market insights

LIGHT HOUSE MARKET INSIGHTS • QUARTERLY REPORT • MARCH 2011

C A N A D A’ S P R E M I E R E R E S O U R C E F O R G R E E N B U I L D I N G M A R K E T I N T E L L I G E N C E
Market Insights Report Framework – New Format!
Starting in 2011, the organizational framework of the Market Insights Report has been updated to reflect the continuing evolution of the industry and its broader applicability to a growing spectrum of businesses. The new 9-point framework, derived from a structure developed by the UK Department of Trade & Investment, addresses the key variables supporting the development of business clusters. Click here for details about the framework.

Networks and Partnerships
International interest – are we ready?
International markets have identified Canada, specifically the Pacific North West, as a priority area for green building and clean technology investment. UK Trade and Investment hosted a trade mission to Vancouver and Seattle in February 2011 that included economic development agencies and companies specializing in low energy ventilation systems, window hardware, pre-fabricated homes and more. Building on a MOU signed between Vancouver and Switzerland’s Trade and Investments Office at the 2010 Globe conference, the Swiss Consulate General in Vancouver is actively exploring business opportunities, including a number of partnerships looking at the integration of next-generation technologies, programs and solutions. In September 2010, Vancouver sent its Vancouver Green Capital Business Mission to China during the Shanghai Trade Fair to explore trade opportunities. However, SDTC’s 2010 Growth and Go-To-Market Report indicates that Canada’s clean tech sector remains in a relatively early stage of development and ill-prepared to compete in the international market. A Light House survey conducted in 2007 corroborates these findings. The fact is that in the past 4 years, little support has been provided for local companies to prepare them for the international market which now means that Vancouver is behind other jurisdictions when it comes to reaping rewards for early entry into this fast growing field.

The Maxxine Wright Centre Building located in Surrey, BC is one of the latest seeking LEED Gold. For more on LEED stats see page 6.

Value of Building Permits ($M)

1000 800 600 400 200 0
Halifax Montreal Ottawa Toronto Winnipeg

5 4 3

$3.86M

$1.69M $0.52M

$1.25M $0.84M $0.64M

$1.20M

2 $0.68M 1

Market Insights Partner:

Regina

Calgary

Edmonton Vancouver

The total value of building permits per LEED certified professional serves as a proxy for capacity to provide green building expertise in a given municipality.

Sources: StatsCan, Green Building Certification Institute

Value of building projects per LEED certified professional ($M)

ALSO IN THIS REPORT : • Labour and Training • Industry Composition • Innovation and R&D Capacity • Supporting Programs and Services • Financing and Incentives • Policies and Regulations • Environmental Performance and more...

Green Building Expertise Capacity
1200 $4.92M 6

LIGHT HOUSE MARKET INSIGHTS • QUARTERLY REPORT

MARCH 2011

Labour and Training

Can we deliver on performance expectations for intelligent buildings?
A 2010 survey conducted by GE Capital Real Estate found that 52% of Canadian tenants are strongly influenced by green building initiatives when renting commercial real estate property. The Photo: IBB’s System 800xA Extended Operator Workplace (EOW) survey interviewed 2,220 office tenants from the U.S., Canada, France, Germany, Sweden, the U.K., Spain, and Japan. Canadian tenants showed a slightly higher concern for green building initiatives than the international average (50%). Savings in operating expenses and energy costs associated with high performance buildings as well as evidence that certified buildings achieve higher rental rates compared to their non-certified counterparts are all driving the trend to more green certified buildings. Unfortunately, like so many such surveys, it does not, however, gauge whether tenants are willing to pay for these initiatives and if so, how much. Despite increased awareness of the linkages between a healthy indoor environment and productivity, evidence shows that cost will generally prevail over quality.

Drivers for Owners and Building Managers to Build Green
Competitive advantage from offering ‘green’ features Reduction in energy needs of the building Overall increase in energy prices Overall savings in operating expenses
0% 20% 40%

72% 81% 79% 89% 50% 89% 65% 94%
60% 80%

Owners

Building Managers

Source: CB Richard Ellis, Do Green Buildings Make Dollars and Sense (January 2011)

These findings also expose emerging concerns about whether Canada’s building operators are sufficiently qualified and supported to meet increasingly exacting demands of building owners, managers and occupants, particularly in cases where performance accountability systems are in effect. The anticipated release of Eco Canada’s national study of building operators in relation to high performance buildings at the upcoming May session of Market Insights promises to shed light on the operational challenges associated with green buildings.

Industry Composition
Consolidation is the trend
The last two quarters of 2010 and into Q1, 2011, has seen a number of corporate mergers within the building consulting sector. In September, four firms from across Canada - Cohos Evamy, Hotson Bakker Boniface Haden, Mole White Associates, and Office for Urbanism – merged to form DIALOG. Subsequently, B+H announced its acquisition of Vancouverbased Bunting Coady Architects, a firm recognized as a pioneer in sustainability and energy-efficient design. The market for green building expertise is growing so fast that large firms are choosing to acquire available talent (thereby reducing the competitive field) as opposed to growing their own capacity in-house. That said, the emergence and success of 3rd party sustainability consultants, such as Recollective, Kane Consulting, Sustainability Solutions and Light House is evidence of the
2

value placed on an independent expert representing the green interests of the project.

One of the elements in developing a robust business cluster is the presence of large firms. Large firms stimulate innovation and development within the cluster and raise the profile of the region as a centre of expertise to larger markets. A recent survey of 588 companies in the US found that large, publiclytraded companies that occupy LEED certified buildings are more likely to develop and implement green strategies (CBRE, Do Green Buildings Make Dollars & Sense, January 2011).

“The market for green building expertise is growing so fast that large firms are choosing to acquire available talent as opposed to growing their own capacity in-house.”

LIGHT HOUSE MARKET INSIGHTS • QUARTERLY REPORT

MARCH 2011

Innovation and R&D Capacity
The Concrete Sustainability Hub at the Massachusetts Institute of Technology has just issued preliminary findings from its study of Life Cycle Analysis of Buildings. The interim report compares life cycle metrics of steel and concrete construction based on a large commercial office building model (12-storey, approximately 500,000ft2 rectangular office building). Preliminary findings on post-construction values suggest that the use of concrete construction offers annual energy savings in heating, cooling and ventilation because of the additional thermal mass, as well as additional opportunities where radiant floor systems and passive technologies are employed. The interim report concludes that increased use of concrete envelope systems and the development of low-carbon structural concrete can have a major impact on lowering the life cycle carbon emissions of commercial buildings. However, while it is true that both in-situ and precast concrete structures and envelope assemblies provide more thermal mass than lightweight steel frame, it should be pointed out that both steel and concrete have relatively high embodied carbon. Given that thermal mass is an important consideration in energy performance, arguably the ideal solution is therefore to improve the mass within low embodied carbon materials and assemblies. The report adds to the

LCA on concrete and assessing energy efficiency strategies
evolving world of life cycle analysis and the growing debate on the environmental merits of different building materials. The CSH’s final report is expected in September 2011. Closer to home, a 2010 Light House study “Cost Assessment of a Selection of Energy Efficiency Strategies in Buildings in British Columbia” , is now available on the Pembina Institute’s Green Building Leaders Project website.

Cost Assessment of Selection of Energy Ef ciency Strategies for Buildings in British Columbia
Helen Goodland
May 2010

Green Building Leaders / www.greenbuildingleaders.ca

The study looks at the costs and savings associated with new construction employing energy efficiency strategies which result in a 30% improvement over BC Building Code as applied to four building types in two model BC geographic locations. Findings indicate both energy cost savings and GHG reductions across all building types with modest payback periods. Pembina’s Green Leaders Project has been supported by Deborah Curran & Company, Light House and the Whistler Centre for Sustainability and provides a complete suite of tools, research findings and resources for local governments, business and homeowners.

Supporting Programs and Services
Dealing with green contract specifications
The proliferation of energy efficiency, carbon emission and green building policies at all levels of government coupled with increased market demand for green requirements in new and existing buildings is driving an increase in performance specifications in building contracts across North America. McGraw-Hill Construction’s 2009 review of more than 50,000 construction contracts shows an increase in LEED certification requirements in building contracts, as well as a growing presence of specifications for Energy Star ratings, green building product designations (e.g. FSC certified materials), LED lighting, solar installations and green roofs.

Appearance of LEED in US Project Specifications (2004 - 2009)
60 Specification Rate (%) 50 40 30 20 10 0 2004 2005 2006 2007 2008 2009 Number of Projects Value of Projects

Source: McGraw-Hill Construction Analytics, SpecShare 2004-2009 3

LIGHT HOUSE MARKET INSIGHTS • QUARTERLY REPORT

MARCH 2011

Financing and Incentives
District energy systems get a boost
business as usual” (BAU) scenario. The maximum incentive is the lesser of $240GWh/yr of savings or the amount required to make the project financially viable. The incentive is awarded based on the reduction in electricity consumption and greenhouse gas emissions, not the amount of biomass energy generated. To be eligible, the baseline heating source must be electric baseboard (for new or existing projects). It will therefore be very difficult to comply where legislation requiring DES hook-up exists and/or where a DES is already in place.

Dockside Green’s Gasification System, Victoria BC. Photo by Bob Matheson used with permission from Nexterra Systems Corp.

The City of Colwood has received $3.9 million through the federal government’s Clean Energy Fund to develop solar energy alternatives within the community. SolarColwood – a three-year program – will focus mainly on solar thermal hot water heating, though it will also include emerging technologies like ductless split heat pumps, Smart Home/ Smart Grid technologies, energy efficient smart appliances, solar photovoltaics, geo-exchange, district energy solutions and electric vehicle charging infrastructure. The project is engaging a wide range of stakeholders, including government, utilities, T’Sou-ke Nation (that has implemented extensive solar installations), Royal Roads University, businesses and Solar BC who are all interested in the economic development and environmental potential of the project. EAGA Services Canada has been hired to develop and launch the program in early summer 2011.

BC Hydro has announced a new district energy capital incentive program for Multi-Unit Residential Buildings (MURBs) through its Power Smart Sustainable Communities Program. Eligible projects receive assistance with the assessment and possible implementation of district energy systems (DES). Incentives are calculated based on energy savings over a 10 year period relative to a “baseline or

Trends in public budgets for R&D, demonstration/field test programs and market incentives in Canada in 2009
35 30 25 Millions CAD$ 20 15 10 5 0 1999 2000 2001 2007 2003 2004 2005 2006 2007 2008 2009

Number of Projects Source: CanmetENERGY, Natural Resources Canada, National Survey Report of PV Power Applications in Canada 2009 4

LIGHT HOUSE MARKET INSIGHTS • QUARTERLY REPORT

MARCH 2011

Vancouver takes next steps with Greenest City Action Plan
Vancouver’s Greenest City 2020 Action targets received unanimous approval from Vancouver’s City Council in January 2011. In February, the Federation of Canadian Municipalities awarded $324,500 to the City for the development of a public consultation and engagement process, research and analysis to support the development of the City’s Greenest City 2020 Action Plan. Vancouver has also taken steps to remove the “green albatross” from around its neck by rebranding the Olympic Village as the “Village by False Creek” and bringing pricing on the high-end Millennium condos in line with market rates. Initial sales have been brisk according to Bob Rennie who was retained by the City to handle the sale of the properties. Whether sales continue is too early to determine. A suit has been brought by 62 owners against the City of Vancouver. They are upset by the quality of the homes and the effectiveness of the heating system. Some commentators have suggested that the project has dampened investors’ enthusiasm for high performance building and innovative technologies. However, Vancouver’s March 2011 ranking as the worlds most livable city by the Economist less than a month after Corporate Knights rated Vancouver as the “Greenest City in Canada” may help keep markets stable for a while yet. Stability of development costs was also forecast by Altus Helyar at the March 2011 presentation to UDI on development and construction cost forecasts. While modest premiums are anticipated for certain green features, costs for Vancouver will remain stable and competitive with other major urban centres across Canada. Altus’ 2011 Construction Cost Guide is now available.

Broader Issues and Impacts

Decade starts with significant steps

Policies and Regulations
Energy Benchmark Summary (AEBS). The San Francisco Ordinance pre-empts reforms to the City of Vancouver’s Building Bylaws for existing buildings expected in late 2011.

Years of hard work in the policy arena appear to be bearing fruit in 2011. British Columbia is expected to put forward proposed amendments to its Building Code including requirements that new homes meet EnerGuide 80, are solar hot water ready, have high-efficiency toilets, and support increased use of non-potable water for toilet flushing and sub-surface irrigation. The Province is also participating in a national process through the Canadian Commission on Building and Fire Codes to establish a standardized energy code for larger, more complex buildings. In February 2011, the District of North Vancouver adopted additional elements to its green building policy framework by passing bylaw amendments relaxing height restrictions and floor areas to allow for green building purposes (e.g. energy systems), and amending its OCP to establish special development permit areas with enhanced environmental requirements. In the US, San Francisco adopted its Commercial Building Energy Performance Ordinance that requires all non-residential building to conduct and file with the Department of the Environment an energy and performance audit every five years and an Annual

Do building occupants care more about comfort than certification?

value the environmental performance of their buildings. But only

52

% %

of Canadian building occupants

believe green rating certification of their building is “valuable” .
While the building industry continues to focus on certification, occupants appear to be voicing a preference for real environmental improvements that result in healthier and more comfortable work environments. GE Capital’s December 2010 Real Estate Survey 5

29

of Canadian building occupants

LIGHT HOUSE MARKET INSIGHTS • QUARTERLY REPORT

MARCH 2011

Environmental Performance
2010 saw a continued increase in the number of LEED registered projects in Canada. However the number of certified projects is not keeping pace. In 2008, the proportion of buildings that were certified in Canada to those registered was 14%, which decreased to 12% in 2010. The situation in BC is marginally better with the proportionate number of certified buildings increasing from 9% in 2008 to 27% in 2010. There may be many reasons for this spread. Most prominent is that CEO Thomas Mueller stated in the 2010 GreenSpace magazine that thousands of projects are awaiting certification suggesting that the process is backlogged. Anecdotally, there is growing sentiment that projects are frequently waiting for over a year and that the process is difficult to predict in terms of duration and consulting effort (small projects receiving inordinate scrutiny compared to large projects).

ABOUT LIGHT HOUSE
Light House is a green building catalyst located in Vancouver BC. We offer a complete range of services to support sustainable building initiatives. Research: Product & Market Research, Cost Analysis, Policy, Technical, Industry Research & Analysis, Testing & Demonstrating Green Products Facilitation: Strategic Planning,
Integrated Design Process. Project Facilitation, Stakeholder Engagement

LEED Totals (includes LEED-NC, LEED-CI, LEED-ND, LEED-EB and LEED-CS)
As of December 31, 2010 | Source: CaGBC
100 90 80 70 60 50 40 30 20 10 0

Technical Services: LEED Action Plans for Buildings, LEED Documentation & Administration, Daylight Views & Calculations for LEED, LEED Support for Buildings, Post Occupancy Evaluations, Tenant Guidelines Training: Custom Training & Education Programs

Next Market Insights Session
2002 2003 2004 2005 2006 2007 2008 2009 2010
Commercial/Industrial: Registered Commercial/Industrial: Certified

Institutional: Registered Institutional: Certified

Residential/Neighbourhoods: Registered Residential/Neighbourhoods: Certified

Ten LEED projects were excluded from the chart because insufficient information was available to classify them. Residential includes mixed use commercial/residential projects.

Existing Buildings: Addressing Performance From The Outside In May 25, 2011, 8:00 - 10:00 am UBC Robson Sq.Theatre How well are existing buildings actually performing and do we have the skilled workforce to operate our building stock efficiently? The May 2011 session of Market Insights will be devoted entirely to the release of findings from two important studies that tackle critical issues facing existing buildings.
Click here to register

BOMA BESt certifications decreased marginally in 2010 from 2009. While this is largely the result of a flat office leasing market, it will be interesting to watch the rate at which those already certified at Level 1 begin to move up the BOMA performance scale as a result of continuous improvement.

BOMA Go Green / BESt
As of December 31, 2010 | Source: BOMA Canada
80 70 60 50 40 30 20 10 0

2008
Level 1 Level 2 Level 3 Level 4

2009

2010

2060 Pine Street Vancouver, BC V6J 4P8 T: 604.699.9560 • F: 604.682.5961 W: www.lhsbc.com

Note: BuiltGreen does not provide data on certified buildings in BC. Light House assumes no responsibility for the veracity of the data provided on green rating certifications.

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