cities (lower ranking means less pollution, higher ranking means more pollution) AP2 Energy Costs AP2.1 Electricity (Cents/kWh) 14.48 11.54 11.21 12.46 8.42 7.83 8.31 16.94 State Residential Avg. (Dec. 2006) AP2.2 Natural Gas ($/thousand ft 3 ) 10.94 9.97 19.02 14.51 8.05 10.29 14.13 16.28 Jan 2007 Avg. Residential Natural Gas prices by State T HE MA R K E T ME T R I C L E NS PILOT CITIES COMPARISON CITIES No. PROXY / INDICATOR Los Angeles, California (90001) Houston, Texas (77001) Miami, Florida (33010) Newark, New Jersey (07101) Denver, Colorado (80265) Indianapolis, Indiana (46204) Atlanta, Georgia (30301) Boston, Massachusetts (02109) Metric used R e s i d e n t i a l G r e e n B u i l d i n g R e p o r t T le four focus areas were closen partially due to tleir relatively unknown green lomes market potential. As sucl, four additional control municipalities wlicl were believed to lave varying degrees of residential green building market strengtl were closen from across tle country to add to tle comparison pool. Denver and Atlanta were closen as cit- ies witl very strong green lome building markets. Boston was closen due to its strong LOHAS (Lifestyles of Healtl and Sustainability) and educated population but relatively week green residential market. Indianapolis was closen due to a presumed relative weakness in all tlree elements of a robust green residential market. Data was collected for tlese four cities for tle MML for comparison to tle four pilot cities. Tis comparison is presented below, based on tle quantitative data collected and contained in Table 2, tle MML. Furtler information (quantita- tive and qualitative) can be found in tle full report “Residential Creen Building: Identifying Latent Demand and Key Drivers for Sector Crowtl”, available at www.erb.umicl.edu. Te Market Engagement Framework (MEF) begins witl an analysis component tlat delves deeply into tle claracteristics of tle tlree principal elements in tle green lomes market. Performing tlis analysis tlrougl tle use of tle Market Metric Lens (as described in Clapter 4) reveals botl gaps in tle marketplace as well as leverage points tlat can be larnessed to augment activity and profit- ability in tle sector. Identifying ideal industry and government partnerslip opportunities and pinpointing salient consumer claracteristics upon wlicl to base a marketing and sales strategy are key components of tle strategic portions of tle MEF. Te strategy components of building partnerslips and forming marketing and sales strategies influence one anotler directly. For tlis reason, tlese steps lave been undertaken and combined below for eacl of tle four pilot geograplies addressed in tlis study. Analysis and Strategies for Four Pilot Ceograplies 44 Chapter 8 A M a r k e t E n g a g e m e n t F r a m e w o r k f o r D e v e l o p e r s a n d B u i l d e r s LOS ANGE L E S / S OUT HE RN C AL I F ORNI A Analysis Los Angeles las a large number of likely green lomebuyers and, on a per capita basis, looks relatively strong. Los Angeles is fiftl in tle nation in per capita lybrid sales (5.6 per 1,000 louselolds) and slows strong demand for lealtly foods and green cleaning and personal care products. Per capita readerslip of publications witl ligl LOHAS subscrib- erslip is relatively moderate, and coverage of green building in tle press over tle last year las been fairly weak (about 40 articles in tle last year). Los Angeles las a relatively moderate proportion of residents witl undergraduate or graduate education (29.4°). Los Angeles appears relatively strong from an industry perspective. Te city las mature residential green building associations and programs, a ligl number of LEED APs (altlougl low per capita) and registered buildings (38), in conjunction witl strong statewide penetration of Energy Star lomes (12° in 2005). On a per lome-permitted basis, tle state is weak in terms of Energy Star providers, but tle city may look different based on tle strengtl of tle otler metrics reviewed above. Lastly, tle city and region las lad two major green residential developments wlicl are garnering a fair amount of attention. Los Angeles appears very strong from a government-support perspective. Witl city and state public-building LEED mandates and tle movement of neigl- boring cities to include private buildings, tlere is a ligl degree of political pressure for green development. A number of programs and aggressive greenlouse gas emission reduction targets support green commercial and residential building, and neiglboring communities are exploring a variety of incentive meclanisms. Los Angeles las significant acute resource pressures, most pressing of wlicl are poor air quality, water use constraints, ligl electricity costs, and traffic congestion. Combined witl a ligl transit riderslip and public understanding of climate clange, attributes of green lomes are easily marketable in Los Angeles. Strategy Te Los Angeles green lomes market las been determined to be quite robust, witl strong industry presence, ligl levels of government involvement, and a consumer base tlat will likely be liglly receptive to tle green lome message. Partnerslip opportunities specific to tle Los Angeles area are numerous and can be found witlin botl tle government and industry sectors. Specific suggestions include: • Forming a relationslip witl tle city’s Sustainable Design Implementation office and gaining familiarity witl tle tenets of tleir program. • Contacting Toyota or otler manufactur- ers of lybrid velicles to explore opportunities for co-branding andior otler promotional activities, latcling onto tle popularity of lybrid velicles in tle region. Anecdotally, accounts of a builder giving away lybrid velicles to eacl new-purclaser of a green lome in tleir development lave already emerged. • Accompanying all green activity witl extensive outreacl to tle local media to lelp garner valuable free publicity. Te local media appears willing to run stories related to green buildings and sustainability. • Leveraging tle broad public concern over tle many acute resource pressures in California, to draw attention to tle benefits of green lomes, botl in media publicity and in sales teclniques. In soutlern California, benefits associated witl energy efficiency, air-quality, and water reduction will resonate well witl a large consumer base. • Targeting tlose areas for development (or for promotion) wlere a Wlole Foods Market is in close proximity. Tere are 17 Wlole Foods Markets witl 8 additional slated for development in tle Los Angeles area. Because of tle overlap in claracteristics between tle consumers of tlose food stores and tlose of green lomes, targeting tlese areas is likely an effective positioning and marketing strategy. • Contacting Ranclo Mission Viejo andi or otler developers active in tlis space to glean consumer insiglt and market- ing best-practices. • Seeking opportunities for knowledge- slaring and collaboration witl industry players in non-competitive markets. Because of tle robust activity and government support in neiglboring cities, tlese opportunities slould be ample. Creen building organizations, sucl as Clobal Creen USA (located in Santa Monica), slould provide information on some likely candidates. Perusal of tle LEED APs in tle area, of wlicl tlere are lundreds, slould also prove effective. • Coordinating witl any of tle 78 member organizations of tle USCBC to lelp fund and advance building-science researcl and consumer market researcl. Tis can also be done in cooperation witl tle building organizations and tle government entities tasked witl sector advancement. • Advertising in lealtl and fitness magazines wlicl enjoy a ligl level of readerslip in tle area. L OS A NGE L E S / S OUT HE R N C A L I F OR NI A 45 R e s i d e n t i a l G r e e n B u i l d i n g R e p o r t HOUS TON/ T E X AS Analysis Due to its size, Houston las a moderate number of likely green lomebuyers, but on a per capita basis, tle city is relatively weak in tle consumer element. Relative to Los Angeles, Denver, and Atlanta, Houston las a relatively small number of per capita lybrid sales and relatively weak demand for lealtly foods and green cleaning and personal care products. Per capita readerslip of publications witl ligl LOHAS subscriberslip is relatively moderate to weak, and coverage of green building in tle press over tle last year las been very low relative to otler focus areas (only about 25 articles in tle last year). Lastly, Houston las a relatively small proportion of residents witl undergradu- ate or graduate education (only 27.8°). Houston appears moderately strong from an industry perspective. Te city las residential green building associa- tions and programs, a very ligl number of LEED APs (about 650) and registered buildings (42), in conjunction witl extremely strong statewide penetration of Energy Star lomes (31° in 2005). Houston also las strong Energy Star lomes support programs at tle city level. 100 Houston appears relatively very weak from a government-program support perspective. Te city las set a target, but not a mandate, for public city buildings to pursue LEED Silver, and Houston is one of only a few cities of its size to not sign on to tle Mayors’ Climate Protec- tion Agreement. Wlile energy efficiency, tlrougl Energy Star, appears to be taking lold, tlere does not seem to be a lolistic interest in green building in city lall. Houston las significant acute pressures, most pressing of wlicl are poor air quality and traffic congestion. Te city is not known for proactive land-use plan- ning or strong public transit systems. Altlougl pressures exist, a demonstrated government willingness to address tlese pressures does not. Strategy Te green lomes market in Texas is relatively nascent. Education levels and demand for green products are lagging, tle Mayor of Houston is one of tle few wlo las yet to sign onto tle Mayors Climate Protection Agreement, and prevailing land-use planning principles defy tle basic tenets of green construc- tion. However, despite relative lack of activity in tle government and consumer sectors, tle industry sector las begun to organize itself and is slowing signs of significant potential witl regard to advancing tle green building movement. Specific recommendations for partnerslips and marketing include: • Framing a relationslip witl tle USCBC clapter and tle Houston Advanced Researcl Center to spread concept awareness tlrouglout tle city and develop skill competencies witlin tle building community. • Refraining from incorporating environmentally-focused messages into sales and marketing material. Ceneral awareness and concern appears to be relatively weak, judging from lagging purclasing belavior across a variety of green products. Conversely, messages tlat address particular common concerns of Houston residents sucl as air-pollution and traffic congestion will likely be well received and mucl more effective. • Learning from tle success of tle Energy Star program and standard in Texas witl regard to marketing and communicating witl service providers and consumers. Energy Star las significant market penetration in tle state (31°) and, tlerefore, is likely botl recognizable and desirable as a brand. • Because tle regulatory climate is likely to remain focused on voluntary initiatives, seeking tlose partners best able to convey tle benefits of building green can directly address tle issue of cost. Tis may mean collaborating on costibenefit researcl studies, but may also mean advocating for more involvement and innovation witlin tle financial community. 46 Clapter 8: Analysis and Strategies for Four Pilot Ceograplics A M a r k e t E n g a g e m e n t F r a m e w o r k f o r D e v e l o p e r s a n d B u i l d e r s 47 MI AMI / S OUT H F LORI DA Analysis Per capita, Miami looks relatively weak in tle consumer element. Miami is not in tle top 15 markets for lybrid velicle sales and slows relatively weak demand for green cleaning and personal care prod- ucts, but slows a relatively strong demand for lealtly foods. Per capita readerslip of publications witl ligl LOHAS subscriberslip is extremely weak witl tle exception of newspapers, but coverage of green building in tle press over tle last year las been ligl relative to otler focus areas (about 70 articles). Miami las a relatively small proportion of residents witl undergraduate or graduate education (27.5°). From an industry perspective, Miami appears relatively moderate to weak. Wlile tle region las a strong residential green building association and program, tle city las only a moderate number of LEED APs and relatively few registered buildings (9), in conjunction witl very weak statewide penetration of Energy Star lomes (less tlan 3° in 2005). Outside tle city, tle soutl Florida region tlere are two major green residential developments garnering a fair degree of attention. Industry strengtl appears stronger in tle region tlan in tle city itself. Concerning tle government support element, Miami appears relatively strong. Te city las an active city lall green division, an environmentally proactive mayor, and is considering LEED targets and codes for buildings. Combined witl state public-building LEED mandates and fast-track permitting in tle county for green buildings, tlere is a ligl degree of political support for green development. Miami las moderate environmental pressures, witl relatively good air quality but significant traffic congestion. Com- bined witl a moderate transit riderslip and growing public understanding of climate clange impacts on Florida, Miami is a mixed environment in wlicl to market a variety of tle attributes of green lomes. Strategy Te Miami green lomes market las yet to take off, a fact largely attributable to an uninformed consumer base and limited industry activity. However, tle city las a strong clampion in Mayor Manny Diaz. He las been extremely proactive in generating awareness of tle need for a greener-built environment in tle region and in promoting government and institutional support of green build- ing initiatives. As sucl, recommended partnerslip and marketing strategies for Miami include: • Leveraging tle institutional momentum clampioned by tle Mayor to spearlead major development projects. Te Miami Creen Commission slould be able to provide valuable support and information. • Collaborating witl Wlole Foods Markets in publicity associated witl tle four stores slated for development. Specifically targeting development in tlose areas wlere an existing or upcom- ing Wlole Foods Market is in close proximity is also an effective strategy. • Developing advertising and marketing sclemes tlat portray and liglliglt tle lealtl benefits associated witl green lomes. Healtly living is a popular belavioral claracteristic in tle region, as signified by tle strong demand for lealtly foods and beverages. • Partnering witl tle green building organizations in tle area–Te Florida Creen Building Coalition, tle Florida Solar Energy Center, and tle USCBC clapter of Soutl Florida–to drive con- sumer education and service-provider training initiatives. Wlereas tle Mayor and tle government sector are lelping spur concept awareness at a more broad level, tlere still remains tle need for partnerslips witl a coalition of industry experts at tle ground level to furtler educate and train interested consumers and tradespeople. Tis is particularly pressing because tle consumers in tle area generally do not possess desirable claracteristics regarding receptivity to tle green lome message. • Leveraging tle knowledge capabilities of non-competitive markets, particularly in Sarasota County on tle west coast, wlere activity in tle green build- ing space is more robust, to institute best practices tlat will be effective in improving proficiency in green building market science and increasing consumer awareness. WCI Communities las been active locally and may also provide valuable insiglt and information. • Ecloing tle messages espoused by tle Mayor and tle general media in marketing materials and sales pitcles. Furtlermore, it will be important to find alternative ways to advertise tlan in mainstream magazines, because readerslip numbers are low in tle region. Consider mainstream newspapers in wlicl readerslip levels are ligler. • Higlliglting tle benefits of passive- cooling and a tiglt exterior envelope in relation to cost-savings. Because of tle lot and lumid climate and relatively ligl electricity rates, tlese messages will resonate well during a sales pitcl. MI A MI / S OUT H F L OR I DA R e s i d e n t i a l G r e e n B u i l d i n g R e p o r t NE WARK/ NORT HE RN NE W J E RS E Y Analysis From a buyer perspective, Newark and nortlern New )ersey are difficult to evalu- ate because of tle area’s proximity to New York City. Witl tle availability of all tle resources of Manlattan and ligl number of LOHAS consumers in tle city, Newark and nortlern New )ersey las a large total population of likely green lomebuy- ers. On a per capita basis, Newark looks relatively strong in tle consumer market. Te city slows relatively weak demand for green cleaning products, but a relatively strong demand for lealtly foods and per- sonal care products. Per capita readerslip of publications witl ligl LOHAS sub- scriberslip is relatively strong, especially of newspapers, but coverage of green building in tle press over tle last year las been moderate relative to otler focus areas (only rouglly 50 articles). Lastly, tle metropolitan statistical area (MSA) las a very ligl relative proportion of residents witl undergraduate (20.7°) and graduate education (14.2°). Witl tle exception of Energy Star pen- etration, Newark appears relatively weak from an industry perspective. Te region does not lave an active residential green building association or program and tle city las relatively few LEED APs (about 35) and registered buildings (1). Te no- table exception to industry relative weak- ness, largely due to state incentives, is tle extremely ligl penetration statewide of Energy Star lomes (36°) and tle avail- ability of Energy Star service providers on a total and per lousing permit bases. Outside tle city, tle region las two major green residential developments garnering a fair degree of attention. Wlile Newark appears relatively weak from a government support perspec- tive, tle state appears very strong, and surrounding communities are adopting programs and mandates tlat will likely spread across tle region. Te state’s ef- forts to promote green affordable lousing are particularly notewortly. Tus wlile tle city itself is ratler weak in govern- ment support of residential green building, tle state and surrounding municipalities are relatively strong. Nortlern New )ersey las a fair degree of environmental pressure to pursue green development, especially in land con- straints. Public understanding of tle im- pact of climate clange on low lying New )ersey is strong, and general development pressures and tle strengtl of long-stand- ing smart-growtl movements are good signs for tle penetration of green lomes into tle market. Strategy In tle Newark and tle greater nortlern New )ersey area, tle green lomes market las not yet made large inroads despite extensive activity witlin tle government sector. Tere is relatively weak overall industry presence, witl very limited demonstrated activity to date aside from tle Energy Star program. However, tlere exists some indication tlat tlis sector is ripe to emerge. Multiple projects (Solaire, Tribeca Creen, and tle Octagon) in neiglboring New York City lave been built according to green standards, a fact tlat slould lave spill-over effects for New )ersey in tle form of skill develop- ment and concept awareness. Additional recommended partnerslip and marketing strategies include tle following: • Tailoring marketing efforts to attract tle large number of ligl-value consumers already familiar witl tle tenets of green lomes – but perlaps not able to afford ownerslip in Manlattan – to green developments in New )ersey. • Focusing marketing efforts and promo- tions around universities and surround- ing neiglborloods in an attempt to capture a number of tle liglly educated consumers in tle area. Use tle interac- tive census map to lone-in on specific areas witl ligler levels of educational attainment. Furtlermore, tle consumers in nortlern New )ersey appear prone to visit lealtly food stores and Aveda stores and salons making appropriate venues for targeted marketing efforts. • Advertising in main-stream press sucl as Newsweek, New York Times, and tle Wall Street )ournal. • Leveraging tle fact tlat energy ef- ficiency, indoor air quality, and lealtl concerns are large drivers of tle New )ersey green lomes market by develop- ing appropriate marketing and sales strategies based on tlese tlemes. • Establisling a symbiotic relationslip witl Energy Star to capitalize upon its successful penetration in tle state. Be- cause tle USCBC las yet to make solid inroads into tle area, Energy Star cur- rently las a larger network of partners and affiliates. • Approacling tle clemical and manu- facturing company BASF, one of tle liglest profile companies in tle region wlo las already built a Near-Zero Energy lome, witl tle idea of furtler increasing publicity and support for tleir products by incorporating tlem into otler ligl-profile development projects. • Using tle New )ersey Creen Home Office (CHO) for general advocacy, education, and teclnical assistance. Te CHO is also currently developing tle New )ersey Higl Performance Homes Plus program for market and production rate builders and will likely be searcling for projects to lelp pilot tle program. • Wlen addressing government organiza- tions, coucling language in terms re- lated to smart growtl since land-density and traffic congestion are two pressing state concerns. • Including provisions for affordable lous- ing witlin development efforts. Tis pressing need is also a major concern witlin city governments. 48 Clapter 8: Analysis and Strategies for Four Pilot Ceograplics A M a r k e t E n g a g e m e n t F r a m e w o r k f o r D e v e l o p e r s a n d B u i l d e r s R E L AT I V E A NA LYS I S OF F OUR P I L OT GE OGR A P HI E S 49 RE L AT I VE ANALYS I S OF F OUR PI LOT GE OGRAPHI E S Of tle four focus municipalities, Los Angeles stands out as tle strongest in its relative strengtl in all tlree key elements of a residential green building market. Wlile tle consumer and industry elements of Miami’s green residential market are relatively ratler weak, tle government element is relatively strong and growing. Te industry element outside of tle city, including a strong residential building program and tle support of a leading builder (WCI), is ratler strong. Te consumer element of tle Newark green residential market is relatively strong, wlile tle govern- ment support element is moderate and tle industry element is relatively weak. Towns in nortlern New )ersey and tle state government are making strong progress in green residential support. Wlile Houston las a relatively strong industry element, it ranked weakest of tle four focus municipalities in government and consumer elements. See Figure 9 for a visual representation of tle relatively ranked elements of tle four pilot cities and tle four comparison cities. Table 3 slows tle strengtls and weaknesses. Fi gure 9: Market Engagement Framework Anal ysi s Strengths Los Angeles, CA Hybrid sales Demand for green cleaning supplies LEED-registered projects City and state building LEED mandates Houston, TX LEED-registered projects USGBC organizational memberships Energy Star homes statewide penetration Miami, FL Demand for healthy foods Green building media coverage Mayor support for green building Fast-track permitting Newark, NJ Readership of publications with high LOHAS subscribership Citizens with bachelors and graduate degrees Energy Star homes statewide penetration State green home programs Weaknesses Los Angeles, CA Green building media coverage Houston, TX Hybrid sales Demand for healthy foods and cleaning supplies Green building media coverage Citizens with bachelors or graduate degrees Government attention to climate change Land-use planning Miami, FL Readership of publications with high LOHAS subscribership Citizens with bachelors and graduate degrees LEED-registered projects Energy Star homes statewide market penetration Newark, NJ Lack of industry programs USGBC LEED APs LEED-registered projects Tabl e 3: Resi denti al Green Bui l di ng Market Strengths and Weaknesses MEF Anayl si s Gover nment Low Medium High L o w M e d i u m H i g h Atlanta Houston Newark Miami Denver Los Angeles Boston Ind anapolis I n d u s t r y Consumer : Size of bubble represents receptivity R e s i d e n t i a l G r e e n B u i l d i n g R e p o r t Te MEF developed lere is designed to lave a variety of uses for lome builders. For a builder new to residential green building, an initial use is to apply tle MEF to existing operating markets to analyze tle strengtl of tle green lomes market and tle particular motivations and demands of buyers, and tlen to plan for engagement. Te MEF can be used to assess current product diversity and develop ligl-perfor- mance lome options and packages tailored to tle particular demands of tle market. Te MEF encourages builders to researcl tle key acute pressures and issues receiving widespread public attention, and tle benefits of green lomes most easily sold in tle particular market. Te MEF can also be used to identify key avenues and strategies for marketing, in particular by identifying readerslip trends of likely green lomebuyers for focused advertising. In tle area of partnerslips, tle MEF can lelp a builder assess tle strengtl of various industry and government programs and identify partnerslip opportunities for starting new initiatives and collaboration. Te framework can also lelp identify asso- ciations and government programs tlat can facilitate entrance into tle green lomes market, as well as opportunities to partner witl like-minded groups to promote tle concept of green lomes. In slort, builders can use tle MEF to develop effective plans for entrance into green lome building in existing geograplic markets. Te MEF also is useful in identifying new geograplic markets for green lome build- ing. A green lome builder can use tle MEF to identify markets witl latent demand ripe for entry, as well as markets already absorbing green lomes. Understanding wletler a market is relatively untapped or maturing is critical in designing tle riglt product roll out, partnerslip strategies, and marketing campaigns to ensure maximum profitability. Lastly, tle MEF can be used to craft strategies to enlance corporate-level differentiation. Sustainability is increasingly becoming a positive brand attribute, and tle MEF can lelp a builder establisl itself in tlis category. Concluding Remarks 50 Future Applications for Builders US E OF T HE MA R K E T E NGAGE ME NT F R A ME WOR K Future Applications for Regional and National Developers Regional developers (tlose tlat work in limited geograplic scope) and national developers can use tle MEF for similar purposes as builders. Civen tle often larger scope of a regional or national developer, tle MEF can also assist in identifying partnerslip opportunities witl city and state government programs as well as national level organizations, sucl as USCBC and NAHB. Te MEF can be used to identify areas in wlicl to fund furtler residential green building researcl in a developer’s region. For instance, a developer may want to do an in-deptl study of tle effectiveness of various local government and industry green lome programs, and tle MEF can lelp to identify differences in tle attributes of tle consumer markets to take into account. Te MEF is a powerful tool for a regional developer in discussing demand for green lomes and strategies for engagement witl builder partners, as it provides a concrete metlod for analyzing a market’s potential and planning for engagement. B y all accounts, tle green lomes market is at an exciting point in its growtl and maturation. Home build- ers and developers of all sizes across tle country are ever more actively engaging in tlis burgeoning market. By using tools sucl as tle Market En- gagement Framework and tle Market Metrics Lens presented in tlis report, tlese firms and companies can maximize tle financial and market oppor- tunities at tlis green lomes tipping point, wlile continuing to drive progress in markets tlrouglout tle United States. Chapter 9 51 A M a r k e t E n g a g e m e n t F r a m e w o r k f o r D e v e l o p e r s a n d B u i l d e r s A P P E NDI X Note: Names witl an asterisk were interviewed twice for additional feedback on tle report’s findings. Appendix LI ST OF I NTERVI EWEES Name Afliation Industry Role Dennis Allen Allen Associates Builders/Developers/Architects Amy Christopherson Bolten* Christopherson Homes Builders/Developers/Architects Karen Childress * WCI Builders/Developers/Architects Gordon Cooke Air Solutions, Inc Marketing Experts Dennis Creech* Southface Energy Institute Green Building Program Managers Abbey Ehman Contects -Consultants and Architects LEED for Homes Maren Engelmohr Mackey & Mitchell Architects Builders/Developers/Architects Barr Hall McStain Neighborhoods Builders/Developers/Architects Katy Hollbacher Build It Green Green Building Program Managers Molly Hoyt Origo Inc. Consulting Marketing Experts David Johnston What’s Working Marketing Experts Greg Kats Capital E National Real Estate Analysis Sara Lamia Building Coach Marketing Experts Richard MacMath Austin Energy Green Building Program Managers Eric Martin Florida Solar Energy Center/ University of Central Florida LEED for Homes Don Mull California Green Builder Green Building Program Managers Mike O’Brien City of Portland Ofce of Sustainable Development Government Programs Annette Osso Virginia Sustainable Building Network Green Building Program Managers Tom Paladino Paladino and Co. Marketing Experts Peter Pfeifer Barley & Pfeifer Architects Builders/Developers/Architects Lance Ramella Hanley Wood Market Intelligence National Real Estate Analysis Samuel Rashkin US EPA - Energy Star Homes Government Programs Marc Richmond Practica Marketing Experts Gwynne Rogers Natural Marketing Institute National Real Estate Analysis Michele Russo McGraw-Hill Construction National Real Estate Analysis Henry Siegel Siegel & Strain Architects Builders/Developers/Architects Greg Stine Polaris Marketing Experts Larry Strain Siegel & Strain Architects Builders/Developers/Architects Bob Taber* Thomas Taber & Drazen Marketing Experts Erich Volkert LivingHomes Builders/Developers/Architects Brooke Warrick* American LIVES National Real Estate Analysis Mary Westcot Davis Energy Group, Inc. LEED for Homes Jerelyn Wilson Building Green National Real Estate Analysis Robert Wisniewski MaGrann Associates LEED for Homes Jerry Yudelson* Greenway Consulting Group, LLC Marketing Experts 52 R e s i d e n t i a l G r e e n B u i l d i n g R e p o r t Endnotes 1 Interview witl Cordon Cooke on 1-29-07. 2 Rogers, Everett M. (1962). Diffusion of Innovations. Te Free Press. New York. 3 Building Design and Construction. 2003. Progress Report on Sustainability. 4 Building Design and Construction. 2006. Progress Report on Sustainability. 5 McCraw-Hill Construction. 2006. Creen Building Smart Market Report. 6 McCraw-Hill Construction. 2006. Residential Creen Building Smart Market Report. 7 McCraw-Hill Construction. 2006. Residential Creen Building Smart Market Report. 8 Oliver, F. September 2005. Competing green. Professional Builder. 9 “An Analysis of Residential Creen Building Best Management Practices”, New )ersey Department of Community Affairs, 10. lttp:iiwww.nj.govidcai06_ gl_best_practices.pdf. Accessed Marcl 20, 2007. 10 USCBC informational Powerpoint from 2006: lttps:iiwww.usgbc.orgi SlowFile.aspx:DocumentID742. Captured on 3-31-07. 11 USCBC. Marcl 2007. Creen Building, USCBC, and LEED. Unpublisled. Captured from lttps:iiwww.usgbc.orgiSlowFile.aspx:DocumentID1991 on 3-31-07. 12 McCraw-Hill Construction. 2006. Creen Building Smart Market Report. USCBC. Marcl 2007. Creen Building, USCBC, and LEED. Unpublisled. Captured from lttps:iiwww.usgbc.orgiSlowFile.aspx:DocumentID1991 on 3-31-07. 13 Captured from Energy Star: lttp:iiwww.energystar.goviindex.cfm:cnew_ lomes.lm_index on 3-31-07. 14 Captured from Energy Star: lttp:iiwww.energystar.goviindex. cfm:fuseactionqlmi.slowHomesMarketIndex on 3-31-07. 15 Natural Marketing Institute. 2006. LOHAS Creen Building Report: Te LOHAS Consumer Trends Report. 16 McCraw-Hill Construction. 2006. Residential Creen Building Smart Market Report. 17 Hairston, ).B. Marcl 11, 2007. “Creen” building makes inroads. Te Atlanta )ournal and Constitution. Captured from lttp:iiwww.customlomeonline. comiindustry-news.asp:sectionID204&articleID456673 on 3-31-07. 18 Captured from lttp:iiwww.lometowntimes.comigreaterrometimesilivingi lomeilaven-properties-ligl-per.sltml on 4-1-07. 19 Oliver, F. September 2005. Competing green. Professional Builder. 20 Lassar, T.). February 2005. Marketing green multifamily lousing. Urban Land. 21 Sclweitzer, ). 2006. Creen lomebuilding: Te last loldout or tle next frontier. Lessons Learned: Te Costs and Benefits of Higl Performance Buildings. Eartl Day New York. 22 Lassar, T.). February 2005. Marketing green multifamily lousing. Urban Land. 23 Libby, B. February 2007. Breaking ground: Will a softer market sink green lome construction: Sustainable Industries )ournal. 24 Oliver, F. September 2005. Competing green. Professional Builder. 25 Interview witl Dennis Creecl on 1-31-07. 26 Kellenberg, S. May 2003. Creen communities. Urban Land. 27 Kellenberg, S. Spring 2004. Making green communities work. Real Estate Issues. 28 Kellenberg, S. May 2003. Creen communities. Urban Land. 29 Farlar, B.C. and Coburn, T.C. December 2006. A New Market Paradigm for Zero-Energy Homes: Te Comparative San Diego Case Study. 30 Farlar, B.C. et al. )uly 2004. Large-Production Home Builder Experience witl Zero Energy Homes. National Renewable Energy Laboratory Conference Paper. 31 Presentation by Amy Bolten at West Coast Creen Conference. September, 2006. Interview witl Amy Bolten on 1-15-07. 32 McCraw-Hill Construction. 2006. Creen Building Smart Market Report. 33 Urban Land Institute. 2002. Environment and Development – Mytl and Fact. Also based on Sclweitzer, ). 2006. Creen lomebuilding: Te last loldout or tle next frontier. Lessons Learned: Te Costs and Benefits of Higl Performance Buildings. Eartl Day New York. And McCraw-Hill Construction. 2006. Residential Creen Building Smart Market Report. And McCraw-Hill Construction. 2006. Creen Building Smart Market Report. 34 Mattliesen, L.F. and Morris, P. )uly 2004. Costing green: A comprelensive cost database and budgeting metlodology. Davis Langdon. 35 Captured from lttp:iiwww.clron.comidispistory.mpliapibusinessi4610173. ltml on 3-8-07. 36 Natural Marketing Institute. )anuary 2007. 2006 Edition of Understanding tle LOHAS Market Report: A Focus on Creen Building. 37 Natural Marketing Institute. )anuary 2007. 2006 Edition of Understanding tle LOHAS Market Report: A Focus on Creen Building. 38 Presentation by Cwynne Rogers at West Coast Creen Conference. September 2006. 39 Natural Marketing Institute. )anuary 2007. 2006 Edition of Understanding tle LOHAS Market Report: A Focus on Creen Building. 40 Presentation by Cwynne Rogers at West Coast Creen Conference. September 2006. 41 Natural Marketing Institute. 2003. Understanding tle LOHAS Consumer Report: Clapter 6: Creen Building. 42 Interview witl Barr Hall on 2-5-07. 43 Interview witl Tom Paladino on 1-22-07. 44 Interview witl Mike O’Brien on 2-9-07. 45 Interview witl Mary Westcott, 2-21-07. 46 Interview witl Dennis Allen 1-10-07. 47 Interview witl Mike O’Brien on 2-9-07. 48 Interview witl Barr Hall on 2-5-07. 49 Presentation by Tomas Taber & Drazen for Built Creen Colorado. August 4, 2005. 2005 A&U Survey Results. 50 Interview witl Dennis Allen on 1-10-07. 51 Interview witl Amy Bolten on 1-15-07. 52 Interview witl Cordon Cooke on 1-26-07. 53 Interview witl Abbey Elman on 1-29-07. 54 Interview witl Marc Riclmond on 12-12-06. 55 American LIVES. Ladera Rancl Post-Occupancy Study: Creen Develop- ment Tables. Unpublisled. Provided by Brooke Warrick. Taken from tlree America LIVES studies: “Terramor”, “Creen National”, and “West”, in 2005, 2002, and 2004, respectively. 53 A M a r k e t E n g a g e m e n t F r a m e w o r k f o r D e v e l o p e r s a n d B u i l d e r s 56 Captured from lttp:iiwww.clristoplersonlomes.comiaboutus.asp on 4-1-07. 57 Polaris, Inc. 2005. Survey of potential lome buyers registered on Clristopler- son Homes website. Unpublisled. Provided by Amy Bolten. 58 Captured from www.sustainlane.usilocal_foo_and_agriculture.jsp on 3-29-07. 59 Interview witl Dennis Creecl on 1-31-07. 60 Interview witl Karen Clildress on 1-29-07. 61 Senick, ). September 2006. An analysis of residential green building best management practices. Institute for Meadowland Studies. 62 Interview witl Bob Taber on 11-16-07. 63 Interview witl Miclele Russo on 11-21-06. Otler concurring experts (tlrougl interviews) include: Peter Pfeiffer on 10-24-06, Amy Bolten on 1-15-07, Eric Martin on 12-6-06, Dennis Allen on 1-10-07, Tom Paladino on 1-22-07, Creg Kats on 1-23-07, and Abbey Elman on 1-29-07. 64 Interview witl Tom Paladino on 1-22-07. 65 Captured from lttp:iiwww.usgbc.orgiDisplayPage.aspx:CMSPageID1496 on 4-1-07. 66 Captured from lttp:iiwww.sustainlane.usioverview.jsp on 4-1-07. 67 Interview witl Creg Kats on 1-23-07. 68 Interview witl Creg Kats on 1-23-07. 69 Captured from lttp:iiwww.seattle.govimayoriclimateidefault.ltm#wlo on 4-1-07. 70 Captured from lttp:iiwww.sustainlane.usiStreet_and_Freeway_Congestion. jsp and lttp:iiwww.sustainlane.usiRegional_Public_Transportation_Riderslip. jsp on 3-17-07. 71 Captured from lttp:iiwww.eia.doe.govicneafielectricityiepmitable5_6 _a.ltml on 3-17-07. 72 Interview witl Riclard MacMatl on 2-2-07. 73 Interview witl Amy Bolten on 1-15-07. 74 Interview witl Sam Raslkin on 3-6-07. 75 Interview witl Dennis Creecl on 1-31-07. 76 Saliba, C.N. September 1, 2006. Te greening of N) buildings: Coing green in tle garden state. New )ersey Business. Volume 52, Issue 9. 77 Saliba, C.N. September 1, 2006. Te greening of N) buildings: Coing green in tle garden state. New )ersey Business. Volume 52, Issue 9. 78 Stine, C. November 15, 2007. Creen building in a soft lousing market. Polaris, Inc. Unpublisled. Captured from lttp:iiwww.polaris-inc.comiarticlesi index.cfm:fuseactionarticle&rowid1169 on 3-15-07. 79 Presentation by Bob Taber at Creenbuild Conference. September, 2006. 80 Presentation by Bob Taber at Creenbuild Conference. September, 2006. 81 Presentation by Bob Taber at Creenbuild Conference. September, 2006. 82 Interview witl Ricl MacMatl on 2-2-07. 83 Interview witl Sam Raslkin on 3-6-07. 84 Canada Mortgage and Housing Corporation (CMHC)iSCHL International. )anuary 2002. Tips on selling in tle U.S. green lousing market. 85 Oliver, F. )uly 1, 2006. Te case for going green. Custom Builder. 86 Oliver, F. )uly 1, 2006. Te case for going green. Custom Builder. 87 Interview witl Barr Hall on 2-5-07. 88 Ray, P. Marcl 2000. Dragonfly Media. Wlo is tle LOHAS consumer: LOHAS )ournal. 89 Interview witl Barr Hall on 2-5-07. 90 Interview witl Marc Riclmond on 12-12-06. 91 Captured from Ricl MacCratl’s Notes from presentations by Sam Raslkin (February 2006) and article by Roy Clitwood (September 2000). Creen Building Program: Marketing for Members: 10 Laws of Selling for tle Energy Star Provider. 92 Presentation by )ennifer Languell. 2005. Creen development: Building green is good for business. Unpublisled. Trifecta Construction Solutions. Captured from lttp:iiwww.greentrends.orgiPresentationsi2005_Presentationsi 4c-Languell-greentrends°202005.pdf on 4-1-07. 93 Polaris, Inc. 2005. Survey of potential lome buyers registered on Clristoplerson Homes website. Unpublisled. Provided by Amy Bolten. 94 McCraw-Hill Construction. 2006. Creen Building Smart Market Report. 95 Interview witl Sam Raslkin on 3-6-07. 96 Interview witl Miclele Russo on 11-21-06, interview witl Cordon Cooke on 1-29-07, and interview witl Sam Raslkin on 3-6-07. 97 Diamon, M.L. )anuary 21, 2007. Some slore-area companies are doing more to protect tle environment. McClatcly-Tribune Business News. 98 Oliver, F. )uly 1, 2006. Te case for going green. Custom Builder. 99 Stine, C. November 15, 2007. Creen building in a soft lousing market. Polaris, Inc. Unpublisled. Captured from lttp:iiwww.polaris-inc.comi articlesiindex.cfm:fuseactionarticle&rowid1169 on 3-8-07. 100 Interview witl Sam Raslkin on 3-6-07. E NDNOT E S 54 55 Jeff Martin jeff[email protected] )eff graduated from tle University of Micligan in tle spring of 2007 witl botl an MBA from tle Ross Sclool of Business and an MS from tle Sclool of Natural Resources and Environment. As a student of tle Erb Institute for Clobal Sustainable Enterprise, )eff focused lis education and professional development on alternative energy, green building, entrepreneurslip, and corporate strategy. He was awarded a Distinguisled Leader merit-based sclolarslip, was elected to tle executive board of lis business sclool colort, served as vice-president of tle Clobal Citizenslip Club, and acted as tle president of tle Soccer Club. A graduate of Duke University witl an undergraduate degree in environmental engineering, )eff spent tle first two years of lis professional life as a consulting environmental engineer before moving to Colorado to become Director of Operations for an adventure travel company. Recently, )eff was awarded a fellowslip by tle William David Institute to develop a comprelensive business plan in support of a community-based ecotourism and rural electrification project in Sagarmatla National Park in Nepal. He will return to tle states in tle summer of 2007 and will begin a job searcl in tle fields of renewable energy and green development. Brian Swett [email protected] Brian Swett will graduate in 2008 witl an MBA from tle Ross Sclool of Business and an MS in Sustainable Enterprise from tle Sclool of Natural Resources and Environment tlrougl tle dual-degree program at tle Erb Institute for Clobal Sustainable Enterprise at tle University of Micligan. Brian’s career interests include green buildings, smart growtl, corporate social responsibility, environmental stewardslip, and socially responsible investing. In tle summer of 2007, Brian will be working for Boston Properties, a national REIT, on green real estate development. At Micligan, le las played a leaderslip role in advancing and advising two major green building efforts: tle $150 million Ross Sclool building and tle $500 million Mott Clildren’s Hospital building. Prior to sclool, Brian worked for an environmental justice nonprofit, two socially responsible investment firms, U.S. Senator Barbara Boxer, and several offices in tle U.S. Environmental Protection Agency. During lis time at EPA’s National Center for Environmental Innovation, Brian created and led a program on learning from international best practices in environmental policy for domestic adaptation and application. Areas of focus included water infrastructure, integrated permitting, and smart growtl and urban planning. Brian lolds a BA witl lonors from Brown University in Public Policy and International Relations. Doug Wein [email protected] Doug Wein las just completed lis MBA at tle Ross Sclool of Business and lis MS at tle Sclool of Natural Resources and Environment as a student of tle Erb Institute for Clobal Sustainable Enterprise at tle University of Micligan. His career focuses on green building and sustainable community optimization, real estate finance and marketing, and management consulting. Doug las been instrumental in many of tle University of Micligan’s recent green building efforts, including tle design and launcl of tle new “Creen Development” graduate course and tle greening of tle new $150 million Ross Sclool building. He acted as Co-President of Ross Net Impact in 2005-2006, wlen it was named National Clapter of tle Year for its exemplary efforts in socially and environmentally responsible business. Upon graduation from tle University of Micligan, Doug was presented witl tle Ross Innovation Award and tle Ross Clobal Citizenslip Award for outstanding service to tle community. He now works as a sustainability consultant in real estate, community planning, and green building witl CTC Energetics, a leading national green design firm. Doug now lives in Providence, RI, witl lis wife Raclael. Autlors 56 WI TH SUPPORT BY For tle complete report please visit www.erb.umicl.edu Printed on 100% post-consumer recycled paper. Please recycle. A summary report of a master’s project of the School of Natural Resources and Environment at the University of Michigan.