The green construction industry will be responsible for 38% of all construction jobs by 2018, according to a report that Booz Allen Hamilton recently prepared for the U.S. Green Building Council (USGBC).

Its forecasts predict huge increases in green construction spending, rising to the tune of $224.4 billion by 2018 from an estimated $129 billion in 2014. Such growth is expected to have ripple effects, increasing green construction’s impact on:


national gross domestic product (GDP) to $284 billion

labor earnings to $190 billion

operational savings to $1.2 billion

That doesn’t include economic benefits from improved health or worker productivity.


All told, green construction is expected to directly support 3.9 million jobs between 2015 and 2018.


The findings of the report forecast a hopeful future, says David Erne, senior associated at Booz Allen Hamilton: “Construction is back up, and green construction is increasing its share of overall construction.” The analysis gives builders and architects a clearer picture of the demand, he says, and also tells regulators that green building has reached a threshold of adoption where they can expect to increase code requirements without much pushback.


Impact of LEED

With the report sponsored by USGBC, the role of LEED in this market transformation is often emphasized.


LEED projects comprised nearly 37.5% of green construction jobs in 2014 and contributed $20.7 billion in direct gross domestic product, according to the analysis. The forecasts predict a year-over-year growth rate for LEED construction of 12.3% to 2018, with particularly high growth in LEED-certified residential projects.


The report also attempts to estimate operational savings from LEED within the context of the whole green construction industry, both to demonstrate the extent of operational savings and to factor in jobs that might be lost due to greener buildings, such as jobs in maintenance or trash disposal. The researchers did a meta-analysis of reported savings, which gave them an annual square foot savings for water, trash, energy, and maintenance.


According to these estimates, the scholars expect the green construction market to generate $4.8 billion in savings from 2015 to 2018, with LEED accounting for as much as $2.2 billion. However, in most of the categories, “green” buildings (Dodge defines this as a building that targets green building upgrades in more than one category across energy efficiency, water efficiency, resource efficiency, site management, or air quality) registered higher average savings than LEED Certified or LEED Gold buildings—something the authors point to in order to indicate that USGBC’s sponsorship of the report did not sway its findings.


However, these are some pretty sunny projections, so what is behind the findings? We spoke to the authors about their assumptions.


Separating the wheat from the chaff

The report acknowledges that the economic impacts it reports are based on the total value of green buildings “rather than segmented spending separating out green-specific technologies or professions.”


This means the $150 billion it reports for green building spending in 2015—and the 1.1 million jobs that green building is projected to directly support by 2018—includes spending on things like framing or roofing that aren’t necessarily part of what makes a building green. The rationale is that “green construction creates employment opportunities for both green and non-green professions.”


That would be true if green building itself were spurring more people to build more buildings, but more likely green features are being added onto buildings that would have been built anyway.


Diminishing marginal costs

It turns out that separating out green features from general construction costs simply has become very hard toIn an earlier report conducted in 2009, Booz Allen researchers used the marginal costs of LEED to estimate the economic impacts, but “more and more, we’ve seen that green or LEED does not cost more,” explains Vinay Couto, a vice president of Booz Allen Hamilton in Chicago. “The only concrete thing we can say is this is what it costs overall to build a green or LEED building.”


Acknowledging the assumption ends up being “more defensible,” agrees David Erne, than relying on contentious evaluations of marginal costs.


The research relies heavily on the 2015 Dodge Construction Outlook Report and its Green Outlook Report for those cost estimates, but when it comes to analyzing LEED’s impact separately, it makes its own generalizations. The researchers used cost-per-square-foot averages by asset type to come up with $61.8 billion in LEED construction spending nationally in 2015, which is expected to increase to $78.6 billion in 2018 based on an “optimistic” modeling scenario. Experience tells us costs per square foot can very widely between buildings—even of the same type—so it is important to note this “concrete” statistic relies on averages.


Stronger data

Nevertheless, the researchers insist that this is the strongest data they’ve ever had. “When we did the last report, it was based on a history of very strong construction starts—then there was the downturn in the economy and things didn’t turn out like we predicted,” says Erne.


Now, the Dodge reports have accrued a large sample size over 11 years, and they develop separate forecasts for general construction and green construction. The USGBC database also has more projects and a longer history from which to model projections. The researchers have also learned from the market experience; they took out all the LEED for Existing Buildings projects, which account for approximately 30% of LEED, according to Couto, because certification in that rating system often doesn’t require a lot of spending.


Quoting a range is easy…

The study reports values from only one model (what it calls “the optimistic scenario”) instead of the range of outputs from all three scenarios modeled, a choice that may come off to some as deceptively confident.


Couto responds with the argument that “quoting a range is easy” but not as powerful in things like policy briefs. Instead, the researchers boldly threw out the big numbers and chose to let their assumptions speak for themselves.