Commercial Market Is Red Hot and Green

May 14, 2007
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Even though residential new construction has slowed down, commercial construction is expected to keep contractors busy over the next few years.

The dramatic plunge in the residential new construction market has garnered most of the media attention lately. It seems every quarter the U.S. Department of Housing and Urban Development (HUD) releases dire statistics regarding the drop-off in residential building permits. For example, the latest figures show that February’s residential building permits fell 28.6 percent compared to year-ago levels.

Things are definitely much rosier on the commercial side of the market. In February, HUD stated that private nonresidential construction was $322 billion, which was 2.3 percent above the revised January estimate. In addition, Reed Construction Data (www.buildingteamforecast.com) expects nonresidential building spending to rise 12.7 percent in 2007. New project starts totaled a record high $19.5 billion in January, so the pipeline is full enough to keep month-to-month spending gains averaging about 1 percent into 2008.

That’s good news for commercial contractors as they can expect continued, or increased, demand from their commercial customers. However, that good news is tempered by the fact that building managers and owners are not necessarily looking for the same old, same old. They are interested in new and innovative products and services that will help them save energy costs and improve comfort while reducing their impact on the environment.

Contractors need to be on top of all the information circulating in the industry regarding high-performance buildings, sustainable materials, LEED certification, and environmentally friendly equipment. There are new techniques to learn and innovative products to understand, and the sooner contractors learn about them the better because it is abundantly clear that the trend toward greener buildings is here to stay.

TURNING GREEN

One of the strongest trends in the commercial marketplace is the focus on sustainability, including reducing energy usage and using environmentally friendlier materials such as R-410A refrigerant. Most building owners realize that sustainability is not only good for the environment, it also makes financial sense from a total cost of ownership perspective. A small cost increase to purchase more efficient equipment often pays dividends for years to come. This is especially true when companies consider that HVAC equipment typically lasts 12 to 15 years or longer.

“Sustainability and green building design, although popular now, will continue to be a driving force in the commercial marketplace,” said Harry Bizios, president and chief operating officer, Lennox Commercial Heating and Cooling. “Building owners need products that can reduce energy usage and help them control energy expenses while still meeting their comfort and indoor air quality objectives. These same customers are increasingly driving manufacturers to make sure their products are environmentally friendlier, delivering the desired performance requirements without damaging the environment.”

Kelly Romano, president, building systems and services, Carrier, agreed, noting, “Green buildings are the future of our industry … and of our planet. With hundreds of billions of dollars in new commercial construction annually, the environmental burden imposed by the construction and operation of buildings will continue to rise. Sustainable design considerations that take into account the environmental impact over the life of the building are critical.”

The environmental impact of commercial buildings has been well documented by the Environmental Protection Agency (EPA). The organization states that commercial buildings account for 18 percent of total U.S. energy consumption and contribute an estimated 15 percent of U.S. greenhouse gas emissions. In addition, energy consumption represents 30 percent of a typical commercial office building’s operating costs, making it the single largest controllable cost of operations, so improved energy efficiency has a direct and substantial payback for building owners and managers.

Michael C. Walker, product manager, commercial rooftop products, Lennox Industries, believes that the green building movement has had a positive impact on both manufacturers and contractors by helping to increase public awareness.

“The more building owners push for great equipment that provides excellent comfort and indoor air quality, while still effectively and efficiently utilizing our natural resources, the more manufacturers and contractors will respond by offering that type of equipment.

“In addition, the more times manufacturers and contractors can supply equipment that actually meets these goals, the more often that building owners will purchase and use this equipment,” he said.

“We think the environmental movement is going to continue to grow and generate more momentum,” said John Conover, president, Trane in the Americas. “At the crux of it is energy. What will happen in our industry is that the green movement will place the demand for higher-quality companies and higher-quality people at a much greater level of importance. Customers will demand this. We have to make sure that we, as an industry, make good on the promises that we make.”

Commercial building managers and owners are expected to challenge contractors to help them find new and innovative technologies and products that will save energy and improve comfort.

LEED THE WAY

Not only does the industry need to make good on its promises, the entities performing the testing to ensure a building is “green” need to be accountable as well. That’s because one of the strongest selling points for green construction is reduced operating costs from increased energy efficiency.

Those making the case for green buildings often assume that a certified green building will be more energy efficient than a conventional building. According to EPA, this might not be the case, as the organization states it is possible, under some rating systems, to achieve a green rating without actually achieving meaningful energy efficiencies. As a result, some property owners are now finding that their green buildings are actually less energy efficient than many conventional buildings.

Many consider the U.S. Green Building Council’s Leadership in Energy and Environmental Design (LEED) Green Building Rating System™ to be the gold standard of all certification programs. According to recent reports, there are currently 3,738 registered projects and 504 certified LEED projects, and the numbers keep climbing every year.

As Romano noted, “LEED is gaining momentum. While the LEED program is targeted for the top 25 percent of the building market, interest is developing at every level and will continue. Many of the high-profile jobs will consider the LEED process even if they don’t use it. Most agencies of the federal government require that the LEED process be used in all new buildings. In Washington, D.C., and in Boston, LEED will even be required of all buildings - both public and private.”

What that means for commercial contractors is that they need to understand LEED and how they fit into the process. As Romano stated, “Contractors are involved in the decision process on 23 credits, the record keeping for 14 credits, and the submittal process on 30 credits. Simply said, LEED certification cannot happen without the contractor.”

Eric Roberts, executive vice president, McQuay Americas, agreed that LEED and other programs for sustainable building design are increasing in awareness and popularity. “For contractors, it drives the need to not only understand how the equipment can perform in the building, but also the value of upgrading the equipment. As equipment sellers, we see an increasing importance of working with building owners to focus on the financial operation of the systems and to look beyond first cost.”

The LEED program is definitely “front and center” at the moment, said Chris Nelson, vice president and general manager, commercial unitary systems, Carrier. “The trend in commercial projects right now is they will be pushed further and faster in the next couple of years. The city of Las Vegas, for example, is giving many different incentives for projects that are LEED-certified.”

MORE TO COME

While green building techniques and LEED certification are the most dominant trends in the commercial market right now, there are other issues that need to be considered as well. For example, the upcoming phaseout of R-22 has many manufacturers considering how to design equipment to utilize the new types of refrigerants.

Nelson noted that the impact refrigerant changes will have on rooftop units will be huge. “It will require everyone to redesign their product line from the bottom up. Carrier will come out with a broad line that will feature higher-efficiency products that are environmentally friendly. We plan to keep pushing levels of efficiency and energy management as well because people are demanding energy efficiency.”

McQuay first moved to R-410A and R-134a back in the early 1990s, said Roberts.

“Currently, we have HFC refrigerants in almost all of our products and will be switching the remainder over well in advance of 2010. Our parent, Daikin, and a sister company already have working natural refrigerant systems with ammonia and CO2, and plan to continue to develop those types of technologies.”

Lennox has added the environmentally friendlier R-410A refrigerant to many of its rooftops and split systems. As Walker noted, “Customers have responded positively to this move, and Lennox currently sells approximately 20 percent of all rooftop units with the environmentally friendly R-410A refrigerant. Lennox has also been working on a new line of super-efficient rooftop units that will help our customers reduce energy usage and address key opportunities in environmental sustainability.”

Another positive trend is the focus on improving comfort and IAQ in the commercial building. Just like sustainability, most building owners realize that great comfort and IAQ are not only good for their employees, customers and tenants, they are also good for the bottom line, said Walker.

“For example, keeping employees healthy helps eliminate sick days and increases productivity. Making sure customers are comfortable promotes extended shopping time and increased purchases. Eliminating tenant comfort complaints can lead to improved customer satisfaction, renewed leases, and higher building occupancy.”

To keep on top of all these trends, commercial contractors will need to be in a continual mode of learning about the new capabilities of equipment and systems. Systems are potentially going to become much more complex, noted Roberts, so understanding how the equipment and building function together as a system will become even more important.

There’s no question that it’s an exciting time to be a commercial contractor. Business is trending up, new products are everywhere, and opportunities abound for a contractor willing to embrace the emerging trends.

Publication date: 05/14/2007

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