Friday, October 24, 2008

Global Recession's Impact on the Green Movement and Sustainability Initiatives

The true test of how strong a foothold the green movement and sustainability initiatives have will become evident in the global recession we are now experiencing. In the commercial real estate industry when things are going well investment capital always seems to be available. However, from past experience in the last two commercial real estate downturns, investment capital in such difficult times always seems hard to find. The prevalent attitude appears to be to preserve what we have as best possible to get through the tough times. As rental growth deteriorated and property valuations dropped, significant investment was often put on hold and cost cutting became the norm.
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Unfortunately, there are already signs that the green movement and sustainability initiatives may temporarily move to a back burner. The U. S. Department of Energy's Zero-Net Energy Commercial Building Initiative (CBI) was part of the Energy Independence and Security Act of 2007. The goal of CBI is to make zero-net energy buildings broadly achievable by 2025 through a combination of energy efficiency and renewable power. Federal funding for the program was authorized at more than $1 billion over the next 10 years. The private-public partnership involved some major players in our industry, including CB Richard Ellis, Hines, ProLogis, Simon Property Group and Tishman Speyer. It also involved some major players in retail, including Best Buy, JCPenney, Macy's, SuperValu, Target, John Deere, Toyota and Whole Foods Market. But alas, in his 2009 budget request, President Bush proposed a 27% cut in funding for DOE's Energy Efficiency and Renewable Energy Office, the agency arm overseeing CBI. Clearly, the impact of the massive, taxpayer-funded bailout recently approved by Congress is becoming evident and will restrict spending.
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Even Europe's leadership in tackling climate change may be weakened by the credit crisis and slumping global economy. Just last week at an EU meeting, Italy, Poland, Latvia and others threatened to veto Europe's carbon plan unless it was softened. They urged the rest of the EU to recognize the economic difficulties being experienced. In fact, today more and more world leaders are discussing the possibility that the world might even fail to agree on new targets for when the Kyoto Protocol runs out in 2012. This would be a disastrous response to progress already made in addressing global warming.
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There is a lot of fear running around and anxiety about commercial real estate fundamentals in a global recession is at an all time high. There is no doubt in my mind that any investment in property improvements will be carefully scrutinized. However, there is one thing I know for sure: investments that can reduce building operating costs will be given priority, so long as the return is reasonable. Reducing energy costs certainly fits this bill!

2 comments:

peter said...

If as expected Obama gets elected today the greenies will have the keys to the kingdom. Moreover the huge Dem majorities in Congress will spend like crazy to re-ignite the economy. By mid '09 solar et al will once again be front and center...more on this later

peter said...

With Obama now firmly in control rhe the Dems will be moderated only by the 44? or so seats held by the Rs, allowing the Rs to filibuster the nuttiest plans from the left. That said, the new Global Warming Religion will drive mega $$ thrown at Green Collar jobs (who can say no to that in this environment). Costs of heating buildings are not tied to oil so the combination of doing good and saving money, combined with the $$ from the Dems.

Moreover Corporations are going to pay lip service at the lowest possible cost to stay in good odor with the Leftist Media and their lackies.

For more - Time Inc. has weighed in at

http://www.time.com/time/health/article/0,8599,1855081,00.html