Green Buildings Impacted by the Credit Crunch, Recession

The credit crunch and sluggish return-on-investment environment are impacting green commercial real estate development – and not in a good way.  Even on projects where dirt actually gets moved, it will be more difficult to incorporate sustainable design principles as companies become more cost conscious.  The greening of the workplace should pick up once again if the high cost and availability of capital eases during 2009.  Already, the Federal Reserve Board’s two half-point interest-rate cuts, which slashed the overnight Fed funds rate to one percent, are having a measured but positive influence. According to National Real Estate Investor magazine, the credit freeze is not the only stumbling block to green projects right now.  Moderating fuel prices, currently at their lowest level in four years, are making renewable power sources – such as solar and wind – seem expensive at a time when people want to save money.  Still, companies with a serious commitment to green principles are motivated by a willingness to minimize their carbon footprint and conserve resources, rather than to just save a few dollars on utilities.

The bad news for sustainable-design proponents is that the recession may frustrate the federal government’s plan to offer tax credits to promote green design.  The reason is that tax credits cut a company’s tax bill; they offer little motivation to firms whose earnings are likely to be flat or suffer net losses during 2009.  Looking on the bright side, the credit crunch may stimulate awareness of sustainability by businesses looking for ways to control expenses over the long term.

The economy shouldn’t put green in the tank, and people should recognize that deflation is always temporary.  The options and futures market will bring energy costs up again.

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