The Challenge Facing “Green” Real Estate Developers

A reader who offers a very interesting concept in green real estate development notes:

Want to first thank you for your informative newsletters, and your overall mission.

My position is the director of marketing and research for 3C-innovate,Inc., I spoke to you at the beginning of the year briefly. We are a group of in-house, sustainable energy developers; our current project is Sanctuary At Cutler Bay in South Miami. We are now in the process of getting funded, but it was a lot more difficult than one would tend to think.  This is such a new concept to most people, we are having to inform, and teach the public this way of living is possible and now affordable. This is only one of many exciting projects we have on the table. Therefore my question to you is, how do you view this industry as an overall investment opportunity. Thank you for your feedback, and insight.

Thanks for the note, and for the opportunity to share my views, which I summarize as follows:

• Building design that incorporates environmentally friendly characteristics and reduces eco-impact / carbon footprint, e.g., efficiency, conservation, and renewable energy, is among the most important ingredients to achieving a sustainable path for our civilization going forward.

• Fortunately, there are uncountable advancements, some large, some tiny, that are being made in this space every day, in terms of building materials, edible landscaping, water conservation, highly efficient HVAC and lighting, solar PV with better efficiency and capacity factor, solar hot-water heating, etc.

• For a number of different reasons, public awareness in this arena is also coming around quickly.

• Real estate developers who ignore all this are very foolish indeed.

• Having said all this, is there a demand for your specific idea?  You face the exact same challenge as the fellow who wants to build 15 “green” houses in Gatlinburg, Tennessee.  As I told him:

If you’re going to sell 15 eco-houses in Gatlinburg, TN, the first thing you need is 15 families who want to live in Gatlinburg, TN.  Do they exist?  You’re creating a huge amount of supply, and if that’s not met with an equal demand, you’re going to face a problem, regardless of the houses’ eco-characteristics.

Obviously, South Miami is a far larger real estate market than Gatlinburg, TN, yet your challenge is similar: Do a sufficiently large number of people want to live in a community in that precise location, with the characteristics you’re describing?  I recommend you establish that first.