Commercial Construction Index 2018 Q2: Surprising Green Building Trends | Construction Podcast

The Commercial Construction Index shows growth in green building globally, but what will that mean for you? Listen to “A Podcast That Builds” host Ben Johnson and Dodge’s Donna Laquidara-Carr discuss the findings from the 2018 Q2 CCI Report, including insights into green construction and sustainable development and what it could mean for the construction market. Below is a transcript of this construction podcast.

Ben Johnson:                      

Welcome to the ninth episode of A Podcast That Builds, construction industry experts keeping you in the know with news trends and analysis that will shape the future of building. I'm your host, Ben Johnson, and the topic of today's show is the Q2 2018 CCI reports spotlight article. And that article's topic is on green building. We have the author of that article here with us today to discuss it Donna Laquidara-Carr. Welcome back.

 

Donna Laquidara-Carr:                

Thank you very much. It's a pleasure to be here again.

 

Ben Johnson:                    

So, Donna, the topic this quarter was sustainability. So, didn't we cover that topic back in the first CCI in Q2 of 2017?

 

Donna Laquidara-Carr:               

Yes, yes. In fact, we have the advantage this year of being able to use many of the same questions we did in that first one, so that we can do some longitudinal analysis to see if anything's changed.

 

Ben Johnson:                      

So, did anything change?

 

Donna Laquidara-Carr:               

Well, yes. In fact, things did. There were two surprising, and somewhat contradictory, results that indicate a big change in the volume of green construction and of the degree to which green experience makes companies more competitive. So, the first one is that both years we did ask contractors about the volume of green work they do. The way we do that is we asked them to give us a percentage and within a range of the overall amount of their work that is green building. And so, and we saw for the first time since we, at Dodge, have started tracking sustainability data, which goes all the way back to 2006. We saw for the first time that contractors were reporting a decline in the overall percentage of green building that they were doing. It's a little bit more complicated, but to keep things simple and to avoid the question about which trades are involved in green, and which ones are not, to look at this issue, let's just focus on the GC's (general contractors). And in 2017, the mean percentage of green building for GC's was 29%. But in 2018, it was 22%. And again, you know, up til now consistently, we've always just seen growth, or at least stability, in these figures. This is the first time we've ever experienced a decline.

 

Ben Johnson:                    

Yeah. So, I guess the obvious question is do you think this indicates an actual decline in the amount of green work being put in place?

 

Donna Laquidara-Carr:               

You know, I wouldn't go so far as to say that based on this one study, this one question. It's one of the key factors to remember is that when we asked this question, it is self-reported data. So, it's their perspective on the volume of green, we don't go out to sites, we don't measure you're doing this, this and this. This also isn't something like tracking lead registration on projects where you can really compare, in terms of the volume of those. So, there's a possibility this could be a change due to a change in perspective. It could be due to green building becoming more normalized. So, contractors are less likely to recognize something that's energy efficient and water efficient as such, because these have become more standard green practices in the industry. It could be due in certain regions of the country to a shift away from using green terminology to focusing on high performance.

Since our study still does use green as terminology, even though it does describe what's necessary to be a green project, and there's even a possibility, the very different political climate we're in right now when it comes to sustainability could be influencing the responses to a certain degree. The good news is that we are doing a much more comprehensive study of green building on a global scale right now. It's in the field right now. And it involves more than just contractors and we're getting a very robust response from the United States and it covers across the industry owners, architects, and contractors. So, it'll be interesting to see though if in the U.S. we do see the brakes going on a little bit with sustainability or if we see that there are other factors in play. So, we should be able to have a more comprehensive answer come the fall when that study comes out in a SmartMarket Report.

 

Ben Johnson:                     

And hopefully we can look forward to a podcast about that SmartMarket Report.

 

Donna Laquidara-Carr:               

I hope so.

 

Ben Johnson:                    

So, what did you learn about the degree to which contractors view green construction as making them more competitive in the marketplace?

 

Donna Laquidara-Carr:               

Well, that percentage actually grew, which is surprising given the fact that they were actually reporting doing a lower volume of green construction. Among the GC's, the growth was modest. It was a 4% growth of percentage point growth from 47% to 51%. However, there was an 8-percentage point growth among trade contractors. And you know, I personally did find that particularly notable.

 

Ben Johnson:                    

So, why do you think the percentage of trade contractors shot up?

 

Donna Laquidara-Carr:              

Well, for one thing, the data points to the challenge in finding green skilled labor, which is also increased notably when compared to 2017, especially for general contractors. In 2017, 24% of GC's reported that it's very challenging to find green workers. But 33%, so from one quarter to one third now see that challenge. So, in a market like that, it's not particularly surprising that trade contractors with sustainable development experience would actually have a competitive advantage.

 

Ben Johnson:                     

So, was there anything else, of particular interest in the sustainable construction findings in this quarter's report?

 

Donna Laquidara-Carr:              

Well, we do continue to see that larger companies are more engaged with green construction, whether that's doing more green projects, they're proposing more green solutions to their customers or seeking out energy efficient materials. This is consistent with the previous findings of other green studies we've conducted, that show that larger projects tend to be more green because of course larger companies are going to have a larger share of their work be big projects than small companies. So, that probably isn't terribly interesting in and of itself, but we did see some data suggesting that the smaller companies just are not being driven by their customers as frequently to build green. And that's a little bit more interesting, I think, that, you know, for instance, 43% of small companies say that their owners are rarely willing to pay more for green. Now less than one quarter, 21% of larger companies say the same. So, you know, if you've got the larger companies more willing to pay for green, you're going to see more green activity on the larger company scale. So, it suggests that if the market wants to increase getting smaller companies, smaller owners out there, more engaged in sustainable development might be one of the best targets to do. And you know, making the business benefits of green clear across the board could be to the advantage of that particular movement.

 

Ben Johnson:                    

So, this is fascinating stuff, seeing how sustainable construction is maturing. So, we mentioned earlier the upcoming report about sustainability. Could you tell us quickly a little more about that?

 

Donna Laquidara-Carr:              

Sure. So, this is going to be the fourth one we've done. We've done this study every three years since 2009. And, we've tried to keep to the same consistent questions for a large bulk of the data so that we can really track what's happening in green trends globally. This quarter though we did add a few additional options to some questions about healthier buildings because we want to understand that trend globally. And we are touching on every continent except for Antarctica across the globe. We are looking probably at having at least 12 to 15 countries that will be analyzed separately. So, we're very excited about where it's going.

 

Ben Johnson:                   

Sounds very interesting and we look forward to hearing about it here. So, thank you again for joining us, Donna.

 

Donna Laquidara-Carr:               

Thank you for having me.

 

Ben Johnson:                      

And as always you can visit Dodge at construction.com, where you can get a free copy of the report referenced in today's show as well as all our past reports and all our future reports. You can also reach us at (877) 784-9556. Thanks again for listening, and we'll see you next time.