As Kermit the frog famously warbled, it's not easy being green--especially when you're a financial advisor whose clients want to add real estate investments to their socially responsible portfolios. Though the array of green real estate-related businesses may be expanding at a rapid clip to include architects, real estate brokers, construction engineers and even mortgage providers, an investor looking for a piece of the action faces an uphill climb.
The problem is a mismatch between supply and demand, with the latter far outstripping the former. According to a 2005 special report on the construction industry by McGraw-Hill, the market for environmentally friendly real estate will be worth as much as $20 billion by 2010. Last summer, a survey released by McGraw-Hill Construction and the National Association of Homebuilders showed those estimates may be too modest: It projected that by 2010 green builders may have captured as much as 10% of the share of new home construction, or an astonishing $38 billion, up from 2% and $7.8 billion today. But while it's getting easier to turn homes green by installing solar panels or bamboo floors, taking the next step and insisting that investment real estate go green is a more arduous process.
So far, the products available mostly make sense only if our your clients are high-net-worth investors. And even for high-net-worth investors choices are limited they will need to scour the landscape for standalone green building projects.
It seems to me that there are a lot more commercial green properties being built every year, because their fundamentals are so appealing. But there still aren't enough homes taking going green into consdieration.
Pete and I have found, in building our home in the wooded mountains of N GA - bordering a gorgeous river that building green can be cost effective. Most of those familiar with the green real estate market believe that soon, products will work their way down to the retail level. A financial planner we spoke with says his clients are intrigued by green real estate. But for the most part, he advises clients to find ways to reduce the environmental impact of their primary real estate investment--their own homes. "I might advise them on how to make sure they buy a holiday or retirement home that is environmentally friendly," he says. In one case, when he discovered a client was paying $1,000 a month in electricity bills for a house built in the 1970s, he suggested solar panels.
That's the kind of creativity that planners will need to possess while waiting for more green real estate products to make their debut. It's up to advisors to familiarize themselves with what is going on in their communities and who the green developers are, so that they are aware when one-off investment opportunities arise that might be right for their clients. I think it's just a matter of time before this is a mainstream investment category. And that is good news for all of us in the real estate industry!
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