BEAM upgrade and cost premium for green building development

Abstract

The world has witnessed the tremendous momentum of green building development. One of the trends is that the definitions of green building are evolving as long with the upgrading of building environment assessment models (BEAMs). Because of the increasing “green” requirements, the cost adhered to the green materials, technologies and management practices is increasing, particularly in the exploration phase. Although the cost premium for the delivery of green buildings is prohibitive in the green building movement, it is expected to be reduced over time due to scale effect and technology maturation, particularly at the exploitation phase. This study provides a critical review of 55 empirical studies published up to the end of 2018. The empirical studies involved have developed two main types of estimation methods: the ex-ante approach and the ex-post approach. It is found that the actual cost premium is much lower than generally believed, and the cost premium obtained by using the ex-post approach is on average higher than that using the ex-ante approach. It is also found that the pull power of exploitation is weaker than that of exploration, as the cost premium is increasing at an annual rate of approximately 10%, probably due to increased green requirements.